A Period of time of Adjustment
Oops! That big hissing sound is the gaming balloon that experienced been increasing over the many years, slowly dropping air. But, it has not been a tide that lowered all ships however, as some emerging and expanding gaming jurisdictions showed robust growth in 2008.
General, the industrial and racetrack casino sectors (excluding Indian gaming), skilled a three.5 percent 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 showed a obtain of almost $one billion in 2008, thus bringing the Industrial sector market place decline to $1.8 billion, or 6.seven per cent. Nevada was the largest loser in 2008, dropping virtually $1.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most portion, casino operators had been caught relatively flat-footed by the extent of the 2008 earnings downturn, as it was not until finally the 3rd and fourth quarters when it truly nosedived. Driving the crest of 12 months more than 12 months market growth throughout the country and the availability of ample credit and equity funds, new building and growth proliferated in recent years. These days, confronted with the realities of declining, or at ideal stagnant demand, many of these initiatives are now deemed more than-leveraged and/or over-sized. As a end result a lot of gaming firms are trying to renegotiate their financial debt – made more tough by reduced valuations – although also paring down operational costs. The latter has become a quite problematic conundrum when dealing with the competition, specifically in individuals jurisdictions that are now vying for industry shares with new emerging on line casino tasks in neighboring places. A subject matter we examine more entirely in the State by Condition analysis part of this publication.
As a consequence of these conditions the gaming market landscape is now strewn with impending fatalities. Between the far more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the listing grows each 7 days.
“How prolonged will these financial conditions persist, and are we at the bottom however?” are concerns no 1 seems to be answering nevertheless. What is very clear nevertheless is that most gaming jurisdictions will have to discover how to deal with a smaller pie.
Be aware:
This investigation contains only gaming revenues of certified casinos and pari-mutuel retailers that offer you on line casino game titles, and not Indian gaming operations, card rooms, or small non-on line casino type slot places. The whole report, such as income tables is offered on our world wide web web page.
Enter/Output Design
A essential aspect that appears to have arisen from the ashes of this present pattern is that many casino tasks have been just too large to support by themselves. The enter, in terms of expenditure pounds, was not proportional to the output, in conditions of internet profit following credit card debt provider, when compared to previously accomplished outcomes. Much more and/or even bigger is not usually far better. Viewing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of much more comprehensive facilities in a lot of other jurisdictions. The flaw in this approach however is that the charges linked with widening industry penetration and occasioned-use, are considerably increased than individuals incurred to attract the base market place.
As daytripper marketplaces turn into more aggressive, on line casino venues will have to depend far more and much more on their in-house hotel patrons, and measurement their qualities (and anticipations) appropriately. Even though Steve Wynn started out a key trend in producing up-market place mega-locations, there just was not ample demand on the Strip to warrant the several other related initiatives that followed that aimed at the exact same specialized niche.
The trick is to strike a pleased medium in venture configurations which of system need considerably less of a ‘seat-of-pants’ strategy, and one that is more examined. A shameless plug for development consultants like ourselves.
Other Gaming Routines
Despite the fact that there are no revealed thorough information of American Indian gaming revenues, anecdotal evidence seems to propose that this phase has been as hard hit as the Business sector. The two Connecticut Indian gaming installations report slot income of $1.6 billion in 2008, symbolizing a drop of about 7 per cent, or practically $114 million, much more than doubling the 3.5 p.c fall from the 12 months just before. This market place is seemingly even now 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 Division of Gaming studies that contributions 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 earlier year decreasing .8 % in the very first quarter, 7.5 per cent in the next quarter, 9.5 % in the 3rd quarter, and 16.1 per cent in the fourth quarter.
Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, stories that whilst calendar 12 months 2008 confirmed an nearly two percent development charge in gaming revenues, there was an 8.7 percent decrease in the third quarter and an almost 10 p.c decrease in the fourth quarter of 2008, in contrast with 2007. Gaming profits trends at nearby Niagara Falls, Ontario had been down one.five% in 2008 in comparison with 2007.
It’s been a blended-bag for state lotteries throughout the country. The North American Affiliation of Point out & Provincial Lotteries studies that U.S. lotteries produced a total of $60.6 billion in revenue in fiscal 2008, up about 3 p.c from the previous 12 months however some jurisdictions documented decreases, most notably California, which confirmed an 8 % fall. Inasmuch as some of these states are on different fiscal year finishes, it would look that the info does not mirror the influence of 3rd and/or fourth quarter final results.
In accordance to info offered by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling seven percent to $thirteen.seven billion in 2008, as opposed to $fourteen.seven billion in 2007.
Prepared & Proposed New Expansions
As formerly observed, it has been new gaming jurisdictions that have spawned a lot of the growth in yearly casino/racino revenues above the several years, and their effect is apt to keep on into the near foreseeable future.
Florida
Miami Dade voters authorized a ballot issue that allows each and every of 3 pari-mutuels to have a on line casino facility of up to 2,000 slot machines. The Flagler Puppy Observe and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has yet to declared its ideas. There are many other proposals currently being regarded as that would even more grow casino advancement all through the state.
Illinois
The point out finally acquired close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,two hundred+ game on line casino found in Des Plaines just east of O’Hare. The new facility is not likely to open up till 2010. There has also been some dialogue about making it possible for an increase in for each place 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 plan that allows for the advancement of four casino gaming zones and slots at existing horse and pet tracks seems mired, as only 1 facility is presently below building, while three other proposals were 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 near to the state line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table video games, together with a 2nd section due to open up in 2011 with 875 slots and 20 table game titles. The condition has extended the software process for the other 3 zones until finally April, 2009.
