A Period of time of Adjustment
Oops! That giant hissing sound is the gaming balloon that experienced been growing more than the many years, slowly and gradually shedding air. But, it has not been a tide that decreased all ships nonetheless, as some emerging and growing gaming jurisdictions confirmed powerful development in 2008.
Total, the professional and racetrack casino sectors (excluding Indian gaming), seasoned a three.five percent decline in gaming revenues for 2008, producing a whole of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a achieve of almost $one billion in 2008, thus bringing the Business sector industry decrease to $one.8 billion, or six.seven %. Nevada was the biggest loser in 2008, dropping almost $one.three billion, a lot more than 50 percent of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most component, casino operators have been caught fairly flat-footed by the extent of the 2008 revenue downturn, as it was not till the third and fourth quarters when it actually nosedived. Riding the crest of 12 months more than calendar year marketplace development throughout the nation and the availability of ample credit and fairness resources, new construction and growth proliferated in latest a long time. Nowadays, faced with the realities of declining, or at best stagnant desire, numerous of these assignments are now regarded as over-leveraged and/or over-sized. As a end result a lot of gaming organizations are trying to renegotiate their debt – created much more hard by lower valuations – even though also paring down operational expenses. The latter has grow to be a very problematic conundrum when dealing with the competitors, particularly in individuals jurisdictions that are now vying for market place shares with new rising on line casino assignments in neighboring regions. A subject matter we examine a lot more fully in the State by Point out examination area of this publication.
As a outcome of these circumstances the gaming industry landscape is now strewn with impending fatalities. Amongst the far more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the record grows every single week.
“How lengthy will these economic situations persist, and are we at the base but?” are inquiries no one appears to be answering but. What is distinct even so is that most gaming jurisdictions will have to discover how to offer with a more compact pie.
Note:
This analysis involves only gaming revenues of licensed casinos and pari-mutuel stores that provide casino video games, and not Indian gaming operations, card rooms, or small non-casino type slot spots. The entire article, including earnings tables is offered on our internet page.
Enter/Output Product
A key factor that would seem to have arisen from the ashes of this existing development is that many on line casino initiatives were just way too massive to help them selves. The input, in phrases of expense dollars, was not proportional to the output, in phrases of net earnings right after debt services, in contrast to beforehand accomplished benefits. Far more and/or larger is not usually better. Seeing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the growth of a lot more comprehensive amenities in a lot of other jurisdictions. The flaw in this strategy however is that the costs connected with widening industry penetration and occasioned-use, are significantly larger than these incurred to attract the foundation market.
As daytripper marketplaces grow to be far more aggressive, on line casino venues will have to rely more and more on their in-residence hotel patrons, and size their qualities (and anticipations) accordingly. Even though Steve Wynn began a major craze in making up-marketplace mega-destinations, there just was not adequate demand on the Strip to warrant the several other equivalent projects that adopted that aimed at the exact same area of interest.
The trick is to strike a satisfied medium in project configurations which of training course require much less of a ‘seat-of-pants’ technique, and 1 that is far more analyzed. A shameless plug for improvement consultants like ourselves.
Other Gaming Actions
Though there are no printed thorough data of American Indian gaming revenues, anecdotal evidence seems to advise that this section has been as difficult hit as the Industrial sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, representing a drop of about seven p.c, or almost $114 million, a lot more than doubling the three.5 per cent drop from the calendar year prior to. This market place is seemingly nonetheless reeling from the ripple-result of a casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Division of Gaming studies that contributions based mostly on a gaming income system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in comparison to the preceding year decreasing .eight % in the first quarter, seven.5 per cent in the next quarter, nine.5 percent in the 3rd quarter, and 16.one percent in the fourth quarter.
Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, stories that whilst calendar 12 months 2008 confirmed an almost 2 per cent expansion fee in gaming revenues, there was an 8.seven percent decline in the third quarter and an nearly ten p.c drop in the fourth quarter of 2008, compared with 2007. Gaming profits developments at close by Niagara Falls, Ontario ended up down 1.5% in 2008 in contrast with 2007.
It really is been a combined-bag for condition lotteries across the region. The North American Association of Condition & Provincial Lotteries reviews that U.S. lotteries generated a overall of $sixty.6 billion in sales in fiscal 2008, up about 3 % from the preceding calendar year nevertheless some jurisdictions documented decreases, most notably California, which showed an 8 % drop. Inasmuch as some of these states are on a variety of fiscal calendar year ends, it would seem that the knowledge does not mirror the impact of 3rd and/or fourth quarter results.
According to information presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 % to $13.seven billion in 2008, as opposed to $fourteen.7 billion in 2007.
Prepared & Proposed New Expansions
As formerly observed, it has been new gaming jurisdictions that have spawned much of the growth in yearly on line casino/racino revenues in excess of the several years, and their effect is apt to continue into the near long term.
Florida
Miami Dade voters accepted a ballot concern that permits each 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, although the Calder installation in Miami Gardens has however to announced its programs. There are numerous other proposals becoming regarded as that would further increase casino development during the condition.
Illinois
The condition lastly got around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ game casino located in Des Plaines just east of O’Hare. The new facility is not likely to open up till 2010. There has also been some discussion about enabling an enhance 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 plan that permits for the improvement of four on line casino gaming zones and slots at present horse and pet tracks seems mired, as only 1 facility is presently underneath design, while a few other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is situated so near to the point out line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table video games, together with a next stage thanks to open up in 2011 with 875 slots and twenty desk online games. The state has extended the software process for the other three zones until finally April, 2009.
Kentucky
There is nonetheless a lot of ‘jockeying’ likely 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 during the recent legislative session.
Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most recent getting the 390 place M Resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new hotels consist of two elements of the Town Middle task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino growth projects in Baton Rouge and Lake Charles, while delayed, are described to even now be on-keep track of for opening this yr and/or early 2010.
Maine
There is a monthly bill under thing to consider that could a lot more than double Penn National’s slot machines to 3,000, as nicely as a proposal that would get rid of the restriction that slots be situated within five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to permit slots, might be contemplating shifting to a much more hospitable town.
Maryland
A referendum was approved in November, 2008 that permits for the improvement of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot though it is not as intensive as the state had anticipated.
Mississippi
Grand Soleil Casino Resort in Natchez had been slated to open up in 2008, but has operate into numerous funding concerns and although the hotel portion is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled back fairly, is still on keep track of to open up this calendar year.
New England
Massachusetts, a sleeping-big in phrases of market possible, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to seem to be to muster the political assistance. A current research concluded by Dartmouth College estimates that Massachusetts resident invested a lot more than $920 million last calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an choice to create casinos, nonetheless the subject is probably to be revisited, particularly if Massachusetts decides to go ahead. There are also attempts 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 just lately agreeing to continue augmenting purses with an added tax. The governor even so, has appointed a new panel to examine the state’s sagging racing plan which ironically, can only be preserved by making it possible for the tracks to have slot machines specifically 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 developed, the successful bidder indicated an incapacity to make the needed $370 million fee, citing the present lending local climate, and throwing the project again into the lap of the governor. Even though the market demand in the area could be regarded very sturdy, the prospect of further competitors from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, especially taking into consideration that marginally much less than 30% of the net get is retained by the operator.
Strategies to relocate Monticello Raceway into a vacation resort sophisticated are currently being reconsidered perhaps owing to each the probable opening of at least one particular or perhaps two racino functions in the NY metro region, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.
Ohio
But another gaming proposal is getting place forth in Ohio, after previous year’s version was turned down by the voters. This program phone calls for one particular on line casino each and every in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision needed of $250 million, as well as an preliminary licensing fee of $fifty million, and a 33 p.c tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is expected to be operational in August, ’09 although Philadelphia’s two slot services nevertheless wallow in a political mire, but are predicted to begin construction this 12 months.
บาคาร่า at Deadwood is slated to open in the Drop of 2009, and contain three hundred games, a hundred and forty rooms and a broad variety of facilities.
Texas
Legislators are proposing a voter referendum that would amend the condition structure to allow on line casino gambling in designated areas, as nicely as enable gambling on American Indian lands in Texas and at present racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer you. Condition federal government has proffered the idea of allowing the vacation resort to offer casino game titles, but this hard work is in too early a phase to have any traction one particular way or an additional.
Indian Gaming
A recent Supreme Court docket ruling that restricts the using of lands into trust on behalf of federally identified American Indian tribes has more stymied some new Class III gaming projects across the place. Furthermore, there were eleven Indian casino tasks rejected by the DOI final year due to the fact of its new rule that casinos must be in close proximity to sufficient to a reservation that tribal associates can function at them. It has been proposed that the new Obama administration may possibly be more sympathetic to the development of Indian gaming initiatives, but this concern has however to be addressed.
Meanwhile, there are other Class III projects in the a variety of phases of advancement. The Seneca casino undertaking in Buffalo, NY, although working a little momentary facility, has delayed an previously below design long term facility till the market rebounds. They have also expressed an interest in establishing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is getting challenged, and could impact their strategies for larger tasks. There are new Indian gaming assignments established to open in Michigan and Oklahoma this yr, and other folks are in the organizing stage. Texas could enable the reopening of Indian gaming facilities and allow other venue and there are ideas afoot by the Navajos in Arizona to construct added casinos. California is poised to open two to 3 new Course III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming revenue in Atlantic Town has declined seven.six per cent, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the metropolis is locating alone in an extreme comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up positioned in Atlantic Town, where it appeared as if it may well in fact even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Slowly and gradually nonetheless its market share was becoming encroached upon, very first by the development of a large Course III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.
Now, with the prepared opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening about Atlantic City’s long term prospects. It truly is reliance on day-trippers lulled it into a false perception of safety, and it now finds itself possessing to redefine its mission statement to “location vacation resort.”
The only difficulty with this approach nevertheless is that it is ill-geared up to pull it off. For all intents and reasons, Atlantic Metropolis is underneath-roomed and/or more than-gamed. There is merely not enough working day-tripper industry to go around, and their successful trading region is tightening, as the peripheral populations northward now/will have far more all set access to a widened supply in New York (Yonkers, and shortly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only true competitive rewards are its hotel capability and the availability of table game titles, despite the fact that the latter is probably to eventuate in Pennsylvania, and probably Delaware. In buy to sufficiently contend as a spot vacation resort the city requirements to develop added guest rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip properties – accurate gaming locations, in that they do not have a lot of a working day-journey market place, except for the ‘locals’ – have an typical of .87 gaming positions for each guest area even though Atlantic City’s average is two.seventy four positions per guest place.
It is not a coincidence that Atlantic City’s two greatest resorts, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, have been the the very least impacted by the most current downturn. The Borgata knowledgeable a gaming profits fall of 1.six per cent, even though Harrah’s Marina noted a four.nine percent enhance in contrast to 2007. Moreover, the most difficult hit venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest amount 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 losing valuation.
With a constant rise in gaming revenues via 2006, the city appeared primary for even more growth, which precipitated arranging for four new resort initiatives, each of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion venture continues to be an iron skeleton, Pinnacle Enjoyment has introduced it may well seek out to market its razed Sands web site, MGM Mirage has shelved its casino programs, and Penn National appears to have stopped its pursuit of the Bader Area airport internet site.
