A Time period of Adjustment
Oops! That huge hissing audio is the gaming balloon that had been expanding in excess of the several years, slowly dropping air. But, it has not been a tide that lowered all ships even so, as some rising and expanding gaming jurisdictions showed strong development in 2008.
General, the commercial and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a 3.5 % decrease in gaming revenues for 2008, creating a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a achieve of nearly $one billion in 2008, thus bringing the Business sector industry decrease to $1.eight billion, or 6.7 p.c. Nevada was the most significant loser in 2008, dropping practically $1.three billion, much more than 50 percent of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most element, casino operators have been caught comparatively flat-footed by the extent of the 2008 profits downturn, as it was not right up until the 3rd and fourth quarters when it actually nosedived. Driving the crest of year in excess of 12 months market place growth throughout the nation and the availability of sufficient credit and equity resources, new development and growth proliferated in current many years. Right now, faced with the realities of declining, or at greatest stagnant demand from customers, a lot of of these assignments are now regarded more than-leveraged and/or in excess of-sized. As a consequence several gaming organizations are trying to renegotiate their debt – manufactured far more tough by reduced valuations – whilst also paring down operational fees. The latter has grow to be a extremely problematic conundrum when working with the competitiveness, particularly in individuals jurisdictions that are now vying for marketplace shares with new rising casino initiatives in neighboring places. A subject we examine much more fully in the Point out by Condition evaluation area of this publication.
As a outcome of these situations the gaming sector landscape is now strewn with impending fatalities. Amongst the much more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the record grows each and every 7 days.
“How extended will these economic conditions persist, and are we at the base however?” are queries no 1 seems to be answering yet. What is clear nonetheless is that most gaming jurisdictions will have to discover how to deal with a more compact pie.
Notice:
This investigation includes only gaming revenues of accredited casinos and pari-mutuel stores that supply casino games, and not Indian gaming operations, card rooms, or small non-on line casino variety slot locations. The entire report, including earnings tables is available on our internet webpage.
Enter/Output Design
A important factor that would seem to have arisen from the ashes of this existing trend is that numerous casino assignments were just as well big to help them selves. The enter, in phrases of expenditure bucks, was not proportional to the output, in terms of web income after personal debt provider, in comparison to beforehand attained final results. A lot more and/or larger is not often better. Looking at the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the advancement of much more complete facilities in a lot of other jurisdictions. The flaw in this method however is that the costs connected with widening marketplace penetration and occasioned-use, are drastically higher than these incurred to appeal to the foundation market place.
As daytripper markets turn out to be far more aggressive, casino venues will have to rely far more and much more on their in-home resort patrons, and size their qualities (and anticipations) accordingly. While Steve Wynn started out a major trend in generating up-market place mega-locations, there basically was not adequate desire on the Strip to warrant the a lot of other similar assignments that adopted that aimed at the exact same market.
The trick is to strike a pleased medium in task configurations which of training course demand considerably less of a ‘seat-of-pants’ method, and a single that is far more examined. A shameless plug for development consultants like ourselves.
Other Gaming Activities
Even though there are no printed comprehensive data of American Indian gaming revenues, anecdotal proof seems to recommend that this section has been as challenging hit as the Commercial sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, representing a drop of about 7 %, or nearly $114 million, more than doubling the three.five percent fall from the calendar year just before. This market place is seemingly nevertheless reeling from the ripple-result of a casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Department of Gaming reviews that contributions based mostly on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in comparison to the preceding year lowering .8 p.c in the initial quarter, seven.5 % in the next quarter, 9.five % in the third quarter, and sixteen.one per cent in the fourth quarter.
Some SEC reporting Indian gaming houses report related decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reports that although calendar year 2008 confirmed an nearly 2 p.c development charge in gaming revenues, there was an 8.seven % drop in the third quarter and an almost ten % decrease in the fourth quarter of 2008, in contrast with 2007. Gaming TH4T at nearby Niagara Falls, Ontario ended up down one.five% in 2008 compared with 2007.
It is been a mixed-bag for condition lotteries across the country. The North American Affiliation of State & Provincial Lotteries reviews that U.S. lotteries generated a total of $sixty.six billion in revenue in fiscal 2008, up about three percent from the prior yr however some jurisdictions described decreases, most notably California, which confirmed an 8 % drop. Inasmuch as some of these states are on different fiscal year finishes, it would appear that the info does not mirror the affect of third and/or fourth quarter final results.
According to information supplied by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 % to $13.seven billion in 2008, as opposed to $fourteen.seven billion in 2007.
Planned & Proposed New Expansions
As beforehand observed, it has been new gaming jurisdictions that have spawned considerably of the growth in once-a-year on line casino/racino revenues over the years, and their affect is apt to proceed into the around potential.
Florida
Miami Dade voters approved a ballot concern that permits every single of a few pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Puppy Observe and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has but to declared its plans. There are several other proposals currently being regarded as that would even more broaden casino advancement throughout the condition.
Illinois
The point out last but not least received all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,two hundred+ sport on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open until 2010. There has also been some discussion about enabling an increase in for each spot 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 system that makes it possible for for the improvement of 4 on line casino gaming zones and slots at current horse and dog tracks seems mired, as only one facility is presently below design, even though three other proposals have been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is found so shut to the condition line that its parking whole lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten table game titles, along with a second phase thanks to open in 2011 with 875 slots and 20 desk games. The condition has prolonged the software procedure for the other three zones until finally April, 2009.
Kentucky
There is nonetheless a great deal of ‘jockeying’ likely on, but the prospect of as many as eight slot parlors and racinos seems to be back on the front-burner, but most likely not solved for the duration of the present legislative session.
Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most current currently being the 390 area M Resort in Henderson. There are expansions underway at the two Caesars Palace and Hard Rock and new accommodations incorporate two parts of the Town Center task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino improvement projects in Baton Rouge and Lake Charles, even though delayed, are documented to still be on-observe for opening this year and/or early 2010.
Maine
There is a invoice underneath thing to consider that could more than double Penn National’s slot equipment to 3,000, as well as a proposal that would eliminate the restriction that slots be found inside five miles of the track. Scarborough Downs, which has been unsuccessful in convincing neighborhood people to enable slots, may possibly be considering transferring to a much more hospitable city.
Maryland
A referendum was approved in November, 2008 that makes it possible for for the growth of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as powerful as the condition experienced predicted.
Mississippi
Grand Soleil Casino Vacation resort in Natchez had been slated to open up in 2008, but has operate into numerous financing troubles and although the hotel part is open, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled back again considerably, is nevertheless on observe to open this year.
New England
Massachusetts, a sleeping-big in phrases of market place likely, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can’t seem to be to muster the political assist. A current examine completed by Dartmouth College estimates that Massachusetts resident put in more than $920 million last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an choice to build casinos, nevertheless the matter is very likely to be revisited, specifically if Massachusetts decides to go ahead. There are also tries in Maine to rethink its alternatives.
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 carry on augmenting purses with an added tax. The governor however, has appointed a new panel to review the state’s sagging racing software which ironically, can only be preserved by making it possible for the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze area)
New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would ultimately be designed, the successful bidder indicated an inability to make the needed $370 million charge, citing the present lending local weather, and throwing the venture again into the lap of the governor. Though the market place demand from customers in the spot could be regarded quite robust, the prospect of extra competition from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, particularly contemplating that a bit much less than thirty% of the web acquire is retained by the operator.
Ideas to relocate Monticello Raceway into a resort complicated are getting reconsidered maybe owing to both the possible opening of at the very least a single or possibly two racino operations in the NY metro region, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.
Ohio
However yet another gaming proposal is being place forth in Ohio, soon after last year’s variation was turned down by the voters. This program calls for a single on line casino each and every in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expense required of $250 million, as nicely as an original licensing fee of $fifty million, and a 33 p.c tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is anticipated to be operational in August, ’09 although Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are anticipated to start design this yr.
South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and contain 300 online games, 140 rooms and a broad range of amenities.
Texas
Legislators are proposing a voter referendum that would amend the state structure to let casino gambling in designated regions, as effectively as let gambling on American Indian lands in Texas and at existing racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Point out government has proffered the notion of allowing the resort to provide casino game titles, but this hard work is in too early a phase to have any traction one way or another.
Indian Gaming
A recent Supreme Court ruling that restricts the taking of lands into have confidence in on behalf of federally identified American Indian tribes has additional stymied some new Course III gaming tasks across the region. Furthermore, there have been eleven Indian casino tasks turned down by the DOI final year simply because of its new rule that casinos have to be in close proximity to adequate to a reservation that tribal members can work at them. It has been proposed that the new Obama administration may be a lot more sympathetic to the advancement of Indian gaming tasks, but this issue has nevertheless to be resolved.
Meanwhile, there are other Course III assignments in the a variety of levels of growth. The Seneca on line casino undertaking in Buffalo, NY, even though functioning a little momentary facility, has delayed an previously underneath development everlasting facility right up until the marketplace rebounds. They have also expressed an fascination in building a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could affect their strategies for larger tasks. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this year, and others are in the arranging stage. Texas may possibly enable the reopening of Indian gaming amenities and let other location and there are strategies afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to 3 new Course III casinos in 2009/ten.
The Nor’easter Squeeze
Whole gaming earnings in Atlantic City has declined 7.6 p.c, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is discovering itself in an intense comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast have been located in Atlantic Metropolis, exactly where it appeared as if it may well actually even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Gradually nevertheless its market share was becoming encroached on, 1st by the improvement of a huge Class III gaming operation in Connecticut, and then yet another slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.
Now, with the prepared opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening close to Atlantic City’s foreseeable future prospects. It really is reliance on working day-trippers lulled it into a bogus feeling of safety, and it now finds alone possessing to redefine its mission statement to “spot resort.”
The only difficulty with this strategy even so is that it is unwell-outfitted to pull it off. For all intents and purposes, Atlantic City is underneath-roomed and/or in excess of-gamed. There is just not enough working day-tripper market to go around, and their effective trading area is tightening, as the peripheral populations northward now/will have a lot more ready obtain to a widened supply in New York (Yonkers, and shortly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean obtain, the city’s only genuine aggressive rewards are its lodge capability and the availability of desk video games, although the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In order to adequately compete as a spot vacation resort the town requirements to build extra guest rooms and not automatically gaming ability. By comparison, the Las Vegas Strip qualities – true gaming locations, in that they do not have much of a working day-excursion marketplace, besides for the ‘locals’ – have an average of .87 gaming positions for every guest area even though Atlantic City’s regular is two.74 positions for each visitor space.
It is not a coincidence that Atlantic City’s two biggest hotels, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, had been the minimum impacted by the latest downturn. The Borgata knowledgeable a gaming income fall of one.6 p.c, whilst Harrah’s Marina documented a four.nine per cent boost in comparison to 2007. Moreover, the most difficult hit venues, namely 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, 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 constant rise in gaming revenues by means of 2006, the city seemed key for more advancement, which precipitated planning for 4 new vacation resort tasks, each of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion project continues to be an iron skeleton, Pinnacle Amusement has introduced it may find to market its razed Sands website, MGM Mirage has shelved its on line casino plans, and Penn National appears to have stopped its pursuit of the Bader Area airport website.