A Time period of Adjustment
Oops! That giant hissing seem is the gaming balloon that had been increasing in excess of the several years, slowly shedding air. But, it has not been a tide that decreased all ships however, as some rising and increasing gaming jurisdictions confirmed robust progress in 2008.
General, the industrial and racetrack casino sectors (excluding Indian gaming), seasoned a three.5 per cent decline in gaming revenues for 2008, making a whole of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a obtain of virtually $1 billion in 2008, thus bringing the Industrial sector marketplace decline to $one.eight billion, or 6.seven percent. Nevada was the most significant loser in 2008, dropping practically $1.3 billion, far more than 50 percent of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most portion, casino operators had been caught comparatively flat-footed by the extent of the 2008 earnings downturn, as it was not until finally the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of 12 months in excess of year marketplace progress throughout the place and the availability of sufficient credit and equity funds, new building and expansion proliferated in latest several years. Nowadays, faced with the realities of declining, or at ideal stagnant desire, a lot of of these tasks are now deemed above-leveraged and/or over-sized. As a consequence numerous gaming firms are making an attempt to renegotiate their debt – made much more tough by reduce valuations – while also paring down operational fees. The latter has become a really problematic conundrum when working with the competitors, especially in those jurisdictions that are now vying for marketplace shares with new emerging on line casino assignments in neighboring locations. A matter we go over more completely in the Point out by Condition evaluation segment of this publication.
As a consequence of these situations the gaming business landscape is now strewn with impending fatalities. Among the more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the record grows every single week.
“How prolonged will these financial problems persist, and are we at the bottom nevertheless?” are questions no one appears to be answering however. What is clear even so is that most gaming jurisdictions will have to understand how to deal with a smaller pie.
Note:
This examination involves only gaming revenues of accredited casinos and pari-mutuel stores that offer casino games, and not Indian gaming operations, card rooms, or little non-on line casino kind slot locations. The whole post, such as earnings tables is available on our web page.
Enter/Output Model
A essential factor that looks to have arisen from the ashes of this present trend is that numerous on line casino initiatives had been just as well big to support themselves. The enter, in terms of investment pounds, was not proportional to the output, in conditions of net earnings after personal debt services, in comparison to previously reached benefits. More and/or bigger is not always better. Seeing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of far more thorough amenities in many other jurisdictions. The flaw in this strategy however is that the charges related with widening industry penetration and occasioned-use, are considerably increased than individuals incurred to appeal to the foundation market.
As daytripper marketplaces turn into far more aggressive, on line casino venues will have to count more and much more on their in-residence lodge patrons, and dimensions their homes (and anticipations) appropriately. While Steve Wynn started a significant pattern in making up-market place mega-places, there just was not adequate demand from customers on the Strip to warrant the numerous other comparable initiatives that adopted that aimed at the very same specialized niche.
The trick is to strike a content medium in task configurations which of course need less of a ‘seat-of-pants’ approach, and a single that is much more analyzed. A shameless plug for development consultants like ourselves.
Other Gaming Pursuits
Though there are no published comprehensive knowledge of American Indian gaming revenues, anecdotal evidence seems to advise that this segment has been as hard strike as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $1.six billion in 2008, representing a fall of about seven %, or practically $114 million, a lot more than doubling the three.5 % fall from the yr ahead of. This marketplace is evidently even now reeling from the ripple-effect of a on line casino expansion 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 method from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in comparison to the prior calendar year lowering .eight % in the very first quarter, 7.five percent in the second quarter, nine.five percent in the third quarter, and sixteen.1 per cent in the fourth quarter.
Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that while calendar yr 2008 showed an virtually two per cent growth price in gaming revenues, there was an eight.7 % decrease in the third quarter and an nearly ten percent drop in the fourth quarter of 2008, when compared with 2007. Gaming revenue traits at close by Niagara Falls, Ontario were down one.five% in 2008 when compared with 2007.
