A Period of time of Adjustment
Oops! That large hissing sound is the gaming balloon that had been increasing above the a long time, gradually getting rid of air. But, it has not been a tide that decreased all ships nonetheless, as some rising and growing gaming jurisdictions showed robust expansion in 2008.
Overall, the business and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.five % decrease in gaming revenues for 2008, creating a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a obtain of virtually $one billion in 2008, thus bringing the Commercial sector market decrease to $one.eight billion, or six.seven per cent. Nevada was the greatest loser in 2008, dropping almost $1.three billion, much more than half of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most part, casino operators were caught reasonably flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the 3rd and fourth quarters when it really nosedived. Using the crest of year in excess of yr market expansion across the place and the availability of ample credit and fairness funds, new building and enlargement proliferated in current several years. These days, confronted with the realities of declining, or at ideal stagnant demand, numerous of these tasks are now considered over-leveraged and/or in excess of-sized. As a outcome numerous gaming firms are trying to renegotiate their credit card debt – manufactured far more difficult by lower valuations – although also paring down operational charges. The latter has turn out to be a quite problematic conundrum when working with the competitiveness, specially in those jurisdictions that are now vying for market shares with new emerging on line casino projects in neighboring places. A topic we examine much more completely in the Condition by Condition investigation segment of this publication.
As a end result of these conditions the gaming industry landscape is now strewn with impending fatalities. Between the more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the record grows every 7 days.
“How prolonged will these economic conditions persist, and are we at the bottom nevertheless?” are concerns no one appears to be answering yet. What is distinct however is that most gaming jurisdictions will have to learn how to deal with a more compact pie.
Observe:
This evaluation consists of 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 tiny non-casino type slot locations. The complete write-up, including earnings tables is available on our net website page.
Enter/Output Model
A important facet that appears to have arisen from the ashes of this existing craze is that many casino tasks ended up just also big to assist on their own. The enter, in phrases of expense dollars, was not proportional to the output, in terms of net earnings soon after credit card debt services, compared to previously accomplished outcomes. Much more and/or larger is not constantly far better. Viewing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of far more thorough facilities in numerous other jurisdictions. The flaw in this method however is that the charges linked with widening marketplace penetration and occasioned-use, are significantly higher than these incurred to appeal to the foundation marketplace.
As daytripper markets become a lot more aggressive, casino venues will have to rely much more and a lot more on their in-home resort patrons, and measurement their houses (and expectations) appropriately. Although Steve Wynn started out a major pattern in creating up-market mega-destinations, there basically was not enough demand from customers on the Strip to warrant the several other similar projects that followed that aimed at the very same market.
The trick is to strike a content medium in undertaking configurations which of course need considerably less of a ‘seat-of-pants’ method, and one particular that is far more studied. A shameless plug for growth consultants like ourselves.
mega888 Gaming Activities
Even though there are no published in depth knowledge of American Indian gaming revenues, anecdotal proof seems to recommend that this segment has been as hard hit as the Industrial sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, symbolizing a drop of about seven %, or almost $114 million, more than doubling the 3.5 p.c fall from the calendar year just before. This marketplace is evidently nonetheless reeling from the ripple-influence of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Department of Gaming reviews that contributions dependent on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 compared to the prior year lowering .eight % in the 1st quarter, 7.5 % in the next quarter, 9.five % in the third quarter, and sixteen.one percent 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, reviews that whilst calendar yr 2008 showed an almost two per cent growth fee in gaming revenues, there was an eight.7 per cent decline in the 3rd quarter and an virtually ten percent decrease in the fourth quarter of 2008, in comparison with 2007. Gaming revenue developments at nearby Niagara Falls, Ontario were down one.five% in 2008 in contrast with 2007.
It truly is been a mixed-bag for state lotteries throughout the country. The North American Affiliation of Point out & Provincial Lotteries studies that U.S. lotteries created a whole of $sixty.six billion in product sales in fiscal 2008, up about three per cent from the prior 12 months nevertheless some jurisdictions documented decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on various fiscal calendar year ends, it would seem that the information does not replicate the influence of 3rd and/or fourth quarter outcomes.
According to info provided by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling 7 % to $13.7 billion in 2008, versus $14.7 billion in 2007.
Prepared & Proposed New Expansions
As beforehand mentioned, it has been new gaming jurisdictions that have spawned significantly of the development in annual on line casino/racino revenues above the several years, and their impact is apt to carry on into the around long term.
Florida
Miami Dade voters authorized a ballot concern that allows every single of three pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Canine Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has but to declared its programs. There are quite a few other proposals being deemed that would additional grow casino improvement during the condition.
Illinois
The point out last but not least got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,200+ sport on line casino situated in Des Plaines just east of O’Hare. The new facility is not most likely to open until finally 2010. There has also been some dialogue about enabling an boost in for each area gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.
Kansas
The state’s expanded lottery software that allows for the growth of four on line casino gaming zones and slots at current horse and pet tracks seems mired, as only 1 facility is presently underneath construction, whilst three other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is located so shut to the condition line that its parking great deal is in Kansas. The Boot Hill On line casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk games, alongside with a next phase because of to open in 2011 with 875 slots and twenty desk games. The point out has extended the application method for the other three zones until April, 2009.
Kentucky
There is still a good deal of ‘jockeying’ going on, but the prospect of as a lot of as 8 slot parlors and racinos appears to be back again on the front-burner, but most likely not settled throughout the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest being the 390 room M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Tough Rock and new accommodations consist of two elements of the Metropolis Heart venture, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino improvement projects in Baton Rouge and Lake Charles, although delayed, are documented to nonetheless be on-keep track of for opening this calendar year and/or early 2010.
