A Time period of Adjustment
Oops! That big hissing audio is the gaming balloon that had been growing more than the many years, slowly and gradually losing air. But, it has not been a tide that lowered all ships however, as some emerging and increasing gaming jurisdictions confirmed powerful expansion in 2008.
All round, the business and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a 3.five p.c drop in gaming revenues for 2008, producing a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a gain of virtually $1 billion in 2008, thus bringing the Professional sector marketplace decline to $1.8 billion, or 6.seven percent. Nevada was the biggest loser in 2008, dropping practically $one.three billion, much more than 50 % of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most element, casino operators were caught relatively flat-footed by the extent of the 2008 income downturn, as it was not right up until the 3rd and fourth quarters when it actually nosedived. Riding the crest of 12 months above yr industry growth throughout the country and the availability of ample credit history and equity resources, new development and expansion proliferated in latest many years. These days, faced with the realities of declining, or at very best stagnant need, many of these assignments are now regarded as over-leveraged and/or above-sized. As a result a lot of gaming businesses are making an attempt to renegotiate their debt – manufactured more challenging by lower valuations – while also paring down operational expenses. The latter has turn into a extremely problematic conundrum when dealing with the competitors, specially in these jurisdictions that are now vying for market place shares with new rising casino tasks in neighboring areas. A topic we go over more completely in the Point out by State analysis section of this publication.
As a result of these situations the gaming sector landscape is now strewn with impending fatalities. Among the much more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the list grows each week.
“How extended will these financial conditions persist, and are we at the base however?” are concerns no 1 seems to be answering but. What is distinct even so is that most gaming jurisdictions will have to learn how to deal with a smaller sized pie.
Notice:
This investigation involves only gaming revenues of certified casinos and pari-mutuel shops that offer you on line casino online games, and not Indian gaming functions, card rooms, or tiny non-casino type slot places. The complete write-up, which includes income tables is available on our world wide web website page.
Enter/Output Product
A important element that looks to have arisen from the ashes of this recent craze is that a lot of on line casino projects ended up just way too large to help themselves. The input, in conditions of investment decision dollars, was not proportional to the output, in phrases of web earnings right after debt service, compared to beforehand attained final results. A lot more and/or even bigger is not always far better. Looking at the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the advancement of more complete features in many other jurisdictions. The flaw in this approach nevertheless is that the charges associated with widening market place penetration and occasioned-use, are considerably greater than those incurred to appeal to the foundation market place.
As daytripper marketplaces turn into far more competitive, casino venues will have to depend a lot more and much more on their in-home lodge patrons, and dimensions their homes (and expectations) accordingly. Whilst Steve Wynn commenced a key pattern in generating up-industry mega-locations, there just was not sufficient need on the Strip to warrant the several other related tasks that adopted that aimed at the same area of interest.
The trick is to strike a content medium in undertaking configurations which of program demand less of a ‘seat-of-pants’ method, and 1 that is a lot more studied. A shameless plug for growth consultants like ourselves.
Other Gaming Pursuits
Though there are no published comprehensive information of American Indian gaming revenues, anecdotal proof seems to suggest that this section has been as hard strike as the Professional sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, representing a fall of about seven p.c, or virtually $114 million, far more than doubling the 3.5 percent fall from the year ahead of. This industry is seemingly nonetheless reeling from the ripple-effect of a casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Department of Gaming reviews that contributions based mostly on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the preceding yr reducing .eight % in the very first quarter, 7.five p.c in the next quarter, 9.five % in the third quarter, and sixteen.1 per cent in the fourth quarter.
Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reports that while calendar calendar year 2008 confirmed an virtually two percent development charge in gaming revenues, there was an eight.7 percent decline in the 3rd quarter and an almost 10 percent decrease in the fourth quarter of 2008, compared with 2007. Gaming profits developments at close by Niagara Falls, Ontario had been down one.five% in 2008 when compared with 2007.
