A Period of time of Adjustment
Oops! That big hissing audio is the gaming balloon that had been developing above the a long time, slowly shedding air. But, it has not been a tide that decreased all ships even so, as some emerging and expanding gaming jurisdictions showed sturdy growth in 2008.
Total, the professional and racetrack on line casino sectors (excluding Indian gaming), experienced a three.5 % decrease in gaming revenues for 2008, producing a whole 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 almost $1 billion in 2008, thus bringing the Professional sector industry drop to $1.eight billion, or 6.7 %. Nevada was the largest loser in 2008, dropping virtually $one.3 billion, more than half of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most component, casino operators ended up caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not till the 3rd and fourth quarters when it really nosedived. Riding the crest of 12 months in excess of calendar year market development across the nation and the availability of ample credit and fairness funds, new design and expansion proliferated in latest a long time. These days, faced with the realities of declining, or at ideal stagnant desire, a lot of of these tasks are now regarded in excess of-leveraged and/or more than-sized. As a end result many gaming businesses are attempting to renegotiate their debt – manufactured more hard by lower valuations – although also paring down operational charges. The latter has turn into a really problematic conundrum when dealing with the competition, especially in individuals jurisdictions that are now vying for marketplace shares with new emerging casino tasks in neighboring locations. A matter we examine a lot more fully in the Point out by State analysis segment of this publication.
As a outcome of these circumstances the gaming business landscape is now strewn with impending fatalities. Amongst the more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows each week.
“How extended will these financial conditions persist, and are we at the base yet?” are questions no a single appears to be answering but. What is distinct even so is that most gaming jurisdictions will have to find out how to deal with a more compact pie.
Be aware:
This evaluation involves only gaming revenues of licensed casinos and pari-mutuel shops that offer you on line casino online games, and not Indian gaming functions, card rooms, or small non-on line casino type slot spots. The total report, such as earnings tables is available on our internet website page.
Input/Output Product
A essential factor that looks to have arisen from the ashes of this present craze is that numerous casino initiatives had been just way too large to assistance by themselves. The input, in conditions of expenditure bucks, was not proportional to the output, in conditions of web profit soon after financial debt support, in contrast to beforehand accomplished final results. Much more and/or even bigger is not always greater. Viewing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of a lot more complete amenities in many other jurisdictions. The flaw in this method nonetheless is that the charges related with widening marketplace penetration and occasioned-use, are drastically increased than individuals incurred to attract the foundation market.
As daytripper marketplaces turn out to be far more aggressive, casino venues will have to count much more and more on their in-property hotel patrons, and size their houses (and expectations) accordingly. Although Steve Wynn started a significant craze in creating up-market place mega-destinations, there basically was not ample demand on the Strip to warrant the several other equivalent projects that adopted that aimed at the very same specialized niche.
The trick is to strike a content medium in task configurations which of system need considerably less of a ‘seat-of-pants’ technique, and a single that is far more studied. A shameless plug for advancement consultants like ourselves.
Other Gaming Pursuits
Though there are no printed in depth info of American Indian gaming revenues, anecdotal evidence appears to propose that this phase has been as difficult strike as the Business sector. The two Connecticut Indian gaming installations report slot earnings of $1.6 billion in 2008, symbolizing a fall of about 7 p.c, or almost $114 million, far more than doubling the 3.five % drop from the year prior to. This marketplace is seemingly nonetheless reeling from the ripple-impact of a casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Office of Gaming studies that contributions based on a gaming income method from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in comparison to the preceding yr decreasing .8 % in the 1st quarter, 7.five % in the second quarter, 9.5 per cent in the 3rd quarter, and 16.one p.c in the fourth quarter.
Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, reports that while calendar calendar year 2008 confirmed an practically 2 per cent progress charge in gaming revenues, there was an 8.7 per cent decrease in the 3rd quarter and an practically 10 percent decline in the fourth quarter of 2008, in comparison with 2007. Gaming income tendencies at nearby Niagara Falls, Ontario had been down 1.five% in 2008 in comparison with 2007.