Maine
There is a invoice below thought that could more than double Penn National’s slot machines to 3,000, as well as a proposal that would take away the restriction that slots be positioned within five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing neighborhood people to permit slots, might be taking into consideration shifting to a a lot more hospitable city.
Maryland
A referendum was accepted in November, 2008 that permits for the advancement of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot although it is not as intensive as the point out experienced anticipated.
Mississippi
Grand Soleil Casino Vacation resort in Natchez had been slated to open in 2008, but has run into different funding concerns and although the hotel portion is open, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back again fairly, is nevertheless on track to open this 12 months.
New England
Massachusetts, a sleeping-huge in terms of marketplace potential, is even now maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but can’t appear to muster the political assist. A recent study completed by Dartmouth College estimates that Massachusetts resident invested far more than $920 million final 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to develop casinos, nevertheless the subject matter is very likely to be revisited, especially 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 equipment at racetracks by recently agreeing to keep on augmenting purses with an added tax. The governor however, has appointed a new panel to examine the state’s sagging racing system which ironically, can only be preserved by permitting the tracks to have slot devices specifically at the Meadowlands. (See The Nor’easter Squeeze section)
New York
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would ultimately be designed, the winning bidder indicated an incapability to make the needed $370 million charge, citing the existing lending local weather, and throwing the undertaking back again into the lap of the governor. Though the marketplace need in the region could be considered really robust, the prospect of added competitors from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, specifically considering that slightly much less than 30% of the internet earn is retained by the operator.
Strategies to relocate Monticello Raceway into a vacation resort intricate are becoming reconsidered maybe owing to each the possible opening of at least one particular or maybe two racino functions in the NY metro spot, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.
Ohio
But an additional gaming proposal is being set forth in Ohio, soon after very last year’s variation was turned down by the voters. This plan calls for one casino every single in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision required of $250 million, as effectively as an first licensing price of $50 million, and a 33 p.c tax on gaming revenue.
Pennsylvania
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is expected to be operational in August, ’09 while Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are predicted to commence development this yr.
South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and consist of 300 game titles, a hundred and forty rooms and a wide variety of facilities.
Texas
Legislators are proposing a voter referendum that would amend the point out constitution to allow casino gambling in specified regions, as nicely as enable gambling on American Indian lands in Texas and at present racetracks.
West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. Point out govt has proffered the idea of making it possible for the vacation resort to offer you on line casino video games, but this effort is in as well early a stage to have any traction one way or yet another.
Indian Gaming
A modern Supreme Court ruling that restricts the getting of lands into trust on behalf of federally recognized American Indian tribes has additional stymied some new Course III gaming initiatives across the region. Furthermore, there were eleven Indian casino initiatives rejected by the DOI last 12 months due to the fact of its new rule that casinos need to be near enough to a reservation that tribal members can work at them. It has been recommended that the new Obama administration might be much more sympathetic to the development of Indian gaming initiatives, but this problem has but to be addressed.
Meanwhile, there are other Course III assignments in the numerous stages of development. The Seneca on line casino undertaking in Buffalo, NY, although running a little temporary facility, has delayed an presently below building everlasting facility till the industry rebounds. They have also expressed an curiosity in developing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could impact their ideas for more substantial tasks. There are new Indian gaming assignments set to open in Michigan and Oklahoma this calendar year, and other folks are in the planning stage. Texas could let the reopening of Indian gaming amenities and let other location and there are strategies afoot by the Navajos in Arizona to assemble additional casinos. California is poised to open two to a few new Course III casinos in 2009/ten.
The Nor’easter Squeeze
Whole gaming profits in Atlantic City has declined seven.six percent, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is discovering by itself in an powerful comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast were positioned in Atlantic Metropolis, the place it looked as if it may well truly even eclipse the Las Vegas Strip’s annual gaming revenues.
Gradually however its market place share was becoming encroached upon, first by the development of a huge 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 just lately 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 functions in Philadelphia, the noose is tightening close to Atlantic City’s potential potential clients. It’s reliance on working day-trippers lulled it into a false perception of protection, and it now finds by itself possessing to redefine its mission assertion to “spot vacation resort.”
The only issue with this strategy even so is that it is ill-equipped to pull it off. For all intents and functions, Atlantic City is underneath-roomed and/or above-gamed. There is basically not sufficient day-tripper industry to go all around, and their effective buying and selling location is tightening, as the peripheral populations northward now/will have far more prepared obtain to a widened supply in New York (Yonkers, and shortly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only real aggressive benefits are its hotel capability and the availability of desk games, despite the fact that the latter is likely to eventuate in Pennsylvania, and possibly Delaware. In order to adequately compete as a spot resort the town requirements to build extra visitor rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip qualities – real gaming places, in that they do not have a lot of a day-vacation market, besides for the ‘locals’ – have an common of .87 gaming positions for each guest room although Atlantic City’s regular is two.74 positions for every guest room.
It is not a coincidence that Atlantic City’s two largest lodges, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, had been the least impacted by the latest downturn. The Borgata experienced a gaming profits fall of 1.six %, whilst Harrah’s Marina noted a 4.9 % boost in comparison to 2007. In addition, the hardest strike venues, namely 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, such as the the Trump homes and Resorts with the hoped for sale of the Tropicana has been more delayed, and getting rid of valuation.
With a continual rise in gaming revenues by means of 2006, the town appeared primary for more development, which precipitated arranging for four new vacation resort projects, each of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion task continues to be an iron skeleton, Pinnacle Enjoyment has introduced it may well find 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 Discipline airport internet site.