It truly is been a combined-bag for state lotteries throughout the country. The North American Association of Condition & Provincial Lotteries studies that U.S. lotteries created a total of $sixty.six billion in revenue in fiscal 2008, up about three % from the previous yr yet some jurisdictions noted decreases, most notably California, which showed an 8 % drop. Inasmuch as some of these states are on various fiscal yr ends, it would look that the information does not mirror the affect of 3rd and/or fourth quarter outcomes.
In accordance to info presented by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping 7 % to $thirteen.seven billion in 2008, versus $14.seven billion in 2007.
Planned & Proposed New Expansions
As previously famous, it has been new gaming jurisdictions that have spawned considerably of the development in yearly on line casino/racino revenues in excess of the years, and their impact is apt to proceed into the in close proximity to future.
Florida
Miami Dade voters accepted a ballot situation that makes it possible for every single of a few pari-mutuels to have a on line casino facility of up to 2,000 slot machines. The Flagler Canine Monitor and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has yet to declared its ideas. There are numerous other proposals becoming deemed that would further grow casino growth throughout the point out.
Illinois
The state lastly got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ sport on line casino found in Des Plaines just east of O’Hare. The new facility is not most likely to open right up until 2010. There has also been some discussion about making it possible for an boost in for every area gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.
www.aw8casino.com ‘s expanded lottery plan that enables for the improvement of four on line casino gaming zones and slots at existing horse and puppy tracks seems mired, as only one particular facility is presently underneath design, while three other proposals were rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is positioned so near to the condition line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table game titles, along with a 2nd period because of to open in 2011 with 875 slots and 20 desk online games. The point out has prolonged the software process for the other three zones right up until April, 2009.
Kentucky
There is nevertheless a great deal of ‘jockeying’ heading on, but the prospect of as several as eight slot parlors and racinos appears to be back again on the front-burner, but most likely not solved throughout the present legislative session.
Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most modern currently being the 390 space M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Hard Rock and new resorts include two parts of the Metropolis Center venture, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino development initiatives in Baton Rouge and Lake Charles, while delayed, are noted to nonetheless be on-monitor for opening this yr and/or early 2010.
Maine
There is a invoice below thing to consider that could far more than double Penn National’s slot machines to three,000, as well as a proposal that would eliminate the restriction that slots be situated within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing regional people to enable slots, may be contemplating moving to a far more hospitable town.
Maryland
A referendum was accepted in November, 2008 that makes it possible for for the growth of 5 casinos with a whole of 15,000 slots, and now the bidding war is afoot even though it is not as extreme as the state had predicted.
Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has operate into a variety of funding problems and even though the lodge part is open up, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled again fairly, is still on monitor to open up this yr.
New England
Massachusetts, a sleeping-big in terms of industry possible, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot seem to muster the political assistance. A latest examine accomplished by Dartmouth University estimates that Massachusetts resident expended a lot more than $920 million previous calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an option to build casinos, nonetheless the subject is most likely to be revisited, particularly if Massachusetts decides to go forward. There are also tries 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 keep on augmenting purses with an extra tax. The governor however, has appointed a new panel to review the state’s sagging racing plan which ironically, can only be preserved by allowing the tracks to have slot devices specifically at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would finally be developed, the winning bidder indicated an inability to make the needed $370 million price, citing the current lending local weather, and throwing the project back again into the lap of the governor. Despite the fact that the market need in the area could be regarded really robust, the prospect of further competitors from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, specially contemplating that slightly significantly less than 30% of the internet win is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort sophisticated are currently being reconsidered probably owing to the two the probable opening of at the very least one particular or maybe 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 one more gaming proposal is becoming place forth in Ohio, right after final year’s variation was turned down by the voters. This program phone calls for one casino each in the state’s biggest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expenditure needed of $250 million, as properly as an preliminary licensing fee of $fifty million, and a 33 per cent tax on gaming income.
