A Period of time of Adjustment
Oops! That large hissing seem is the gaming balloon that experienced been growing above the many years, little by little dropping air. But, it has not been a tide that reduced all ships however, as some rising and expanding gaming jurisdictions confirmed powerful development in 2008.
Overall, the commercial and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.five % drop in gaming revenues for 2008, creating a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a obtain of practically $1 billion in 2008, thereby bringing the Commercial sector industry decrease to $1.8 billion, or 6.7 %. Nevada was the greatest loser in 2008, dropping nearly $1.3 billion, much more than fifty percent of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most component, casino operators ended up caught fairly flat-footed by the extent of the 2008 income downturn, as it was not right up until the third and fourth quarters when it genuinely nosedived. Using the crest of yr over yr industry growth throughout the region and the availability of ample credit score and fairness money, new construction and enlargement proliferated in current many years. Today, faced with the realities of declining, or at very best stagnant desire, a lot of of these assignments are now considered above-leveraged and/or above-sized. As a result numerous gaming organizations are attempting to renegotiate their credit card debt – produced a lot more difficult by reduce valuations – whilst also paring down operational costs. The latter has grow to be a really problematic conundrum when dealing with the opposition, specifically in those jurisdictions that are now vying for market shares with new emerging casino tasks in neighboring regions. A subject we talk about far more totally in the Condition by Condition investigation section of this publication.
As a consequence of these problems the gaming sector landscape is now strewn with impending fatalities. Amongst the more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows every single 7 days.
“How prolonged will these economic problems persist, and are we at the bottom yet?” are questions no 1 seems to be answering nevertheless. What is distinct nonetheless is that most gaming jurisdictions will have to understand how to deal with a more compact pie.
Be aware:
This evaluation consists of only gaming revenues of accredited casinos and pari-mutuel stores that offer casino online games, and not Indian gaming functions, card rooms, or small non-casino kind slot areas. The complete report, which includes income tables is accessible on our world wide web webpage.
Input/Output Product
A essential element that appears to have arisen from the ashes of this recent pattern is that a lot of casino tasks were just as well huge to assistance on their own. The enter, in conditions of expenditure bucks, was not proportional to the output, in conditions of web earnings after debt service, in comparison to beforehand reached results. More and/or larger is not constantly far better. Observing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the growth of more thorough amenities in a lot of other jurisdictions. The flaw in this method however is that the expenses connected with widening market place penetration and occasioned-use, are significantly greater than people incurred to attract the base industry.
As daytripper markets turn into far more aggressive, casino venues will have to count much more and much more on their in-house hotel patrons, and dimension their homes (and anticipations) accordingly. Although Steve Wynn began a main pattern in making up-industry mega-destinations, there merely was not enough need on the Strip to warrant the many other related tasks that adopted that aimed at the same market.
The trick is to strike a content medium in task configurations which of system call for much less of a ‘seat-of-pants’ technique, and one particular that is much more studied. A shameless plug for development consultants like ourselves.
Other Gaming Activities
Although there are no printed thorough info of American Indian gaming revenues, anecdotal evidence seems to suggest that this phase has been as difficult strike as the Industrial sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, representing a fall of about seven %, or nearly $114 million, a lot more than doubling the 3.five percent fall from the yr just before. This marketplace is seemingly still reeling from the ripple-result 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 reports that contributions based mostly on a gaming revenue formulation from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the preceding year lowering .8 % in the initial quarter, seven.5 % in the 2nd quarter, nine.five p.c in the third quarter, and 16.one percent in the fourth quarter.
Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reports that although calendar 12 months 2008 showed an nearly two per cent growth price in gaming revenues, there was an eight.7 % decrease in the third quarter and an almost 10 per cent decline in the fourth quarter of 2008, compared with 2007. Gaming earnings developments at nearby Niagara Falls, Ontario have been down one.five% in 2008 compared with 2007.