It’s been a combined-bag for state lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries studies that U.S. lotteries created a overall of $sixty.6 billion in income in fiscal 2008, up about 3 p.c from the prior 12 months yet some jurisdictions reported decreases, most notably California, which showed an 8 % fall. Inasmuch as some of these states are on numerous fiscal year finishes, it would look that the knowledge does not reflect the impact of 3rd and/or fourth quarter benefits.
According to info supplied by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 per cent to $13.7 billion in 2008, versus $14.seven billion in 2007.
Prepared & Proposed New Expansions
As previously observed, it has been new gaming jurisdictions that have spawned significantly of the development in once-a-year on line casino/racino revenues more than the a long time, and their influence is apt to keep on into the near foreseeable future.
Florida
Miami Dade voters accepted a ballot problem that permits each and every of three pari-mutuels to have a on line casino facility of up to 2,000 slot equipment. The Flagler Pet Observe and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has yet to introduced its plans. There are several other proposals currently being considered that would even more increase casino growth throughout the point out.
Illinois
The state last but not least obtained about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,two hundred+ match on line casino positioned in Des Plaines just east of O’Hare. The new facility is not probably to open till 2010. There has also been some dialogue about permitting an improve in per spot gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.
Kansas
The state’s expanded lottery system that allows for the advancement of 4 casino gaming zones and slots at present horse and canine tracks appears mired, as only one particular facility is presently under construction, even though three other proposals have been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is positioned so close to the state line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten desk online games, alongside with a second section because of to open in 2011 with 875 slots and twenty desk games. The point out has prolonged the software procedure for the other 3 zones until April, 2009.
Kentucky
There is nevertheless a whole lot of ‘jockeying’ likely on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be back on the entrance-burner, but likely not resolved for the duration of the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most modern getting the 390 area M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Difficult Rock and new hotels include two factors of the Metropolis Heart undertaking, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino growth tasks in Baton Rouge and Lake Charles, even though delayed, are documented to nonetheless be on-keep track of for opening this 12 months and/or early 2010.
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There is a bill under thing to consider that could much more than double Penn National’s slot equipment to 3,000, as properly as a proposal that would remove the restriction that slots be situated in 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing local inhabitants to enable slots, may possibly be considering shifting to a far more hospitable city.
Maryland
A referendum was accepted in November, 2008 that allows for the advancement of 5 casinos with a complete of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as powerful as the point out had anticipated.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into different financing troubles and whilst the lodge portion is open, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back again considerably, is nonetheless on keep track of to open up this year.
New England
Massachusetts, a sleeping-giant in conditions of industry potential, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but cannot appear to muster the political help. A recent review finished by Dartmouth University estimates that Massachusetts resident expended much more than $920 million last year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to develop casinos, nevertheless the matter is probably to be revisited, specifically if Massachusetts decides to go forward. There are also tries in Maine to rethink its alternatives.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by lately agreeing to carry on augmenting purses with an additional tax. The governor even so, has appointed a new panel to research the state’s sagging racing system which ironically, can only be preserved by enabling the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it looked as if Aqueduct’s four,500 VLT facility would last but not least be produced, the profitable bidder indicated an lack of ability to make the needed $370 million charge, citing the recent lending local weather, and throwing the project back into the lap of the governor. Though the industry need in the area could be deemed really strong, the prospect of extra competitors from nearby Belmont could have an influence on Aqueduct’s underlining financial feasibility, especially contemplating that somewhat significantly less than thirty% of the internet earn is retained by the operator.
Plans to relocate Monticello Raceway into a vacation resort complicated are getting reconsidered possibly owing to both the possible opening of at the very least one or probably two racino operations in the NY metro location, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.
Ohio
But another gaming proposal is getting set forth in Ohio, after very last year’s variation was turned down by the voters. This prepare calls for one on line casino each in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment necessary of $250 million, as properly as an initial licensing price of $50 million, and a 33 p.c tax on gaming profits.