It is been a combined-bag for condition lotteries across the region. The North American Association of State & Provincial Lotteries reports that U.S. lotteries generated a whole of $sixty.6 billion in product sales in fiscal 2008, up about three percent from the prior year nevertheless some jurisdictions described decreases, most notably California, which showed an eight per cent drop. Inasmuch as some of these states are on different fiscal calendar year finishes, it would seem that the information does not replicate the influence of third and/or fourth quarter outcomes.
In accordance to data provided by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 percent to $13.7 billion in 2008, compared to $fourteen.seven billion in 2007.
Prepared & Proposed New Expansions
As beforehand noted, it has been new gaming jurisdictions that have spawned a lot of the progress in once-a-year casino/racino revenues above the many years, and their influence is apt to proceed into the near foreseeable future.
Florida
Miami Dade voters authorized a ballot concern that enables every single of three pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Puppy Track and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to announced its strategies. There are several other proposals being considered that would even more grow casino advancement throughout the point out.
Illinois
The point out last but not least received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,200+ game on line casino found in Des Plaines just east of O’Hare. The new facility is not probably to open up until finally 2010. There has also been some discussion about allowing an enhance in for each location gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.
Kansas
The state’s expanded lottery system that makes it possible for for the growth of four casino gaming zones and slots at existing horse and puppy tracks appears mired, as only one facility is presently beneath construction, while 3 other proposals had 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 near to the point out line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 table game titles, together with a second phase owing to open in 2011 with 875 slots and twenty desk online games. The condition has extended the application approach for the other 3 zones right up until April, 2009.
Kentucky
There is still a great deal of ‘jockeying’ likely on, but the prospect of as a lot of as 8 slot parlors and racinos appears to be back again on the entrance-burner, but very likely not settled in the course of the current legislative session.
Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most modern being the 390 place M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new accommodations incorporate two parts of the Metropolis Center undertaking, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino advancement tasks in Baton Rouge and Lake Charles, while delayed, are documented to still be on-keep track of for opening this calendar year and/or early 2010.
Maine
There is a monthly bill under thing to consider that could far more than double Penn National’s slot devices to three,000, as properly as a proposal that would get rid of the restriction that slots be located inside of five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to allow slots, could be contemplating moving to a a lot more hospitable city.
Maryland
A referendum was approved in November, 2008 that enables for the improvement of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot even though it is not as powerful as the point out experienced anticipated.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has operate into various financing troubles and while the lodge part is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back considerably, is still on monitor to open up this yr.
New England
Massachusetts, a sleeping-big in terms of market place possible, is still maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can not seem to muster the political assistance. A modern review accomplished by Dartmouth University estimates that Massachusetts resident put in far more than $920 million very last calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an selection to create casinos, nevertheless the topic is likely to be revisited, particularly if Massachusetts decides to go ahead. There are also tries in Maine to reconsider its options.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by just lately agreeing to proceed augmenting purses with an further tax. The governor however, has appointed a new panel to research the state’s sagging racing system which ironically, can only be preserved by making it possible for the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze area)
New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would ultimately be designed, the profitable bidder indicated an lack of ability to make the necessary $370 million price, citing the current lending local climate, and throwing the project back into the lap of the governor. Despite the fact that the market need in the area could be deemed fairly powerful, the prospect of further opposition from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, especially considering that slightly less than thirty% of the net win is retained by the operator.
Plans to relocate Monticello Raceway into a resort intricate are being reconsidered possibly owing to the two the possible opening of at the very least one particular or probably two racino functions in the NY metro region, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.
Ohio
Yet one more gaming proposal is becoming set forth in Ohio, following last year’s model was turned down by the voters. This strategy phone calls for one casino each in the state’s premier metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment decision essential of $250 million, as well as an initial licensing price of $50 million, and a 33 percent tax on gaming profits.
