A Time period of Adjustment
Oops! That large hissing seem is the gaming balloon that had been increasing more than the many years, slowly and gradually getting rid of air. But, it has not been a tide that decreased all ships even so, as some emerging and increasing gaming jurisdictions confirmed strong progress in 2008.
Total, the industrial and racetrack on line casino sectors (excluding Indian gaming), experienced a three.five percent decrease in gaming revenues for 2008, producing a overall 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 almost $1 billion in 2008, thus bringing the Professional sector industry decrease to $one.8 billion, or 6.7 %. Nevada was the greatest loser in 2008, dropping virtually $one.3 billion, much more than fifty percent of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most component, casino operators had been caught relatively flat-footed by the extent of the 2008 earnings downturn, as it was not right up until the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of yr more than 12 months marketplace expansion throughout the country and the availability of ample credit history and equity funds, new construction and growth proliferated in modern years. Today, confronted with the realities of declining, or at best stagnant demand from customers, several of these projects are now regarded as in excess of-leveraged and/or more than-sized. As a outcome numerous gaming companies are trying to renegotiate their credit card debt – manufactured much more challenging by reduced valuations – while also paring down operational fees. The latter has turn out to be a very problematic conundrum when dealing with the competitiveness, specially in individuals jurisdictions that are now vying for market place shares with new rising casino projects in neighboring regions. A topic we go over a lot more fully in the State by Condition evaluation area of this publication.
As a end result of these problems the gaming business landscape is now strewn with impending fatalities. Amid the far more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows every week.
“How lengthy will these financial conditions persist, and are we at the bottom however?” are concerns no one appears to be answering yet. What is distinct however is that most gaming jurisdictions will have to learn how to offer with a smaller sized pie.
Note:
This investigation contains only gaming revenues of licensed casinos and pari-mutuel stores that provide on line casino game titles, and not Indian gaming functions, card rooms, or little non-on line casino type slot locations. The complete report, such as earnings tables is offered on our net webpage.
Enter/Output Design
A crucial facet that would seem to have arisen from the ashes of this present development is that a lot of casino initiatives ended up just way too big to support them selves. The enter, in phrases of expenditure pounds, was not proportional to the output, in terms of internet income following personal debt support, in comparison to formerly accomplished results. A lot more and/or bigger is not usually greater. Observing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of more extensive amenities in many other jurisdictions. The flaw in this approach nonetheless is that the charges linked with widening marketplace penetration and occasioned-use, are significantly increased than those incurred to attract the foundation marketplace.
As daytripper markets become much more competitive, casino venues will have to rely more and far more on their in-house lodge patrons, and dimensions their properties (and anticipations) appropriately. Even though Steve Wynn started a main development in generating up-industry mega-destinations, there simply was not ample desire on the Strip to warrant the a lot of other comparable assignments that adopted that aimed at the same market.
The trick is to strike a pleased medium in undertaking configurations which of system need much less of a ‘seat-of-pants’ strategy, and one particular that is much more examined. A shameless plug for improvement consultants like ourselves.
Other Gaming Routines
Despite the fact that there are no printed comprehensive knowledge of American Indian gaming revenues, anecdotal proof appears to suggest that this section has been as difficult strike as the Industrial sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, symbolizing a drop of about seven p.c, or practically $114 million, far more than doubling the three.five p.c fall from the year before. This marketplace is seemingly still reeling from the ripple-impact of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Section of Gaming stories that contributions based on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the previous 12 months lowering .eight % in the first quarter, 7.five percent in the 2nd quarter, 9.five % in the 3rd quarter, and 16.one % in the fourth quarter.
Some SEC reporting Indian gaming properties report related decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, studies that whilst calendar yr 2008 showed an nearly 2 % expansion charge in gaming revenues, there was an 8.seven percent decline in the 3rd quarter and an nearly ten p.c decline in the fourth quarter of 2008, in comparison with 2007. Gaming revenue tendencies at close by Niagara Falls, Ontario have been down one.5% in 2008 when compared with 2007.
It’s been a blended-bag for state lotteries across the place. sbobet of Point out & Provincial Lotteries reports that U.S. lotteries created a overall of $sixty.six billion in revenue in fiscal 2008, up about three per cent from the earlier year however some jurisdictions reported decreases, most notably California, which showed an eight per cent drop. Inasmuch as some of these states are on numerous fiscal 12 months finishes, it would seem that the info does not reflect the affect of third and/or fourth quarter results.
In accordance to data offered by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 percent to $13.seven billion in 2008, compared to $fourteen.7 billion in 2007.
Planned & Proposed New Expansions
As earlier mentioned, it has been new gaming jurisdictions that have spawned a lot of the expansion in once-a-year casino/racino revenues over the a long time, and their influence is apt to proceed into the in close proximity to foreseeable future.
Florida
Miami Dade voters approved a ballot situation that enables every of three pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Dog Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has however to announced its ideas. There are quite a few other proposals getting regarded that would more grow casino growth all through the condition.
Illinois
The condition ultimately obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,200+ match casino located in Des Plaines just east of O’Hare. The new facility is not likely to open till 2010. There has also been some dialogue about permitting an boost in for every spot gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.
Kansas
The state’s expanded lottery software that permits for the growth of four casino gaming zones and slots at existing horse and dog tracks seems mired, as only one facility is presently underneath building, while three other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so near to the point out line that its parking great deal is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table video games, along with a next stage because of to open up in 2011 with 875 slots and 20 desk game titles. The state has prolonged the software approach for the other 3 zones right up until April, 2009.
Kentucky
There is even now a lot of ‘jockeying’ going on, but the prospect of as a lot of as eight slot parlors and racinos seems to be again on the front-burner, but likely not solved during the existing legislative session.
Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most recent becoming the 390 place M Resort in Henderson. There are expansions underway at both Caesars Palace and Difficult Rock and new accommodations incorporate two factors of the Metropolis Middle task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino growth tasks in Baton Rouge and Lake Charles, even though delayed, are described to nevertheless be on-track for opening this 12 months and/or early 2010.
Maine
There is a monthly bill under thought that could more than double Penn National’s slot devices to 3,000, as effectively as a proposal that would eliminate the restriction that slots be found within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional inhabitants to allow slots, might be contemplating relocating to a a lot more hospitable city.
Maryland
A referendum was accredited in November, 2008 that makes it possible for for the improvement of five casinos with a overall of 15,000 slots, and now the bidding war is afoot even though it is not as extreme as the condition had anticipated.
Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has operate into numerous financing problems and whilst the hotel part is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back fairly, is even now on keep track of to open this yr.
New England
Massachusetts, a sleeping-big in conditions of industry potential, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but are not able to look to muster the political assist. A recent review accomplished by Dartmouth University estimates that Massachusetts resident invested a lot more than $920 million previous yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to create casinos, nonetheless the topic is likely to be revisited, specially if Massachusetts decides to go ahead. 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 just lately agreeing to carry on augmenting purses with an extra tax. The governor nonetheless, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by making it possible for the tracks to have slot devices specially at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would finally be created, the winning bidder indicated an lack of ability to make the needed $370 million price, citing the recent lending local weather, and throwing the project back into the lap of the governor. Even though the market place demand from customers in the region could be deemed quite robust, the prospect of additional competition from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, especially thinking about that slightly much less than thirty% of the internet get is retained by the operator.
Strategies to relocate Monticello Raceway into a vacation resort complex are becoming reconsidered probably owing to the two the probable opening of at the very least 1 or perhaps two racino functions in the NY metro location, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.
Ohio
Nevertheless one more gaming proposal is becoming place forth in Ohio, right after previous year’s variation was turned down by the voters. This strategy calls for one on line casino every single in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expenditure required of $250 million, as properly as an initial licensing charge of $fifty million, and a 33 per cent tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers project in Pittsburgh is predicted to be operational in August, ’09 even though Philadelphia’s two slot services still wallow in a political mire, but are anticipated to commence design this year.
South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and include 300 video games, a hundred and forty rooms and a vast selection of facilities.
Texas
Legislators are proposing a voter referendum that would amend the state structure to enable casino gambling in specified places, as nicely as allow 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 personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer. Condition government has proffered the notion of permitting the vacation resort to offer you on line casino game titles, but this work is in as well early a stage to have any traction a single way or an additional.
Indian Gaming
A recent Supreme Court docket ruling that restricts the taking of lands into have confidence in on behalf of federally recognized American Indian tribes has additional stymied some new Course III gaming tasks across the place. Moreover, there ended up eleven Indian on line casino initiatives rejected by the DOI last calendar year because of its new rule that casinos need to be around ample to a reservation that tribal customers can work at them. It has been advised that the new Obama administration may well be more sympathetic to the advancement of Indian gaming projects, but this issue has nevertheless to be dealt with.
Meanwhile, there are other Course III assignments in the different phases of improvement. The Seneca on line casino venture in Buffalo, NY, while operating a modest temporary facility, has delayed an previously under development everlasting facility until the marketplace rebounds. They have also expressed an curiosity in establishing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is currently being challenged, and could affect their strategies for greater tasks. There are new Indian gaming initiatives set to open up in Michigan and Oklahoma this year, and other folks are in the preparing stage. Texas may possibly enable the reopening of Indian gaming amenities and allow other venue and there are strategies afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to three new Course III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming earnings in Atlantic Town has declined seven.6 %, from $four.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the metropolis is locating itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been situated in Atlantic City, the place it appeared as if it may possibly in fact even eclipse the Las Vegas Strip’s annual gaming revenues.
Slowly and gradually however its marketplace share was getting encroached on, first by the growth of a big Class III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just 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 around Atlantic City’s potential prospects. It is reliance on working day-trippers lulled it into a fake perception of security, and it now finds by itself having to redefine its mission assertion to “vacation spot resort.”
The only problem with this strategy nonetheless is that it is sick-geared up to pull it off. For all intents and functions, Atlantic City is beneath-roomed and/or in excess of-gamed. There is basically not adequate working day-tripper industry to go around, and their effective investing area is tightening, as the peripheral populations northward now/will have much more all set obtain to a widened supply in New York (Yonkers, and quickly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean obtain, the city’s only genuine competitive advantages are its lodge capacity and the availability of desk online games, even though the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In get to sufficiently contend as a vacation spot vacation resort the city demands to develop additional guest rooms and not always gaming capacity. By comparison, the Las Vegas Strip homes – accurate gaming places, in that they do not have significantly of a day-journey industry, besides for the ‘locals’ – have an average of .87 gaming positions for every visitor space whilst Atlantic City’s regular is 2.seventy four positions for each guest place.
It is not a coincidence that Atlantic City’s two greatest accommodations, the Borgata and Harrah’s Marina, the two of which extra new rooms in 2008, have been the minimum impacted by the most recent downturn. The Borgata knowledgeable a gaming income fall of one.six per cent, although Harrah’s Marina documented a four.9 percent boost compared to 2007. Moreover, the most difficult hit venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest number of rooms. In the meantime some of the venues are teetering on viability, including the the Trump properties and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.
With a steady increase in gaming revenues by way of 2006, the town seemed prime for even more growth, which precipitated arranging for 4 new resort assignments, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.5 billion project remains an iron skeleton, Pinnacle Entertainment has announced it may possibly seek to offer its razed Sands internet site, MGM Mirage has shelved its casino plans, and Penn National seems to have stopped its pursuit of the Bader Field airport internet site.