Kentucky
There is still a whole lot of ‘jockeying’ heading 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 settled for the duration of the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most current currently being the 390 room M Resort in Henderson. There are expansions underway at each Caesars Palace and Tough Rock and new hotels include two factors of the Metropolis Center task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino development initiatives in Baton Rouge and Lake Charles, while delayed, are noted to still be on-keep track of for opening this 12 months and/or early 2010.
Maine
There is a invoice beneath thing to consider that could more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would eliminate the restriction that slots be positioned inside of 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to enable slots, could be taking into consideration relocating to a more hospitable city.
Maryland
A referendum was authorized in November, 2008 that enables for the improvement of 5 casinos with a overall of fifteen,000 slots, and now the bidding war is afoot although it is not as intense as the point out had expected.
Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open up in 2008, but has run into numerous funding problems and although the hotel part is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled again fairly, is nonetheless on keep track of to open up this calendar year.
New England
Massachusetts, a sleeping-huge in phrases of marketplace prospective, is even now maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but cannot seem to muster the political support. A latest review finished by Dartmouth College estimates that Massachusetts resident expended far more than $920 million last calendar year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to create casinos, however the matter is very likely to be revisited, specifically if Massachusetts decides to go forward. 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 machines at racetracks by lately agreeing to proceed augmenting purses with an additional tax. The governor nevertheless, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by enabling the tracks to have slot machines particularly at the Meadowlands. (See The Nor’easter Squeeze section)
New York
Just when it looked as if Aqueduct’s 4,500 VLT facility would last but not least be created, the winning bidder indicated an incapability to make the needed $370 million fee, citing the recent lending climate, and throwing the venture back into the lap of the governor. Despite the fact that the marketplace demand in the area could be deemed fairly sturdy, the prospect of extra competitiveness from close by Belmont could have an impact on Aqueduct’s underlining economic feasibility, specially taking into consideration that slightly significantly less than thirty% of the net get is retained by the operator.
Strategies to relocate Monticello Raceway into a resort complex are being reconsidered possibly owing to the two the possible opening of at least one or probably two racino operations in the NY metro location, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.
Ohio
Nevertheless yet another gaming proposal is becoming place forth in Ohio, soon after very last year’s version was turned down by the voters. This prepare calls for one on line casino every in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment decision needed of $250 million, as effectively as an original licensing price of $fifty million, and a 33 % tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 even though Philadelphia’s two slot amenities even now wallow in a political mire, but are anticipated to start off construction this year.
South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and incorporate three hundred games, one hundred forty rooms and a vast variety of amenities.
Texas
Legislators are proposing a voter referendum that would amend the state constitution to allow casino gambling in designated regions, as properly as permit gambling on American Indian lands in Texas and at current racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. Point out govt has proffered the notion of permitting the vacation resort to provide on line casino games, but this work is in also early a phase to have any traction 1 way or another.
Indian Gaming
A current Supreme Court ruling that restricts the taking of lands into trust on behalf of federally regarded American Indian tribes has even more stymied some new Course III gaming initiatives throughout the region. Furthermore, there were eleven Indian casino initiatives rejected by the DOI last calendar year simply because of its new rule that casinos need to be around ample to a reservation that tribal customers can operate at them. It has been proposed that the new Obama administration may possibly be far more sympathetic to the growth of Indian gaming projects, but this issue has yet to be resolved.
Meanwhile, there are other Class III projects in the different levels of development. The Seneca casino task in Buffalo, NY, whilst working a little short-term facility, has delayed an previously under construction long lasting facility until finally the market rebounds. They have also expressed an fascination in creating a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could influence their plans for larger tasks. There are new Indian gaming projects established to open in Michigan and Oklahoma this yr, and other individuals are in the planning 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 assemble further casinos. California is poised to open up two to a few new Course III casinos in 2009/ten.
The Nor’easter Squeeze
Overall gaming revenue in Atlantic Town has declined seven.six %, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining alone in an extreme comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast were positioned in Atlantic Town, in which it appeared as if it may well really even eclipse the Las Vegas Strip’s yearly gaming revenues.
Gradually however its market share was getting encroached upon, first by the development of a huge Course III gaming procedure in Connecticut, and then one more slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.
Now, with the prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening about Atlantic City’s long term prospects. It really is reliance on working day-trippers lulled it into a untrue sense of security, and it now finds alone obtaining to redefine its mission assertion to “spot vacation resort.”
The only difficulty with this strategy nevertheless is that it is ill-equipped to pull it off. For all intents and functions, Atlantic Metropolis is under-roomed and/or over-gamed. There is basically not adequate working day-tripper industry to go around, and their powerful buying and selling location is tightening, as the peripheral populations northward now/will have more ready obtain to a widened supply in New York (Yonkers, and before long at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only actual competitive advantages are its hotel capacity and the availability of table game titles, though the latter is likely to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently compete as a vacation spot vacation resort the metropolis needs to create additional visitor rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip houses – true gaming destinations, in that they do not have significantly of a day-excursion industry, apart from for the ‘locals’ – have an common of .87 gaming positions for every guest place although Atlantic City’s average is 2.seventy four positions for each visitor room.
It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, ended up the minimum impacted by the most current downturn. The Borgata experienced a gaming revenue drop of one.six p.c, even though Harrah’s Marina reported a four.nine per cent increase in contrast to 2007. Moreover, the most difficult hit venues, specifically 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, including the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.
With a steady increase in gaming revenues via 2006, the city seemed prime for even more advancement, which precipitated arranging for 4 new resort assignments, each and every of which have now been indefinitely delayed. Winbet ‘s $2.5 billion task continues to be an iron skeleton, Pinnacle Amusement has declared it may seek out to offer its razed Sands web site, MGM Mirage has shelved its on line casino plans, and Penn Countrywide seems to have stopped its pursuit of the Bader Area airport internet site.
