A Period of Adjustment
Oops! That giant hissing seem is the gaming balloon that had been developing over the a long time, slowly and gradually dropping air. But, it has not been a tide that reduced all ships however, as some emerging and increasing gaming jurisdictions showed powerful progress in 2008.
All round, the professional and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.five % decline in gaming revenues for 2008, creating a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a gain of nearly $one billion in 2008, thereby bringing the Industrial sector industry decrease to $1.8 billion, or six.seven percent. Nevada was the largest loser in 2008, dropping almost $1.3 billion, far more than 50 % of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most part, casino operators have been caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not till the 3rd and fourth quarters when it genuinely nosedived. Driving the crest of calendar year more than calendar year marketplace development across the nation and the availability of ample credit history and equity funds, new building and growth proliferated in current years. Right now, faced with the realities of declining, or at very best stagnant demand from customers, many of these projects are now considered more than-leveraged and/or above-sized. As a result a lot of gaming companies are attempting to renegotiate their credit card debt – produced a lot more difficult by decrease valuations – even though also paring down operational fees. The latter has grow to be a quite problematic conundrum when working with the opposition, specially in those jurisdictions that are now vying for marketplace shares with new rising casino assignments in neighboring areas. A subject matter we examine a lot more entirely in the State by Point out examination part of this publication.
As a outcome of these situations the gaming market landscape is now strewn with impending fatalities. Between the far more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows each week.
“How prolonged will these economic conditions persist, and are we at the base but?” are concerns no one particular appears to be answering yet. What is obvious nonetheless is that most gaming jurisdictions will have to find out how to deal with a smaller sized pie.
Notice:
This examination includes only gaming revenues of certified casinos and pari-mutuel outlets that provide on line casino online games, and not Indian gaming functions, card rooms, or modest non-on line casino type slot places. The entire article, such as earnings tables is obtainable on our internet page.
Input/Output Product
A essential aspect that seems to have arisen from the ashes of this current craze is that numerous casino tasks had been just also big to assistance on their own. The input, in phrases of investment dollars, was not proportional to the output, in conditions of web profit after financial debt support, in contrast to previously attained final results. Much more and/or bigger is not usually much better. Viewing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the advancement of far more thorough features in several other jurisdictions. The flaw in this technique even so is that the charges associated with widening industry penetration and occasioned-use, are significantly higher than people incurred to draw in the foundation industry.
As daytripper marketplaces become far more aggressive, casino venues will have to count far more and a lot more on their in-home resort patrons, and dimensions their houses (and anticipations) accordingly. While Steve Wynn commenced a main trend in generating up-industry mega-destinations, there merely was not adequate need on the Strip to warrant the several other comparable assignments that followed that aimed at the very same area of interest.
The trick is to strike a satisfied medium in project configurations which of course need less of a ‘seat-of-pants’ strategy, and one that is much more analyzed. A shameless plug for advancement consultants like ourselves.
Other Gaming Pursuits
Despite the fact that there are no released comprehensive data of American Indian gaming revenues, anecdotal proof appears to suggest that this phase has been as tough hit as the Professional sector. The two Connecticut Indian gaming installations report slot earnings of $1.6 billion in 2008, symbolizing a drop of about 7 %, or nearly $114 million, a lot more than doubling the three.5 p.c drop from the yr just before. This market place is evidently nevertheless reeling from the ripple-impact of a casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Section of Gaming reports that contributions primarily based on a gaming earnings formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the previous calendar year decreasing .8 per cent in the initial quarter, 7.five % in the second quarter, 9.five per cent in the third quarter, and sixteen.one percent in the fourth quarter.
Some SEC reporting Indian gaming properties report related decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reports that even though calendar yr 2008 showed an almost two % development fee in gaming revenues, there was an eight.seven per cent decline in the 3rd quarter and an nearly 10 p.c decline in the fourth quarter of 2008, compared with 2007. Gaming earnings trends at nearby Niagara Falls, Ontario have been down 1.5% in 2008 in comparison with 2007.
It really is been a combined-bag for condition lotteries throughout the region. tototojudge.com of Condition & Provincial Lotteries studies that U.S. lotteries created a total of $60.six billion in product sales in fiscal 2008, up about 3 per cent from the earlier calendar year yet some jurisdictions reported decreases, most notably California, which confirmed an eight percent fall. Inasmuch as some of these states are on a variety of fiscal calendar year ends, it would look that the data does not mirror the impact of 3rd and/or fourth quarter results.
According to data offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 per cent to $thirteen.seven billion in 2008, versus $fourteen.7 billion in 2007.
Prepared & Proposed New Expansions
As previously noted, it has been new gaming jurisdictions that have spawned significantly of the expansion in annual on line casino/racino revenues in excess of the many years, and their influence is apt to proceed into the close to long term.
Florida
Miami Dade voters accredited a ballot problem that allows every of 3 pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Canine Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has but to introduced its programs. There are quite a few other proposals becoming regarded that would even more broaden on line casino improvement throughout the condition.
Illinois
The state finally got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,200+ sport on line casino positioned in Des Plaines just east of O’Hare. The new facility is not likely to open till 2010. There has also been some dialogue about allowing an boost in per area gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.
Kansas
The state’s expanded lottery program that makes it possible for for the growth of four on line casino gaming zones and slots at current horse and dog tracks seems mired, as only one particular facility is presently under construction, although a few other proposals have been rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is found so close to the point out line that its parking whole lot is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk video games, together with a second period due to open in 2011 with 875 slots and 20 desk game titles. The state has prolonged the software process for the other a few zones till April, 2009.
