A Interval of Adjustment
Oops! That huge hissing audio is the gaming balloon that experienced been expanding more than the many years, gradually losing air. But, it has not been a tide that lowered all ships even so, as some rising and growing gaming jurisdictions showed strong expansion in 2008.
Total, the business and racetrack on line casino sectors (excluding Indian gaming), skilled a 3.five % drop in gaming revenues for 2008, producing a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a achieve of virtually $1 billion in 2008, thus bringing the Commercial sector industry decrease to $1.8 billion, or 6.7 %. Nevada was the greatest loser in 2008, dropping nearly $1.3 billion, more than 50 percent of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most element, on line casino operators were caught comparatively flat-footed by the extent of the 2008 income downturn, as it was not till the 3rd and fourth quarters when it genuinely nosedived. Driving the crest of 12 months over calendar year market progress throughout the place and the availability of ample credit and fairness resources, new building and expansion proliferated in current years. Nowadays, confronted with the realities of declining, or at greatest stagnant demand from customers, numerous of these assignments are now considered more than-leveraged and/or in excess of-sized. As a result numerous gaming firms are making an attempt to renegotiate their financial debt – made more tough by reduce valuations – whilst also paring down operational fees. The latter has turn out to be a very problematic conundrum when dealing with the competition, especially in individuals jurisdictions that are now vying for industry shares with new rising casino initiatives in neighboring areas. A subject matter we discuss a lot more totally in the Condition by State examination area of this publication.
As a consequence of these problems the gaming market landscape is now strewn with impending fatalities. Amid the far more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the record grows each and every 7 days.
“How long will these economic conditions persist, and are we at the bottom but?” are questions no 1 seems to be answering but. What is obvious however is that most gaming jurisdictions will have to understand how to deal with a smaller pie.
Observe:
This investigation consists of only gaming revenues of licensed casinos and pari-mutuel retailers that supply casino online games, and not Indian gaming operations, card rooms, or tiny non-on line casino kind slot areas. The complete post, such as revenue tables is available on our net website page.
Input/Output Product
A important element that looks to have arisen from the ashes of this recent trend is that several on line casino projects were just also massive to assistance themselves. The enter, in terms of expenditure pounds, was not proportional to the output, in terms of internet income after credit card debt services, when compared to beforehand reached results. A lot more and/or greater is not constantly far better. Seeing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the development of much more comprehensive features in many other jurisdictions. The flaw in this method even so is that the costs connected with widening marketplace penetration and occasioned-use, are substantially greater than those incurred to entice the base market.
As daytripper marketplaces become more aggressive, casino venues will have to count more and a lot more on their in-house resort patrons, and size their properties (and expectations) appropriately. Whilst Steve Wynn started out a major trend in creating up-industry mega-destinations, there just was not adequate demand on the Strip to warrant the many other similar initiatives that adopted that aimed at the identical market.
The trick is to strike a content medium in venture configurations which of program need considerably less of a ‘seat-of-pants’ strategy, and one particular that is much more researched. A shameless plug for growth consultants like ourselves.
Other Gaming Activities
Although there are no printed thorough information of American Indian gaming revenues, anecdotal evidence appears to suggest that this segment has been as challenging hit as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, representing a fall of about seven p.c, or virtually $114 million, far more than doubling the 3.five percent fall from the yr ahead of. This marketplace is seemingly nevertheless reeling from the ripple-influence of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Office of Gaming reviews that contributions dependent on a gaming revenue formula from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in contrast to the preceding yr lowering .eight percent in the very first quarter, seven.5 percent in the second quarter, nine.5 p.c in the third quarter, and 16.1 percent in the fourth quarter.
Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, reports that although calendar calendar year 2008 confirmed an nearly two % progress price in gaming revenues, there was an eight.seven per cent decrease in the 3rd quarter and an practically ten per cent decrease in the fourth quarter of 2008, when compared with 2007. Gaming earnings developments at close by Niagara Falls, Ontario were down 1.five% in 2008 in contrast with 2007.
