A Period of time of Adjustment
Oops! That big hissing sound is the gaming balloon that had been increasing above the a long time, slowly and gradually losing air. But, it has not been a tide that lowered all ships nevertheless, as some rising and growing gaming jurisdictions showed strong development in 2008.
General, the business and racetrack casino sectors (excluding Indian gaming), experienced a three.5 percent decrease in gaming revenues for 2008, making a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a achieve of almost $1 billion in 2008, therefore bringing the Industrial sector market place decline to $1.eight billion, or six.seven per cent. Nevada was the greatest loser in 2008, dropping nearly $1.3 billion, a lot more than fifty percent of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most element, casino operators ended up caught comparatively flat-footed by the extent of the 2008 profits downturn, as it was not till the 3rd and fourth quarters when it really nosedived. Using the crest of calendar year more than 12 months market place growth across the region and the availability of ample credit and equity money, new design and growth proliferated in current years. Today, confronted with the realities of declining, or at ideal stagnant desire, numerous of these tasks are now regarded as in excess of-leveraged and/or more than-sized. As a end result numerous gaming businesses are attempting to renegotiate their financial debt – produced much more difficult by decrease valuations – whilst also paring down operational charges. The latter has become a really problematic conundrum when dealing with the competition, especially in those jurisdictions that are now vying for market place shares with new rising casino projects in neighboring regions. A subject we examine a lot more entirely in the Point out by State analysis part of this publication.
As a outcome of these problems the gaming market landscape is now strewn with impending fatalities. Amongst the a lot more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the list grows every single week.
“How long will sexy gaming persist, and are we at the base but?” are questions no 1 appears to be answering yet. What is clear nevertheless is that most gaming jurisdictions will have to understand how to offer with a smaller sized pie.
Observe:
This examination contains only gaming revenues of licensed casinos and pari-mutuel retailers that provide casino video games, and not Indian gaming functions, card rooms, or modest non-casino kind slot areas. The total post, including revenue tables is available on our web website page.
Input/Output Design
A important aspect that appears to have arisen from the ashes of this recent trend is that several on line casino tasks were just way too massive to assistance them selves. The enter, in conditions of investment pounds, was not proportional to the output, in phrases of internet revenue following debt service, in comparison to earlier achieved results. More and/or larger is not often far better. Looking at the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of far more comprehensive features in numerous other jurisdictions. The flaw in this strategy nonetheless is that the costs connected with widening industry penetration and occasioned-use, are substantially higher than individuals incurred to entice the foundation market.
As daytripper markets turn into far more competitive, on line casino venues will have to rely much more and more on their in-house lodge patrons, and measurement their houses (and expectations) appropriately. While Steve Wynn started a key development in producing up-market mega-destinations, there merely was not sufficient need on the Strip to warrant the several other equivalent projects that followed that aimed at the same specialized niche.
The trick is to strike a happy medium in task configurations which of program demand much less of a ‘seat-of-pants’ technique, and one particular that is far more examined. A shameless plug for improvement consultants like ourselves.
Other Gaming Routines
Even though there are no published in depth knowledge of American Indian gaming revenues, anecdotal evidence appears to advise that this segment has been as hard strike as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, symbolizing a drop of about seven %, or nearly $114 million, far more than doubling the 3.five percent drop from the calendar year just before. This market is apparently still reeling from the ripple-impact of a casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Office of Gaming reports that contributions dependent on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the previous yr decreasing .eight per cent in the first quarter, 7.five % in the next quarter, 9.five p.c in the 3rd quarter, and 16.1 percent 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, studies that even though calendar 12 months 2008 confirmed an almost two per cent development price in gaming revenues, there was an 8.seven p.c decline in the third quarter and an nearly 10 % decrease in the fourth quarter of 2008, in comparison with 2007. Gaming profits tendencies at close by Niagara Falls, Ontario ended up down 1.5% in 2008 when compared with 2007.
It truly is been a mixed-bag for state lotteries across the nation. The North American Affiliation of Condition & Provincial Lotteries stories that U.S. lotteries produced a total of $60.6 billion in income in fiscal 2008, up about three p.c from the earlier 12 months however some jurisdictions noted decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on different fiscal year finishes, it would seem to be that the info does not reflect the influence of 3rd and/or fourth quarter outcomes.
In accordance to knowledge supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven percent to $thirteen.7 billion in 2008, as opposed to $fourteen.7 billion in 2007.
Planned & Proposed New Expansions
As formerly noted, it has been new gaming jurisdictions that have spawned much of the progress in yearly on line casino/racino revenues more than the a long time, and their affect is apt to proceed into the near potential.
Florida
Miami Dade voters accepted a ballot situation that makes it possible for every single of three pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Dog Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has but to announced its ideas. There are many other proposals getting deemed that would even more increase casino improvement throughout the condition.
Illinois
The state lastly obtained around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,two hundred+ game casino situated in Des Plaines just east of O’Hare. The new facility is not most likely to open up right up until 2010. There has also been some dialogue about enabling an boost in per area 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 development of four casino gaming zones and slots at current horse and dog tracks appears mired, as only one facility is presently beneath development, although a few other proposals were rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is located so near to the condition line that its parking whole lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk video games, along with a second phase owing to open up in 2011 with 875 slots and twenty table online games. The point out has prolonged the application process for the other a few zones until April, 2009.
Kentucky
There is still a lot of ‘jockeying’ going on, but the prospect of as many as eight slot parlors and racinos appears to be again on the front-burner, but most likely not solved for the duration of the recent legislative session.
Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most current getting the 390 space M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new resorts consist of two parts of the City Center project, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino advancement tasks in Baton Rouge and Lake Charles, while delayed, are documented to even now be on-monitor for opening this year and/or early 2010.
Maine
There is a bill beneath consideration that could far more than double Penn National’s slot machines to 3,000, as properly as a proposal that would get rid of the restriction that slots be found in five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional citizens to allow slots, may possibly be taking into consideration relocating to a much more hospitable town.
Maryland
A referendum was authorized in November, 2008 that allows for the advancement of 5 casinos with a total of 15,000 slots, and now the bidding war is afoot though it is not as extreme 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 numerous financing issues and even though the resort part is open, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back fairly, is still on monitor to open up this calendar year.
New England
Massachusetts, a sleeping-big in terms of marketplace prospective, is nevertheless maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but cannot seem to be to muster the political assist. A current review finished by Dartmouth College estimates that Massachusetts resident spent far more than $920 million very last year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to build casinos, nonetheless the topic is likely to be revisited, specifically if Massachusetts decides to go forward. There are also makes an attempt in Maine to reconsider its alternatives.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by recently agreeing to carry on augmenting purses with an added tax. The governor however, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze area)
New York
Just when it seemed as if Aqueduct’s four,500 VLT facility would last but not least be created, the successful bidder indicated an lack of ability to make the essential $370 million charge, citing the existing lending local climate, and throwing the task again into the lap of the governor. Although the market place demand from customers in the location could be regarded as fairly robust, the prospect of further opposition from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, particularly thinking about that somewhat much less than 30% of the web earn is retained by the operator.
Programs to relocate Monticello Raceway into a resort intricate are getting reconsidered probably owing to equally the possible opening of at least one particular or maybe two racino operations in the NY metro spot, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.
Ohio
However an additional gaming proposal is being put forth in Ohio, after final year’s edition was turned down by the voters. This strategy calls for one particular 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 well as an initial licensing charge of $fifty million, and a 33 percent tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is expected to be operational in August, ’09 even though Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are anticipated to begin development this yr.
South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and include 300 video games, 140 rooms and a broad selection of amenities.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to allow casino gambling in selected locations, as effectively as allow gambling on American Indian lands in Texas and at existing racetracks.
West Virginia
The Greenbriar, the state’s venerable vacation resort facility has submitted for bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. Condition authorities has proffered the notion of making it possible for the vacation resort to provide on line casino games, but this effort is in too early a stage to have any traction 1 way or an additional.
Indian Gaming
A latest Supreme Courtroom ruling that restricts the having of lands into have faith in on behalf of federally acknowledged American Indian tribes has further stymied some new Course III gaming initiatives throughout the region. Additionally, there were eleven Indian on line casino projects rejected by the DOI previous calendar year simply because of its new rule that casinos need to be around ample to a reservation that tribal associates can operate at them. It has been recommended that the new Obama administration may be much more sympathetic to the advancement of Indian gaming assignments, but this situation has however to be addressed.
Meanwhile, there are other Class III tasks in the a variety of stages of advancement. The Seneca on line casino venture in Buffalo, NY, while operating a small short-term facility, has delayed an already beneath development long term facility right up until the industry rebounds. They have also expressed an desire in establishing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is getting challenged, and could impact their plans for more substantial tasks. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this year, and other individuals are in the planning phase. Texas could let the reopening of Indian gaming facilities and permit other venue and there are strategies afoot by the Navajos in Arizona to build further casinos. California is poised to open two to a few new Course III casinos in 2009/10.
The Nor’easter Squeeze
Complete gaming profits in Atlantic Town has declined seven.6 per cent, from $four.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is locating by itself in an intensive comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast were located in Atlantic City, where it looked as if it may in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.
Slowly nevertheless its marketplace share was being encroached upon, very first by the growth of a massive Course III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then video clip 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 on line casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening around Atlantic City’s future prospects. It is reliance on working day-trippers lulled it into a bogus feeling of stability, and it now finds alone possessing to redefine its mission statement to “location vacation resort.”
The only problem with this method even so is that it is unwell-equipped to pull it off. For all intents and reasons, Atlantic Town is under-roomed and/or in excess of-gamed. There is simply not sufficient working day-tripper market to go close to, and their powerful buying and selling spot is tightening, as the peripheral populations northward now/will have a lot more all set entry to a widened offer in New York (Yonkers, and before long at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only true competitive rewards are its hotel capability and the availability of table video games, though the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In purchase to adequately contend as a spot vacation resort the metropolis needs to create additional guest rooms and not essentially gaming capacity. By comparison, the Las Vegas Strip houses – correct gaming destinations, in that they do not have significantly of a working day-excursion market place, except for the ‘locals’ – have an regular of .87 gaming positions for each guest room even though Atlantic City’s typical is 2.74 positions for every guest room.
It is not a coincidence that Atlantic City’s two premier hotels, the Borgata and Harrah’s Marina, equally of which added new rooms in 2008, ended up the least impacted by the newest downturn. The Borgata seasoned a gaming earnings fall of 1.six p.c, even though Harrah’s Marina documented a 4.nine per cent boost in contrast to 2007. Furthermore, the hardest 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, like the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.
With a continual increase in gaming revenues by way of 2006, the metropolis appeared primary for more development, which precipitated arranging for 4 new resort assignments, each and every of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion task continues to be an iron skeleton, Pinnacle Enjoyment has announced it may well seek to offer its razed Sands website, MGM Mirage has shelved its on line casino ideas, and Penn National appears to have stopped its pursuit of the Bader Field airport web site.