A Time period of Adjustment
Oops! That large hissing sound is the gaming balloon that had been increasing over the several years, slowly and gradually getting rid of air. But, it has not been a tide that reduced all ships even so, as some emerging and growing gaming jurisdictions showed powerful expansion in 2008.
Total, the professional and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a three.five percent decline in gaming revenues for 2008, generating a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a acquire of almost $one billion in 2008, thereby bringing the Commercial sector industry drop to $one.eight billion, or 6.seven percent. Nevada was the most significant loser in 2008, dropping practically $1.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most component, casino operators have been caught reasonably flat-footed by the extent of the 2008 revenue downturn, as it was not until the 3rd and fourth quarters when it really nosedived. Riding the crest of yr over calendar year marketplace progress throughout the place and the availability of ample credit history and equity money, new design and expansion proliferated in current several years. These days, faced with the realities of declining, or at ideal stagnant demand, numerous of these initiatives are now regarded as over-leveraged and/or more than-sized. As a outcome numerous gaming companies are trying to renegotiate their credit card debt – manufactured a lot more hard by reduced valuations – while also paring down operational fees. The latter has become a really problematic conundrum when working with the opposition, specially in these jurisdictions that are now vying for industry shares with new rising on line casino initiatives in neighboring places. A subject we talk about more fully in the State by State examination part of this publication.
As a end result of these circumstances the gaming sector landscape is now strewn with impending fatalities. Among the much more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the listing grows every single week.
“How extended will these financial circumstances persist, and are we at the base nevertheless?” are inquiries no one seems to be answering however. What is distinct nonetheless is that most gaming jurisdictions will have to discover how to deal with a more compact pie.
Notice:
This investigation includes only gaming revenues of licensed casinos and pari-mutuel stores that offer you casino game titles, and not Indian gaming functions, card rooms, or modest non-on line casino kind slot areas. The whole report, which includes profits tables is accessible on our world wide web webpage.
Input/Output Product
A key element that appears to have arisen from the ashes of this recent development is that numerous casino assignments were just also large to support on their own. The enter, in phrases of expense pounds, was not proportional to the output, in terms of web profit right after credit card debt support, in contrast to beforehand reached benefits. A lot more and/or greater is not constantly far better. Viewing the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the growth of far more complete facilities in numerous other jurisdictions. The flaw in this approach however is that the expenses connected with widening market penetration and occasioned-use, are considerably higher than people incurred to attract the foundation market.
As daytripper marketplaces turn into far more competitive, casino venues will have to rely much more and far more on their in-home lodge patrons, and dimensions their properties (and anticipations) appropriately. Although Steve Wynn began a main trend in creating up-marketplace mega-destinations, there basically was not sufficient desire on the Strip to warrant the a lot of other similar initiatives that adopted that aimed at the same niche.
The trick is to strike a happy medium in undertaking configurations which of program need considerably less of a ‘seat-of-pants’ method, and a single that is a lot more analyzed. A shameless plug for growth consultants like ourselves.
Other Gaming Pursuits
Although there are no revealed thorough information of American Indian gaming revenues, anecdotal proof seems to recommend that this phase has been as challenging strike as the Commercial sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, representing a fall of about seven per cent, or virtually $114 million, much more than doubling the 3.5 p.c fall from the 12 months before. This market is seemingly still reeling from the ripple-impact of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Section of Gaming studies that contributions primarily based on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in comparison to the previous year lowering .eight p.c in the first quarter, 7.5 per cent in the 2nd quarter, 9.five % in the 3rd quarter, and sixteen.1 percent in the fourth quarter.
Some SEC reporting Indian gaming homes report related decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, stories that whilst calendar calendar year 2008 confirmed an practically two p.c progress fee in gaming revenues, there was an eight.7 per cent drop in the 3rd quarter and an nearly 10 percent decline in the fourth quarter of 2008, in contrast with 2007. Gaming profits tendencies at close by Niagara Falls, Ontario have been down one.5% in 2008 in comparison with 2007.
It truly is been a mixed-bag for point out lotteries across the country. The North American Affiliation of Point out & Provincial Lotteries stories that U.S. lotteries produced a complete of $60.6 billion in income in fiscal 2008, up about 3 % from the earlier 12 months however some jurisdictions documented decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on various fiscal yr ends, it would appear that the info does not mirror the impact of 3rd and/or fourth quarter results.
In accordance to info presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 per cent to $thirteen.seven billion in 2008, as opposed to $14.seven billion in 2007.
Planned & Proposed New Expansions
As previously famous, it has been new gaming jurisdictions that have spawned considerably of the expansion in annual casino/racino revenues above the a long time, and their influence is apt to proceed into the around potential.
Florida
Miami Dade voters authorized a ballot problem that makes it possible for each of 3 pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Dog Track and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has but to declared its plans. There are quite a few other proposals being considered that would additional increase on line casino advancement during the state.
Illinois
The state finally obtained all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ game casino found in Des Plaines just east of O’Hare. The new facility is not most likely to open up right up until 2010. There has also been some dialogue about making it possible for an increase in for every place gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.
Kansas
The state’s expanded lottery system that makes it possible for for the improvement of four on line casino gaming zones and slots at existing horse and dog tracks appears mired, as only 1 facility is presently below construction, whilst 3 other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is found so shut to the state line that its parking good deal is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk video games, together with a next section because of to open up in 2011 with 875 slots and twenty table game titles. The point out has extended the software procedure for the other three zones until finally April, 2009.