Pennsylvania
The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers task in Pittsburgh is expected to be operational in August, ’09 while Philadelphia’s two slot amenities even now wallow in a political mire, but are predicted to start off design this 12 months.
South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and include three hundred game titles, one hundred forty rooms and a wide range of amenities.
Texas
Legislators are proposing a voter referendum that would amend the condition constitution to permit on line casino gambling in designated locations, as well as allow gambling on American Indian lands in Texas and at present racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Point out government has proffered the notion of enabling the resort to provide on line casino video games, but this effort is in way too early a phase to have any traction 1 way or another.
Indian Gaming
A recent Supreme Court ruling that restricts the having of lands into believe in on behalf of federally regarded American Indian tribes has additional stymied some new Class III gaming initiatives throughout the place. Additionally, there had been eleven Indian on line casino tasks turned down by the DOI previous 12 months since of its new rule that casinos need to be in close proximity to sufficient to a reservation that tribal customers can operate at them. It has been proposed that the new Obama administration may possibly be much more sympathetic to the growth of Indian gaming tasks, but this concern has nevertheless to be resolved.
In the meantime, there are other Class III assignments in the different levels of advancement. The Seneca on line casino task in Buffalo, NY, while running a tiny momentary facility, has delayed an already under design permanent facility till the industry rebounds. They have also expressed an fascination in developing a casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could influence their programs for larger projects. There are new Indian gaming tasks set to open up in Michigan and Oklahoma this 12 months, and other people are in the preparing phase. Texas could allow the reopening of Indian gaming services and enable other venue and there are programs afoot by the Navajos in Arizona to construct extra casinos. California is poised to open up two to three new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Overall gaming profits in Atlantic City has declined 7.six %, from $four.9 billion in 2007 to $4.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 ended up positioned in Atlantic City, the place it appeared as if it may possibly truly even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Slowly nevertheless its market share was becoming encroached on, initial by the growth of a big Class III gaming operation in Connecticut, and then an additional slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.
Now, with the planned 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 future prospects. It really is reliance on working day-trippers lulled it into a fake perception of protection, and it now finds by itself possessing to redefine its mission assertion to “vacation spot vacation resort.”
The only issue with this approach even so is that it is ill-outfitted to pull it off. For all intents and reasons, Atlantic City is beneath-roomed and/or above-gamed. There is merely not sufficient working day-tripper industry to go around, and their successful investing region is tightening, as the peripheral populations northward now/will have a lot more completely ready obtain to a widened source in New York (Yonkers, and soon at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean access, the city’s only genuine aggressive benefits are its lodge potential and the availability of table games, although the latter is most likely to eventuate in Pennsylvania, and possibly Delaware. In purchase to sufficiently contend as a location resort the town demands to create extra guest rooms and not always gaming potential. By comparison, the Las Vegas Strip houses – real gaming places, in that they do not have a lot of a working day-excursion industry, except for the ‘locals’ – have an average of .87 gaming positions for every guest place whilst Atlantic City’s average is 2.74 positions for each guest place.
It is not a coincidence that Atlantic City’s two biggest hotels, the Borgata and Harrah’s Marina, each of which extra new rooms in 2008, have been the least impacted by the latest downturn. The Borgata skilled a gaming earnings drop of 1.6 %, although Harrah’s Marina documented a 4.nine percent improve in comparison to 2007. Furthermore, the hardest hit venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest variety of rooms. In the meantime some of the venues are teetering on viability, which includes the the Trump homes and Resorts with the hoped for sale of the Tropicana has been further delayed, and dropping valuation.
With a constant increase in gaming revenues through 2006, the metropolis appeared prime for even more improvement, which precipitated arranging for four new resort initiatives, every of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion undertaking stays an iron skeleton, Pinnacle Amusement has announced it might find to sell its razed Sands web site, MGM Mirage has shelved its casino ideas, and Penn National appears to have stopped its pursuit of the Bader Subject airport internet site.