Kentucky
There is nevertheless a good deal of ‘jockeying’ going on, but the prospect of as several as 8 slot parlors and racinos appears to be back again on the entrance-burner, but very likely not solved throughout the recent legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most recent being the 390 area M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Tough Rock and new hotels include two parts of the Metropolis Middle project, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino improvement initiatives in Baton Rouge and Lake Charles, while delayed, are noted to even now be on-track for opening this year and/or early 2010.
Maine
There is a invoice below thought that could far more than double Penn National’s slot equipment to 3,000, as effectively as a proposal that would remove the restriction that slots be situated inside five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing local inhabitants to permit slots, could be considering relocating to a more hospitable city.
Maryland
A referendum was accredited in November, 2008 that permits for the improvement of 5 casinos with a total of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the state had anticipated.
Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has operate into numerous funding issues and although the hotel part is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back fairly, is nevertheless on monitor to open up this 12 months.
New England
Massachusetts, a sleeping-large in conditions of market place potential, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot appear to muster the political assistance. A current study concluded by Dartmouth College estimates that Massachusetts resident expended a lot more than $920 million final yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an alternative to produce casinos, even so the subject matter is most likely to be revisited, specifically if Massachusetts decides to go ahead. There are also attempts 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 further tax. The governor nonetheless, has appointed a new panel to research the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot machines particularly 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 last but not least be designed, the profitable bidder indicated an lack of ability to make the required $370 million fee, citing the existing lending local climate, and throwing the project back again into the lap of the governor. Even though the market demand from customers in the spot could be considered fairly strong, the prospect of additional opposition from nearby Belmont could have an affect on Aqueduct’s underlining financial feasibility, especially considering that marginally much less than 30% of the net acquire is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort complicated are becoming reconsidered probably owing to the two the probable opening of at the very least a single or maybe two racino functions in the NY metro area, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.
Ohio
But yet another gaming proposal is currently being place forth in Ohio, soon after final year’s edition was turned down by the voters. This prepare calls for one particular casino every in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment needed of $250 million, as properly as an initial licensing price of $50 million, and a 33 % tax on gaming revenue.
Pennsylvania
The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 although Philadelphia’s two slot amenities nonetheless wallow in a political mire, but are expected to begin building this yr.
South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and include 300 games, a hundred and forty rooms and a vast assortment of amenities.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to enable on line casino gambling in specified areas, as nicely as allow 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 federal government has proffered the idea of enabling the vacation resort to offer you casino video games, but this effort is in too early a phase to have any traction 1 way or an additional.
Indian Gaming
A latest Supreme Court ruling that restricts the getting of lands into have confidence in on behalf of federally acknowledged American Indian tribes has further stymied some new Course III gaming tasks across the region. Moreover, there had been eleven Indian on line casino assignments turned down by the DOI final year because of its new rule that casinos should be around adequate to a reservation that tribal users can function at them. It has been recommended that the new Obama administration may possibly be much more sympathetic to the growth of Indian gaming initiatives, but this concern has yet to be addressed.
Meanwhile, there are other Course III initiatives in the numerous levels of development. The Seneca on line casino undertaking in Buffalo, NY, even though operating a small short term facility, has delayed an previously beneath development everlasting facility right up until the market rebounds. They have also expressed an curiosity in establishing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could affect their programs for larger projects. There are new Indian gaming tasks set to open in Michigan and Oklahoma this yr, and other individuals are in the planning stage. Texas may let the reopening of Indian gaming facilities and allow other venue and there are ideas afoot by the Navajos in Arizona to assemble further casinos. California is poised to open two to a few new Class III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming revenue in Atlantic Metropolis has declined 7.6 p.c, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the metropolis is locating by itself in an powerful comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast have been situated in Atlantic Metropolis, in which it looked as if it might truly even eclipse the Las Vegas Strip’s annual gaming revenues.
Gradually however its market place share was getting encroached on, 1st by the improvement of a big Class III gaming procedure in Connecticut, and then one more slots functions 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 planned opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening close to Atlantic City’s foreseeable future potential clients. It’s reliance on working day-trippers lulled it into a fake feeling of safety, and it now finds by itself possessing to redefine its mission statement to “vacation spot vacation resort.”
The only difficulty with this method however is that it is unwell-equipped to pull it off. For all intents and functions, Atlantic Town is beneath-roomed and/or in excess of-gamed. There is merely not ample working day-tripper market to go around, and their powerful trading spot is tightening, as the peripheral populations northward now/will have a lot more all set access to a widened provide in New York (Yonkers, and soon at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only actual competitive advantages are its lodge potential and the availability of table online games, despite the fact that the latter is likely to eventuate in Pennsylvania, and perhaps Delaware. In purchase to sufficiently contend as a spot vacation resort the city wants to develop additional guest rooms and not always gaming ability. By comparison, the Las Vegas Strip homes – correct gaming locations, in that they do not have a lot of a day-trip market place, apart from for the ‘locals’ – have an regular of .87 gaming positions per guest room even though Atlantic City’s typical is 2.74 positions per visitor area.
It is not a coincidence that Atlantic City’s two premier hotels, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, ended up the the very least impacted by the most recent downturn. The Borgata experienced a gaming revenue drop of one.six percent, while Harrah’s Marina noted a 4.nine % enhance when compared to 2007. Moreover, the hardest strike venues, particularly 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, including the the Trump houses and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.
With a constant rise in gaming revenues by means of 2006, the town appeared primary for more advancement, which precipitated planning for four new vacation resort initiatives, every of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.5 billion task continues to be an iron skeleton, Pinnacle Enjoyment has announced it may well seek out to sell its razed Sands web site, MGM Mirage has shelved its on line casino strategies, and Penn Countrywide seems to have stopped its pursuit of the Bader Area airport web site.