As a result small-cap gaming companies, such as Hollywood Park, Isle of Capri Casinos, and Argosy Gaming have seen significant increases in their stock prices. Driving the improved forecast has been:

• The relaxation of restrictive regulations.
• Improved marketing by casino companies.
• Added amenities, such as hotel rooms and entertainment that have attracted customers from further distances and encouraged longer stays.

Illinois Shows a Change in Law Can Change the Bottom Line 

Illinois Governor George Ryan set the stage for gaming revenue and win-per-position growth when he signed legislation removing riverboat cruising requirements on June 26th. Since then conditions have improved for Illinois casino operators including Harrah�s, Hollywood Casino, Boyd Gaming and Players International. Gaming revenues increased 34.6% and 34.2% in July and August, respectively, while win-per-position in July and August increased 33.9% and 33.7%, respectively.

Illinois� gain however appears to be their neighbors� loss. �In our opinion, casino patrons from nearby Indiana have been driving to Illinois to gamble as the lack of cruising times has eliminated long waits if patrons miss the scheduled boarding time,� Ader says. Even
though Indiana�s riverboat revenue increased over last year Ader attributes the increase to the addition of one new boat, Caesar�s Glory of Rome Riverboat in Harrison County. Subtract that revenue and August gaming revenues for Indiana would have been flat versus last year, and win-per-position has been steadily declining.

Missouri and Mississippi Are Also Making Changes

Missouri relaxes boarding restrictions: After losing customers to other states, Missouri also decided to change their laws to allow open boarding without time restrictions on riverboats throughout the state. The move sparked an increase in revenues and attendance of 10% and 45%, respectively, during a 30-day period beginning August 16.

Mississippi improves facilities: In Mississippi meanwhile, new facilities and new amenities have driven growth thanks to the opening of the Mirage�s Las Vegas-caliber facility known as Beau Rivage. The move could cause others to follow suit, which Ader concludes should allow the Mississippi Gulf Coast to grow considerably and evolve into a regional destination.

Who's Next?

At the beginning of 1999 several states were poised to enact legislation to enable casino gaming, but several high-profile legislative losses in states such as Maryland, Pennsylvania and Massachusetts, has slowed the momentum. Ader believes however, that casino-enabling legislation could come to the fore over the next several years, as any potential softening of the strong U.S. economy could drive legislators to seek new ways to pay their bills. Casino gaming has already been raised as an issue in states such as Kentucky, Alabama, and Arkansas. Likewise, in the lottery business, Tennessee, Alabama, and North and South Carolina are also looking at taking the plunge.

Jason Ader is a senior managing director responsible for equity research coverage of the Gaming, Lodging and Leisure industries. His division covers a universe of over 100 public companies. Mr. Ader is the #1-ranked gaming analyst according to Institutional Investor, and has been a member of that publication�s �All-America Research Team� for the past four years.

Founded in 1923, Bear, Stearns  Co. Inc. is leading investment banking and securities trading and brokerage firm and a major subsidiary of The Bear Stearns Companies Inc. (NYSE:BSC). With approximately $21.4 billion in total capital, Bear Stearns serves governments, corporations, institutions and individuals worldwide.