A Period of time of Adjustment
Oops! That large hissing audio is the gaming balloon that had been increasing over the years, slowly shedding air. But, it has not been a tide that decreased all ships nevertheless, as some emerging and expanding gaming jurisdictions confirmed sturdy progress in 2008.
General, the industrial and racetrack casino sectors (excluding Indian gaming), experienced a three.five p.c drop in gaming revenues for 2008, making a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a achieve of almost $one billion in 2008, thereby bringing the Industrial sector market decrease to $one.8 billion, or six.7 per cent. Nevada was the most significant loser in 2008, dropping virtually $one.3 billion, far more than 50 percent of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most portion, casino operators had been caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not right up until the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of 12 months above year marketplace progress across the nation and the availability of sufficient credit history and equity cash, new development and enlargement proliferated in recent many years. Right now, confronted with the realities of declining, or at very best stagnant demand, many of these tasks are now regarded in excess of-leveraged and/or above-sized. As a result a lot of gaming companies are making an attempt to renegotiate their personal debt – created far more difficult by reduced valuations – even though also paring down operational costs. The latter has turn out to be a very problematic conundrum when working with the opposition, specifically in those jurisdictions that are now vying for market place shares with new rising casino initiatives in neighboring areas. A subject matter we discuss much more fully in the Condition by State investigation segment of this publication.
As a consequence of these problems the gaming industry landscape is now strewn with impending fatalities. Amongst the more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the record grows each and every 7 days.
“How lengthy will these economic situations persist, and are we at the base but?” are inquiries no one particular appears to be answering but. What is very clear nonetheless is that most gaming jurisdictions will have to understand how to offer with a smaller sized pie.
Be aware:
This evaluation consists of only gaming revenues of certified casinos and pari-mutuel stores that offer casino online games, and not Indian gaming functions, card rooms, or small non-on line casino kind slot places. The complete write-up, like earnings tables is obtainable on our world wide web web page.
Enter/Output Design
A key element that seems to have arisen from the ashes of this current trend is that several on line casino tasks have been just also huge to support themselves. The input, in phrases of investment decision bucks, was not proportional to the output, in terms of web profit soon after personal debt provider, in contrast to earlier accomplished results. A lot more and/or bigger is not constantly greater. Viewing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the growth of a lot more comprehensive features in numerous other jurisdictions. The flaw in this strategy nonetheless is that the fees connected with widening marketplace penetration and occasioned-use, are substantially increased than these incurred to attract the base market.
As daytripper markets become a lot more aggressive, on line casino venues will have to count much more and far more on their in-home hotel patrons, and dimension their houses (and anticipations) accordingly. Although Steve Wynn commenced a major pattern in generating up-market place mega-locations, there simply was not ample demand from customers on the Strip to warrant the a lot of other equivalent initiatives that adopted that aimed at the same specialized niche.
The trick is to strike a content medium in venture configurations which of system need much less of a ‘seat-of-pants’ approach, and 1 that is much more researched. A shameless plug for growth consultants like ourselves.
Other Gaming Routines
Though there are no released in depth information of American Indian gaming revenues, anecdotal evidence seems to advise that this section has been as tough hit as the Industrial sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, symbolizing a drop of about 7 p.c, or nearly $114 million, far more than doubling the 3.five per cent fall from the 12 months just before. This market place is evidently even now reeling from the ripple-effect of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Office of Gaming reports that contributions dependent on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the preceding yr lowering .8 p.c in the very first quarter, seven.5 p.c in the next quarter, nine.five per cent in the third quarter, and sixteen.one p.c in the fourth quarter.
Some SEC reporting Indian gaming properties report related decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, reviews that even though calendar year 2008 showed an practically 2 percent development rate in gaming revenues, there was an eight.7 % decrease in the third quarter and an nearly ten % decrease in the fourth quarter of 2008, in comparison with 2007. Gaming revenue developments at close by Niagara Falls, Ontario have been down 1.five% in 2008 compared with 2007.
It truly is been a blended-bag for condition lotteries across the nation. The North American Association of Point out & Provincial Lotteries studies that U.S. lotteries generated a complete of $60.six billion in revenue in fiscal 2008, up about 3 p.c from the earlier 12 months however some jurisdictions noted decreases, most notably California, which showed an eight p.c drop. Inasmuch as some of these states are on different fiscal yr finishes, it would seem to be that the information does not reflect the effect of 3rd and/or fourth quarter results.
In accordance to information presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling seven per cent to $thirteen.seven billion in 2008, vs . $fourteen.seven billion in 2007.
Prepared & Proposed New Expansions
As formerly mentioned, it has been new gaming jurisdictions that have spawned a lot of the development in annual on line casino/racino revenues in excess of the years, and their effect is apt to keep on into the around foreseeable future.
Florida
Miami Dade voters accredited a ballot concern that allows each of three 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, whilst the Calder installation in Miami Gardens has but to introduced its programs. There are many other proposals getting regarded as that would even more broaden casino improvement throughout the state.
Illinois
The state lastly acquired about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,200+ match casino positioned in Des Plaines just east of O’Hare. The new facility is not probably to open up until 2010. There has also been some dialogue about enabling an enhance in for each spot 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 software that makes it possible for for the improvement of four casino gaming zones and slots at current horse and puppy tracks appears mired, as only one particular facility is presently below design, while three other proposals ended up rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is located so shut to the state line that its parking good deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 desk games, together with a next phase thanks to open up in 2011 with 875 slots and twenty table game titles. The condition has prolonged the application method for the other a few zones until April, 2009.
Kentucky
There is nevertheless a whole lot of ‘jockeying’ going on, but the prospect of as several as eight slot parlors and racinos appears to be back on the front-burner, but probably not resolved for the duration of the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most recent being the 390 room M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new resorts incorporate two factors of the Metropolis Middle task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino growth initiatives in Baton Rouge and Lake Charles, although delayed, are described to even now be on-keep track of for opening this calendar year and/or early 2010.