Kentucky
There is still a lot of ‘jockeying’ heading on, but the prospect of as several as 8 slot parlors and racinos seems to be again on the front-burner, but most likely not settled during the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest currently being the 390 room M Resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new resorts incorporate two parts of the Metropolis Centre undertaking, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino advancement assignments in Baton Rouge and Lake Charles, even though delayed, are described to nonetheless be on-keep track of for opening this calendar year and/or early 2010.
Maine
There is a bill beneath thing to consider that could much more than double Penn National’s slot devices to 3,000, as effectively as a proposal that would eliminate the restriction that slots be situated in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing local citizens to permit slots, may be taking into consideration moving to a far more hospitable town.
Maryland
A referendum was approved in November, 2008 that enables for the advancement of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the state had predicted.
Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has run into various funding problems and whilst the hotel portion is open, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled again fairly, is still on track to open up this 12 months.
New England
Massachusetts, a sleeping-huge in terms of marketplace possible, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to look to muster the political help. A current research concluded by Dartmouth College estimates that Massachusetts resident invested far more than $920 million final 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an option to build casinos, nonetheless the subject is very likely to be revisited, specifically if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its possibilities.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by recently agreeing to keep on augmenting purses with an additional tax. The governor even so, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would ultimately be created, the successful bidder indicated an incapacity to make the necessary $370 million payment, citing the recent lending weather, and throwing the undertaking again into the lap of the governor. Despite the fact that the industry demand in the region could be deemed very robust, the prospect of additional competitiveness from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, especially contemplating that marginally significantly less than 30% of the net acquire is retained by the operator.
Programs to relocate Monticello Raceway into a resort complex are getting reconsidered maybe owing to each the probable opening of at the very least 1 or maybe two racino functions in the NY metro spot, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.
Ohio
But another gaming proposal is becoming place forth in Ohio, after final year’s variation was turned down by the voters. This program calls for 1 casino every single in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expense essential of $250 million, as properly as an preliminary licensing charge of $fifty million, and a 33 per cent tax on gaming income.
Pennsylvania
The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are expected to begin construction this year.
South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and incorporate 300 online games, a hundred and forty rooms and a vast variety of amenities.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to permit casino gambling in designated places, as nicely as let gambling on American Indian lands in Texas and at existing racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer. State government has proffered the notion of enabling the resort to provide on line casino online games, but this effort is in as well early a stage to have any traction one way or an additional.
Indian Gaming
A latest Supreme Courtroom ruling that restricts the taking of lands into have confidence in on behalf of federally acknowledged American Indian tribes has further stymied some new Class III gaming projects throughout the place. Moreover, there ended up eleven Indian on line casino assignments turned down by the DOI very last 12 months due to the fact of its new rule that casinos should be near ample to a reservation that tribal associates can work at them. It has been advised that the new Obama administration might be a lot more sympathetic to the development of Indian gaming projects, but this issue has yet to be resolved.
Meanwhile, there are other Course III projects in the various levels of advancement. The Seneca casino task in Buffalo, NY, while working a small short-term facility, has delayed an currently under construction long lasting facility until the marketplace rebounds. They have also expressed an fascination in building a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is currently being challenged, and could affect their plans for bigger projects. There are new Indian gaming projects set to open up in Michigan and Oklahoma this yr, and others are in the organizing stage. Texas may enable the reopening of Indian gaming services and allow other venue and there are ideas afoot by the Navajos in Arizona to construct added casinos. California is poised to open up two to three new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Total gaming income in Atlantic Metropolis has declined 7.6 p.c, from $4.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the town is obtaining itself in an intense comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast have been positioned in Atlantic Metropolis, the place it looked as if it might truly even eclipse the Las Vegas Strip’s annual gaming revenues.
Gradually even so its marketplace share was becoming encroached on, very first by the improvement of a big Class III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.
Now, with C9TAYA planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening all around Atlantic City’s potential potential customers. It’s reliance on working day-trippers lulled it into a untrue sense of safety, and it now finds itself possessing to redefine its mission statement to “spot vacation resort.”
The only problem with this strategy however is that it is sick-outfitted to pull it off. For all intents and purposes, Atlantic Town is beneath-roomed and/or more than-gamed. There is simply not sufficient working day-tripper industry to go around, and their powerful investing region is tightening, as the peripheral populations northward now/will have much more ready accessibility to a widened provide in New York (Yonkers, and shortly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean obtain, the city’s only true competitive benefits are its hotel potential and the availability of desk games, even though the latter is very likely to eventuate in Pennsylvania, and possibly Delaware. In order to adequately compete as a location resort the metropolis wants to create additional visitor rooms and not always gaming potential. By comparison, the Las Vegas Strip properties – correct gaming locations, in that they do not have much of a working day-trip marketplace, apart from for the ‘locals’ – have an common of .87 gaming positions for each visitor room while Atlantic City’s common is 2.seventy four positions for every visitor area.
It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, the two of which added new rooms in 2008, have been the least impacted by the most current downturn. The Borgata seasoned a gaming profits fall of one.6 p.c, while Harrah’s Marina described a four.9 percent boost in comparison to 2007. Moreover, the hardest hit venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity of rooms. In the meantime some of the venues are teetering on viability, such as the the Trump properties and Resorts with the hoped for sale of the Tropicana has been further delayed, and dropping valuation.
With a regular rise in gaming revenues via 2006, the city seemed primary for even more improvement, which precipitated planning for 4 new vacation resort assignments, every of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion venture continues to be an iron skeleton, Pinnacle Entertainment has introduced it may possibly seek to sell its razed Sands internet site, MGM Mirage has shelved its on line casino ideas, and Penn Countrywide appears to have stopped its pursuit of the Bader Discipline airport internet site.