It truly is been a blended-bag for state lotteries throughout the region. The North American Affiliation of State & Provincial Lotteries studies that U.S. lotteries generated a complete of $60.6 billion in income in fiscal 2008, up about three % from the previous yr yet some jurisdictions described decreases, most notably California, which confirmed an eight per cent drop. Inasmuch as some of these states are on different fiscal 12 months ends, it would seem that the data does not mirror the impact of third and/or fourth quarter final results.
In accordance to data supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling 7 per cent to $thirteen.7 billion in 2008, as opposed to $fourteen.seven billion in 2007.
Prepared & Proposed New Expansions
As previously famous, it has been new gaming jurisdictions that have spawned a lot of the growth in yearly casino/racino revenues in excess of the many years, and their effect is apt to keep on into the near future.
Florida
Miami Dade voters authorized a ballot situation that makes it possible for each and every of three pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Pet Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, whilst the Calder set up in Miami Gardens has but to declared its ideas. There are numerous other proposals currently being deemed that would further increase on line casino improvement through the point out.
Illinois
The state last but not least acquired about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,200+ match casino situated in Des Plaines just east of O’Hare. The new facility is not likely to open until finally 2010. There has also been some dialogue about permitting an improve in for each area gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.
Kansas
The state’s expanded lottery program that enables for the advancement of 4 on line casino gaming zones and slots at present horse and pet tracks appears mired, as only one particular facility is presently beneath development, while a few 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 positioned so shut to the condition line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table online games, together with a second period thanks to open up in 2011 with 875 slots and twenty desk game titles. The point out has extended the application process for the other three zones till April, 2009.
Kentucky
There is still a lot of ‘jockeying’ going on, but the prospect of as several as 8 slot parlors and racinos seems to be back again on the entrance-burner, but probably not fixed in the course of the present legislative session.
Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most modern getting the 390 room M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Tough Rock and new accommodations contain two elements of the Town Center project, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino advancement projects in Baton Rouge and Lake Charles, while delayed, are noted to even now be on-keep track of for opening this yr and/or early 2010.
Maine
There is a invoice under consideration that could much more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would take away the restriction that slots be located within 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to permit slots, may possibly be taking into consideration relocating to a more hospitable city.
UNLIMIT888 was accredited in November, 2008 that allows for the development of 5 casinos with a whole of 15,000 slots, and now the bidding war is afoot even though it is not as powerful as the point out experienced expected.
Mississippi
Grand Soleil Casino Resort in Natchez had been slated to open up in 2008, but has run into various funding problems and while the lodge part is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back again somewhat, is even now on keep track of to open up this yr.
New England
Massachusetts, a sleeping-big in phrases of market place possible, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t seem to be to muster the political support. A recent research completed by Dartmouth College estimates that Massachusetts resident spent 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 alternative to develop casinos, nonetheless the subject matter is very likely to be revisited, specifically if Massachusetts decides to go ahead. There are also makes an attempt in Maine to reconsider its choices.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by recently agreeing to proceed augmenting purses with an extra tax. The governor nonetheless, has appointed a new panel to review the state’s sagging racing plan which ironically, can only be preserved by making it possible for the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would lastly be developed, the winning bidder indicated an incapability to make the needed $370 million payment, citing the existing lending local climate, and throwing the task back into the lap of the governor. Even though the marketplace demand in the location could be deemed fairly robust, the prospect of additional competitiveness from nearby Belmont could have an influence on Aqueduct’s underlining economic feasibility, particularly contemplating that marginally considerably less than thirty% of the internet get is retained by the operator.
Strategies to relocate Monticello Raceway into a resort complex are currently being reconsidered probably owing to the two the probable opening of at least 1 or possibly two racino operations in the NY metro area, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.
Ohio
However an additional gaming proposal is becoming place forth in Ohio, after very last year’s version was turned down by the voters. This plan phone calls for one casino every single in the state’s biggest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment decision required of $250 million, as properly as an original licensing charge of $50 million, and a 33 percent tax on gaming revenue.
Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot services nevertheless wallow in a political mire, but are expected to commence construction this yr.
South Dakota
The Lodge at Deadwood is slated to open up in the Fall of 2009, and consist of 300 video games, 140 rooms and a vast range of amenities.
Texas
Legislators are proposing a voter referendum that would amend the state constitution to enable on line casino gambling in designated areas, as well as enable gambling on American Indian lands in Texas and at current racetracks.
West Virginia
The Greenbriar, the state’s venerable vacation resort facility has submitted for bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer you. Point out govt has proffered the notion of allowing the resort to provide casino games, but this energy is in too early a stage to have any traction one particular way or one more.
Indian Gaming
A current Supreme Courtroom ruling that restricts the having of lands into have confidence in on behalf of federally recognized American Indian tribes has even more stymied some new Class III gaming assignments throughout the place. Additionally, there ended up eleven Indian casino initiatives turned down by the DOI very last yr since of its new rule that casinos need to be in close proximity to ample to a reservation that tribal customers can work at them. It has been proposed that the new Obama administration might be a lot more sympathetic to the improvement of Indian gaming initiatives, but this issue has nevertheless to be dealt with.
Meanwhile, there are other Class III tasks in the different stages of growth. The Seneca on line casino undertaking in Buffalo, NY, even though operating a modest short-term facility, has delayed an already beneath building long lasting facility until finally the industry rebounds. They have also expressed an fascination in establishing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could impact their programs for greater tasks. There are new Indian gaming assignments set to open in Michigan and Oklahoma this calendar year, and others are in the arranging stage. Texas may possibly let the reopening of Indian gaming amenities and allow other location and there are programs afoot by the Navajos in Arizona to construct extra casinos. California is poised to open up two to a few new Course III casinos in 2009/ten.
The Nor’easter Squeeze
Complete gaming profits in Atlantic Town has declined seven.six %, from $4.9 billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the metropolis is finding alone in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast had been situated in Atlantic City, exactly where it appeared as if it might truly even eclipse the Las Vegas Strip’s yearly gaming revenues.
Little by little nevertheless its industry share was currently being encroached on, very first by the growth of a big Course III gaming procedure in Connecticut, and then one more slots operations in Rhode Island, and then online video 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 operations 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 foreseeable future prospects. It truly is reliance on day-trippers lulled it into a false perception of stability, and it now finds by itself having to redefine its mission statement to “spot vacation resort.”
The only problem with this strategy however is that it is ill-outfitted to pull it off. For all intents and needs, Atlantic Metropolis is under-roomed and/or over-gamed. There is simply not ample day-tripper market to go around, and their effective trading spot is tightening, as the peripheral populations northward now/will have far more prepared access to a widened provide in New York (Yonkers, and quickly 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 genuine aggressive benefits are its resort capacity and the availability of desk games, even though the latter is most likely to eventuate in Pennsylvania, and probably Delaware. In buy to sufficiently contend as a vacation spot vacation resort the metropolis demands to create added guest rooms and not essentially gaming capability. By comparison, the Las Vegas Strip qualities – real gaming destinations, in that they do not have much of a day-vacation industry, apart from for the ‘locals’ – have an common of .87 gaming positions for every guest room although Atlantic City’s typical is two.74 positions for each guest room.
It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, had been the the very least impacted by the most recent downturn. The Borgata seasoned a gaming revenue drop of 1.six per cent, whilst Harrah’s Marina reported a 4.9 % improve in comparison to 2007. In addition, the hardest hit venues, particularly 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, like the the Trump homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.
With a continual rise in gaming revenues by way of 2006, the metropolis appeared primary for even more development, which precipitated organizing for 4 new resort projects, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.5 billion venture continues to be an iron skeleton, Pinnacle Enjoyment has declared it may possibly find to market its razed Sands website, MGM Mirage has shelved its on line casino strategies, and Penn National seems to have stopped its pursuit of the Bader Field airport site.