Maine
There is a invoice under thought that could much more than double Penn National’s slot devices to three,000, as well as a proposal that would eliminate the restriction that slots be found inside five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to allow slots, may be considering transferring to a a lot more hospitable town.
Maryland
A referendum was authorized in November, 2008 that allows for the advancement of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot even though it is not as intense as the point out experienced anticipated.
Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has run into a variety of funding concerns and even though the hotel portion is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled again considerably, is still on observe to open up this calendar year.
New England
Massachusetts, a sleeping-large in phrases of market place prospective, is still maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to muster the political assistance. A latest examine concluded by Dartmouth College estimates that Massachusetts resident expended a lot more than $920 million final calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an choice to create casinos, nonetheless the topic is most likely to be revisited, especially 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 devices at racetracks by not too long ago agreeing to keep 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 equipment particularly at the Meadowlands. (See The Nor’easter Squeeze area)
New York
Just when it seemed as if Aqueduct’s four,five hundred VLT facility would ultimately be developed, the successful bidder indicated an lack of ability to make the required $370 million fee, citing the recent lending weather, and throwing the undertaking back into the lap of the governor. Although the market place demand in the region could be considered very powerful, the prospect of additional competition from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, specifically thinking about that somewhat considerably less than thirty% of the internet acquire is retained by the operator.
Strategies to relocate Monticello Raceway into a resort sophisticated are being reconsidered maybe owing to equally the possible opening of at the very least one or probably two racino functions in the NY metro spot, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.
Ohio
Yet yet another gaming proposal is becoming set forth in Ohio, after previous year’s edition was turned down by the voters. This program phone calls for one casino each and every in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment necessary of $250 million, as effectively as an preliminary licensing price of $fifty million, and a 33 % tax on gaming profits.
Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers project in Pittsburgh is expected to be operational in August, ’09 even though Philadelphia’s two slot services nonetheless wallow in a political mire, but are predicted to start off building this 12 months.
South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and incorporate 300 games, 140 rooms and a wide range of amenities.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to let casino gambling in selected areas, as well as permit gambling on American Indian lands in Texas and at current racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer. Point out federal government has proffered the idea of permitting the resort to supply on line casino online games, but this hard work is in also early a phase to have any traction 1 way or one more.
Indian Gaming
A recent Supreme Court ruling that restricts the having of lands into trust on behalf of federally recognized American Indian tribes has further stymied some new Course III gaming projects throughout the place. Moreover, there have been eleven Indian on line casino assignments rejected by the DOI final year since of its new rule that casinos must be close to sufficient to a reservation that tribal members can function at them. It has been advised that the new Obama administration may be much more sympathetic to the growth of Indian gaming tasks, but this situation has nevertheless to be addressed.
Meanwhile, there are other Class III tasks in the various levels of growth. The Seneca casino undertaking in Buffalo, NY, whilst working a small momentary facility, has delayed an already under development everlasting facility till the market place rebounds. They have also expressed an desire in building a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could effect their ideas for larger initiatives. There are new Indian gaming assignments set to open in Michigan and Oklahoma this yr, and other folks are in the organizing stage. Texas may possibly allow the reopening of Indian gaming amenities and let other venue and there are ideas afoot by the Navajos in Arizona to build extra casinos. California is poised to open up two to 3 new Course III casinos in 2009/10.
The Nor’easter Squeeze
Overall gaming revenue in Atlantic Town has declined 7.six p.c, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the metropolis is finding alone in an extreme comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast have been positioned in Atlantic Town, exactly where it appeared as if it might really even eclipse the Las Vegas Strip’s annual gaming revenues.
Slowly even so its market place share was being encroached upon, first by the development of a big Course III gaming procedure in Connecticut, and then yet another slots operations in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.
Now, with the planned opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening all around Atlantic City’s potential potential customers. It is reliance on working day-trippers lulled it into a false perception of stability, and it now finds itself having to redefine its mission statement to “location resort.”
The only dilemma with this method nonetheless is that it is ill-outfitted to pull it off. For all intents and functions, Atlantic Town is beneath-roomed and/or over-gamed. There is just not sufficient day-tripper market to go about, and their successful buying and selling spot is tightening, as the peripheral populations northward now/will have much more all set entry to a widened provide in New York (Yonkers, and quickly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only actual aggressive rewards are its hotel capability and the availability of desk games, although the latter is most likely to eventuate in Pennsylvania, and possibly Delaware. In purchase to adequately compete as a destination resort the city needs to create extra guest rooms and not essentially gaming capacity. By www.gbcity-w.com , the Las Vegas Strip properties – accurate gaming destinations, in that they do not have significantly of a day-vacation marketplace, other than for the ‘locals’ – have an regular of .87 gaming positions for each guest area while Atlantic City’s common is 2.74 positions for every visitor place.
It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, the two of which extra new rooms in 2008, have been the minimum impacted by the newest downturn. The Borgata skilled a gaming profits drop of 1.six p.c, while Harrah’s Marina reported a 4.nine percent increase when compared to 2007. Furthermore, the most difficult hit venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest variety of rooms. In the meantime some of the venues are teetering on viability, such as the the Trump homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.
With a regular rise in gaming revenues by means of 2006, the metropolis appeared key for additional development, which precipitated organizing for four new resort assignments, each and every of which have now been indefinitely delayed. Revel Amusement Group’s $two.five billion venture remains an iron skeleton, Pinnacle Entertainment has announced it might seek out to promote its razed Sands internet site, MGM Mirage has shelved its casino plans, and Penn National appears to have stopped its pursuit of the Bader Field airport web site.