A Time period of Adjustment
Oops! That large hissing audio is the gaming balloon that had been expanding more than the many years, slowly and 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 development in 2008.
All round, the professional and racetrack casino sectors (excluding Indian gaming), knowledgeable a three.5 per cent decline in gaming revenues for 2008, making a total of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a gain of nearly $one billion in 2008, thus bringing the Commercial sector industry drop to $1.8 billion, or six.seven percent. Nevada was the greatest loser in 2008, dropping practically $one.three billion, much more than 50 percent of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most part, casino operators ended up caught comparatively flat-footed by the extent of the 2008 revenue downturn, as it was not till the 3rd and fourth quarters when it truly nosedived. Driving the crest of calendar year over 12 months industry expansion throughout the place and the availability of ample credit score and equity resources, new development and growth proliferated in modern many years. Nowadays, confronted with the realities of declining, or at greatest stagnant need, a lot of of these projects are now regarded as in excess of-leveraged and/or more than-sized. As a end result a lot of gaming companies are trying to renegotiate their debt – produced a lot more difficult by reduced valuations – although also paring down operational expenses. The latter has become a really problematic conundrum when dealing with the opposition, specially in individuals jurisdictions that are now vying for market place shares with new emerging on line casino initiatives in neighboring places. A topic we discuss a lot more completely in the Point out by State investigation area of this publication.
As a consequence of these conditions the gaming industry landscape is now strewn with impending fatalities. Among the much more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows each and every 7 days.
“How extended will these economic problems persist, and are we at the base yet?” are inquiries no 1 appears to be answering however. What is obvious even so is that most gaming jurisdictions will have to learn how to deal with a scaled-down pie.
Be aware:
This examination includes only gaming revenues of accredited casinos and pari-mutuel retailers that supply casino game titles, and not Indian gaming functions, card rooms, or little non-on line casino kind slot places. The entire article, including earnings tables is obtainable on our web webpage.
Input/Output Product
A crucial aspect that seems to have arisen from the ashes of this existing pattern is that many casino projects were just as well huge to help on their own. The input, in phrases of expense bucks, was not proportional to the output, in terms of internet earnings right after personal debt services, in comparison to previously achieved outcomes. Far more and/or larger is not often far better. Seeing the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of much more comprehensive facilities in a lot of other jurisdictions. The flaw in this technique however is that the fees linked with widening market penetration and occasioned-use, are substantially greater than individuals incurred to entice the base industry.
As daytripper markets grow to be a lot more aggressive, casino venues will have to depend far more and a lot more on their in-property lodge patrons, and measurement their properties (and anticipations) appropriately. Although Steve Wynn commenced a key development in producing up-industry mega-places, there merely was not adequate demand from customers on the Strip to warrant the a lot of other comparable tasks that followed that aimed at the identical specialized niche.
The trick is to strike a satisfied medium in task configurations which of system call for much less of a ‘seat-of-pants’ approach, and 1 that is more examined. A shameless plug for advancement consultants like ourselves.
Other Gaming Activities
Even though there are no printed thorough information of American Indian gaming revenues, anecdotal proof appears to recommend that this section has been as challenging hit as the Industrial sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, symbolizing a fall of about 7 percent, or practically $114 million, far more than doubling the three.5 per cent fall from the 12 months just before. This market place is seemingly nevertheless reeling from the ripple-effect of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Office of Gaming reports that contributions based mostly on a gaming revenue formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in contrast to the preceding calendar year lowering .eight % in the very first quarter, seven.5 p.c in the second quarter, 9.5 % in the third quarter, and sixteen.1 percent in the fourth quarter.
Some SEC reporting Indian gaming houses report related decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, studies that while calendar yr 2008 confirmed an practically 2 per cent development fee in gaming revenues, there was an eight.7 % decrease in the third quarter and an almost 10 p.c decline in the fourth quarter of 2008, compared with 2007. Gaming profits tendencies at nearby Niagara Falls, Ontario had been down 1.5% in 2008 in contrast with 2007.
It truly is been a combined-bag for state lotteries across the country. The North American Affiliation of Condition & Provincial Lotteries reports that U.S. lotteries produced a whole of $60.6 billion in income in fiscal 2008, up about 3 % from the prior yr yet some jurisdictions noted decreases, most notably California, which showed an 8 per cent fall. Inasmuch as some of these states are on different fiscal year finishes, it would seem that the info does not mirror the influence of third and/or fourth quarter final results.
In accordance to knowledge supplied by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 % to $thirteen.7 billion in 2008, vs . $fourteen.7 billion in 2007.
Prepared & Proposed New Expansions
As earlier observed, it has been new gaming jurisdictions that have spawned significantly of the progress in annual casino/racino revenues above the a long time, and their influence is apt to continue into the close to long term.
Florida
Miami Dade voters accepted a ballot issue that makes it possible for each and every of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has but to declared its programs. There are many other proposals being deemed that would additional expand casino growth during the state.
Illinois
The state ultimately got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,two hundred+ sport on line casino found in Des Plaines just east of O’Hare. The new facility is not very likely to open until finally 2010. There has also been some discussion about permitting an boost in for each place 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 makes it possible for for the advancement of four casino gaming zones and slots at current horse and puppy tracks seems mired, as only 1 facility is presently beneath building, although 3 other proposals were rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is found so near to the point out line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 table online games, along with a 2nd stage owing to open in 2011 with 875 slots and 20 table video games. The state has extended the software method for the other 3 zones right up until April, 2009.
Kentucky
There is nonetheless a lot of ‘jockeying’ heading on, but the prospect of as several as 8 slot parlors and racinos appears to be again on the front-burner, but very likely not fixed during the existing legislative session.
Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most current becoming the 390 place M Resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new resorts incorporate two parts of the City Middle task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino growth initiatives in Baton Rouge and Lake Charles, even though delayed, are noted to nevertheless be on-track for opening this year and/or early 2010.
Maine
There is a bill beneath thing to consider that could more than double Penn National’s slot equipment to three,000, as effectively as a proposal that would eliminate the restriction that slots be situated inside of five miles of the track. Scarborough Downs, which has been unsuccessful in convincing regional citizens to enable slots, might be taking into consideration relocating to a far more hospitable town.
Maryland
A referendum was accredited in November, 2008 that permits for the development of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the point out had anticipated.
Mississippi
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into various financing concerns and whilst the hotel part is open up, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled again somewhat, is nevertheless on monitor to open up this calendar year.
New England
Massachusetts, a sleeping-huge in conditions of market place potential, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot appear to muster the political assistance. A latest study finished by Dartmouth College estimates that Massachusetts resident expended much more than $920 million last year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to build casinos, nonetheless the subject is most likely to be revisited, particularly if Massachusetts decides to go ahead. There are also tries in Maine to reconsider its possibilities.
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 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 equipment particularly at the Meadowlands. (See The Nor’easter Squeeze section)
New York
Just when it looked as if Aqueduct’s 4,500 VLT facility would last but not least be created, the winning bidder indicated an inability to make the required $370 million payment, citing the recent lending local climate, and throwing the task again into the lap of the governor. Despite the fact that the market place desire in the region could be regarded as quite sturdy, the prospect of further opposition from nearby Belmont could have an influence on Aqueduct’s underlining economic feasibility, specially thinking about that marginally considerably less than 30% of the net acquire is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort complex are getting reconsidered perhaps owing to the two the probable opening of at the very least one or maybe two racino functions in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.
Ohio
But an additional gaming proposal is getting place 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 premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expenditure required of $250 million, as well as an initial licensing charge of $50 million, and a 33 percent tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers task in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot facilities still wallow in a political mire, but are anticipated to commence building this calendar year.
South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and incorporate 300 video games, one hundred forty rooms and a extensive variety of facilities.
Texas
Legislators are proposing a voter referendum that would amend the condition structure to let casino gambling in selected locations, as well as enable gambling on American Indian lands in Texas and at current racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an supply. Point out authorities has proffered the notion of enabling the vacation resort to provide on line casino video games, but this work is in as well early a stage to have any traction one particular way or yet another.
Indian Gaming
A current Supreme Courtroom ruling that restricts the taking of lands into believe in on behalf of federally acknowledged American Indian tribes has further stymied some new Class III gaming projects across the nation. Additionally, there ended up eleven Indian casino projects turned down by the DOI very last year since of its new rule that casinos must be near ample to a reservation that tribal users can perform at them. It has been advised that the new Obama administration may be more sympathetic to the development of Indian gaming projects, but this concern has nevertheless to be resolved.
Meanwhile, there are other Course III initiatives in the numerous phases of advancement. The Seneca on line casino venture in Buffalo, NY, whilst operating a modest short term facility, has delayed an currently beneath design long term facility until finally the industry rebounds. They have also expressed an interest in building a casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could affect their ideas for bigger projects. There are new Indian gaming projects established to open in Michigan and Oklahoma this yr, and others are in the arranging phase. Texas may possibly permit the reopening of Indian gaming amenities and permit other location and there are ideas afoot by the Navajos in Arizona to construct extra casinos. California is poised to open two to a few new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Whole gaming earnings in Atlantic City has declined 7.6 %, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is locating itself in an intensive comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast had been located in Atlantic Metropolis, in which it seemed as if it might really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Little by little however its market share was currently being encroached on, initial by the improvement of a huge Course III gaming operation in Connecticut, and then yet another slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.
Now, with the prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening about Atlantic City’s potential prospective customers. It truly is reliance on working day-trippers lulled it into a false feeling of safety, and it now finds itself getting to redefine its mission assertion to “vacation spot vacation resort.”
The only difficulty with this technique nevertheless is that it is sick-equipped to pull it off. For all intents and functions, Atlantic City is beneath-roomed and/or above-gamed. There is merely not sufficient working day-tripper market place to go close to, and their successful trading location is tightening, as the peripheral populations northward now/will have more ready obtain to a widened provide in New York (Yonkers, and quickly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only genuine aggressive positive aspects are its resort potential and the availability of table online games, though the latter is very likely to eventuate in Pennsylvania, and perhaps Delaware. In purchase to sufficiently contend as a location vacation resort the city requirements to create further guest rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip properties – correct gaming places, in that they do not have considerably of a working day-excursion marketplace, except for the ‘locals’ – have an average of .87 gaming positions per visitor room while Atlantic City’s common is two.seventy four positions for each guest space.
It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, equally of which added new rooms in 2008, were the the very least impacted by the most recent downturn. The Borgata skilled a gaming revenue drop of 1.six %, whilst Harrah’s Marina documented a four.nine % increase when compared to 2007. Furthermore, the toughest 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 houses and Resorts with the hoped for sale of the Tropicana has been more delayed, and dropping valuation.
With a steady increase in gaming revenues through 2006, the metropolis appeared key for more advancement, which precipitated arranging for four new vacation resort initiatives, each and every of which have now been indefinitely delayed. Revel Amusement Group’s $two.five billion task remains an iron skeleton, Pinnacle Leisure has announced it may well seek out to sell its razed Sands site, MGM Mirage has shelved its casino programs, and Penn Nationwide seems to have stopped its pursuit of the Bader Area airport website.