Pennsylvania
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot amenities still wallow in a political mire, but are expected to start development this yr.
South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and incorporate 300 online games, 140 rooms and a wide assortment of features.
Texas
Legislators are proposing a voter referendum that would amend the state constitution to enable casino gambling in designated places, as effectively as permit gambling on American Indian lands in Texas and at current racetracks.
West Virginia
The Greenbriar, the state’s venerable vacation resort facility has submitted for bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. Condition authorities has proffered the idea of making it possible for the resort to offer casino games, but this effort is in also early a stage to have any traction one way or an additional.
Indian Gaming
A current Supreme Courtroom ruling that restricts the taking of lands into believe in on behalf of federally acknowledged American Indian tribes has additional stymied some new Class III gaming projects across the region. Furthermore, there had been eleven Indian casino tasks rejected by the DOI last calendar year due to the fact of its new rule that casinos have to be around enough to a reservation that tribal members can perform at them. It has been suggested that the new Obama administration may be far more sympathetic to the advancement of Indian gaming assignments, but this problem has yet to be dealt with.
Meanwhile, there are other Course III tasks in the a variety of phases of improvement. The Seneca on line casino venture in Buffalo, NY, although operating a small temporary facility, has delayed an currently beneath construction permanent facility until finally the market place rebounds. They have also expressed an interest in developing a casino in the Catskills. The state gaming compact with Seminoles in Florida is currently being challenged, and could influence their plans for greater assignments. There are new Indian gaming projects set to open up in Michigan and Oklahoma this year, and other people are in the arranging stage. Texas may enable the reopening of Indian gaming facilities and permit other venue and there are strategies afoot by the Navajos in Arizona to assemble extra casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Complete gaming profits in Atlantic Metropolis has declined 7.six per cent, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is finding by itself in an intensive comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been positioned in Atlantic Metropolis, in which it seemed as if it might truly even eclipse the Las Vegas Strip’s annual gaming revenues.
Gradually however its industry share was currently being encroached on, first by the improvement of a massive Class III gaming procedure in Connecticut, and then another slots operations in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.
Now, with the prepared opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening close to Atlantic City’s long term potential customers. It truly is reliance on working day-trippers lulled it into a fake sense of safety, and it now finds itself possessing to redefine its mission statement to “destination vacation resort.”
The only problem with this method even so is that it is ill-equipped to pull it off. For all intents and functions, Atlantic City is beneath-roomed and/or over-gamed. There is basically not sufficient day-tripper marketplace to go about, and their powerful trading area is tightening, as the peripheral populations northward now/will have a lot more prepared access to a widened source in New York (Yonkers, and quickly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean obtain, the city’s only real competitive advantages are its lodge potential and the availability of table games, although the latter is probably to eventuate in Pennsylvania, and probably Delaware. In buy to sufficiently contend as a vacation spot resort the town wants to develop additional guest rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip properties – correct gaming destinations, in that they do not have considerably of a day-trip marketplace, except for the ‘locals’ – have an average of .87 gaming positions for each guest area even though Atlantic City’s common is 2.74 positions for every visitor place.
It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, equally of which extra new rooms in 2008, ended up the minimum impacted by the most current downturn. The Borgata seasoned a gaming income drop of one.6 p.c, although Harrah’s Marina noted a four.9 per cent improve in comparison to 2007. In addition, the most difficult hit venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest number of rooms. In the meantime some of the venues are teetering on viability, like the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and dropping valuation.
With a continual increase in gaming revenues by means of 2006, the metropolis seemed prime for more development, which precipitated arranging for 4 new vacation resort assignments, each of which have now been indefinitely delayed. Revel Leisure Group’s $2.five billion project stays an iron skeleton, Pinnacle Entertainment has introduced it may seek out to market its razed Sands internet site, MGM Mirage has shelved its on line casino ideas, and Penn National seems to have stopped its pursuit of the Bader Subject airport website.