Pennsylvania
The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot services still wallow in a political mire, but are anticipated to start development this year.
South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and consist of 300 games, a hundred and forty rooms and a wide assortment of features.
Texas
Legislators are proposing a voter referendum that would amend the condition structure to enable casino gambling in selected locations, as effectively as enable 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 Accommodations, who have reportedly tendered an offer. State authorities has proffered the idea of permitting the resort to offer you casino game titles, but this effort is in as well early a stage to have any traction 1 way or one more.
Indian Gaming
A modern Supreme Courtroom ruling that restricts the taking of lands into have faith in on behalf of federally identified American Indian tribes has even more stymied some new Course III gaming initiatives throughout the country. Additionally, there ended up eleven Indian casino assignments turned down by the DOI previous year simply because of its new rule that casinos should be in close proximity to sufficient to a reservation that tribal users can perform at them. It has been proposed that the new Obama administration may possibly be more sympathetic to the advancement of Indian gaming initiatives, but this issue has nevertheless to be dealt with.
In the meantime, there are other Class III assignments in the numerous levels of growth. The Seneca casino project in Buffalo, NY, whilst functioning a small momentary facility, has delayed an previously underneath development long lasting facility right up until the marketplace rebounds. They have also expressed an interest in developing a on line casino in the Catskills. Winbet gaming compact with Seminoles in Florida is getting challenged, and could affect their ideas for more substantial tasks. There are new Indian gaming projects established to open up in Michigan and Oklahoma this year, and others are in the preparing stage. Texas might permit the reopening of Indian gaming amenities and let other location and there are plans afoot by the Navajos in Arizona to assemble additional casinos. California is poised to open two to 3 new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Complete gaming revenue in Atlantic Metropolis has declined 7.6 per cent, from $4.9 billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the metropolis is finding by itself in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been located in Atlantic Town, where it appeared as if it may truly even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Gradually however its industry share was becoming encroached upon, very first by the advancement of a large Course III gaming operation in Connecticut, and then an additional slots functions in Rhode Island, and then movie 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 operations in Philadelphia, the noose is tightening close to Atlantic City’s future prospective customers. It is reliance on day-trippers lulled it into a bogus sense of safety, and it now finds by itself getting to redefine its mission statement to “location resort.”
The only difficulty with this strategy however is that it is ill-geared up to pull it off. For all intents and functions, Atlantic City is beneath-roomed and/or more than-gamed. There is just not adequate day-tripper market place to go around, and their effective buying and selling spot is tightening, as the peripheral populations northward now/will have much more completely ready accessibility to a widened offer 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 access, the city’s only real aggressive rewards are its lodge capacity and the availability of table game titles, although the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently contend as a vacation spot resort the city requirements to produce extra visitor rooms and not essentially gaming capacity. By comparison, the Las Vegas Strip homes – accurate gaming locations, in that they do not have much of a working day-vacation industry, apart from for the ‘locals’ – have an average of .87 gaming positions for each guest place whilst Atlantic City’s typical is two.74 positions per guest area.
It is not a coincidence that Atlantic City’s two biggest lodges, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, have been the least impacted by the latest downturn. The Borgata skilled a gaming earnings drop of 1.6 percent, even though Harrah’s Marina reported a 4.nine p.c enhance in comparison to 2007. Moreover, the hardest hit venues, namely 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, which includes the the Trump houses and Resorts with the hoped for sale of the Tropicana has been additional delayed, and shedding valuation.
With a constant rise in gaming revenues through 2006, the town appeared prime for even more advancement, which precipitated arranging for 4 new resort initiatives, every single of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion project remains an iron skeleton, Pinnacle Entertainment has announced it may possibly seek out to promote its razed Sands internet site, MGM Mirage has shelved its on line casino programs, and Penn Countrywide appears to have stopped its pursuit of the Bader Field airport web site.