It is been a blended-bag for point out lotteries across the nation. The North American Association of Point out & Provincial Lotteries stories that U.S. lotteries generated a complete of $sixty.6 billion in revenue in fiscal 2008, up about 3 p.c from the previous calendar year but some jurisdictions documented decreases, most notably California, which confirmed an eight per cent fall. Inasmuch as some of these states are on various fiscal calendar year finishes, it would seem to be that the knowledge does not mirror the effect of 3rd and/or fourth quarter final results.
According to data presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling seven p.c to $13.seven billion in 2008, vs . $14.7 billion in 2007.
Planned & Proposed New Expansions
As formerly observed, it has been new gaming jurisdictions that have spawned a lot of the progress in yearly on line casino/racino revenues in excess of the a long time, and their influence is apt to carry on into the in close proximity to long term.
Florida
Miami Dade voters approved 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 devices. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has yet to declared its strategies. There are many other proposals getting regarded as that would even more increase casino advancement all through the point out.
Illinois
The point out last but not least obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,two hundred+ game casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open up until 2010. There has also been some discussion about enabling an boost in for each spot gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.
Kansas
The state’s expanded lottery program that permits for the advancement of four casino gaming zones and slots at existing horse and puppy tracks seems mired, as only one particular facility is presently under construction, even though a few other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is positioned so close to the condition line that its parking good deal is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk games, along with a 2nd phase thanks to open in 2011 with 875 slots and 20 table games. The condition has extended the software process for the other a few zones until finally April, 2009.
Kentucky
There is even now a good deal of ‘jockeying’ heading on, but the prospect of as numerous as eight slot parlors and racinos appears to be again on the entrance-burner, but likely not fixed during the present legislative session.
Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most modern currently being the 390 room M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Challenging Rock and new accommodations consist of two components of the City Center task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino advancement initiatives in Baton Rouge and Lake Charles, even though delayed, are documented to still be on-monitor for opening this year and/or early 2010.
Maine
There is a bill under thought that could far more than double Penn National’s slot devices to 3,000, as well as a proposal that would eliminate the restriction that slots be situated inside five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby residents to enable slots, may possibly be contemplating transferring to a a lot more hospitable town.
Maryland
A referendum was approved in November, 2008 that enables for the improvement of five casinos with a complete of 15,000 slots, and now the bidding war is afoot even though it is not as intense as the state had predicted.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open up in 2008, but has run into numerous funding troubles and although the lodge portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled again considerably, is even now on keep track of to open up this calendar year.
New England
Massachusetts, a sleeping-huge in phrases of industry likely, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t seem to be to muster the political assistance. A recent research accomplished by Dartmouth University estimates that Massachusetts resident expended a lot more than $920 million final calendar year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an choice to build casinos, even so the subject matter is very likely to be revisited, specially if Massachusetts decides to go forward. 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 proceed augmenting purses with an additional tax. The governor nevertheless, has appointed a new panel to study the state’s sagging racing software which ironically, can only be preserved by allowing the tracks to have slot equipment particularly at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it looked as if Aqueduct’s 4,500 VLT facility would lastly be developed, the profitable bidder indicated an incapacity to make the necessary $370 million charge, citing the existing lending local weather, and throwing the project back again into the lap of the governor. Even though the marketplace need in the location could be regarded as very robust, the prospect of additional opposition from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, particularly taking into consideration that somewhat considerably less than thirty% of the internet get is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort complex are becoming reconsidered maybe owing to equally the possible opening of at the very least one particular or probably two racino operations in the NY metro area, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.
Ohio
Nevertheless one more gaming proposal is being place forth in Ohio, following very last year’s version was turned down by the voters. This strategy calls for one particular casino every in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure needed of $250 million, as properly as an original licensing payment of $fifty million, and a 33 per cent tax on gaming profits.
Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is anticipated to be operational in August, ’09 even though Philadelphia’s two slot facilities even now wallow in a political mire, but are predicted to begin development this calendar year.
South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and include 300 games, one hundred forty rooms and a vast assortment of amenities.
Texas
Legislators are proposing a voter referendum that would amend the state constitution to let casino gambling in specified locations, as properly as enable 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 individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. ufo777 out federal government has proffered the notion of allowing the resort to offer you casino game titles, but this work is in as well early a phase to have any traction 1 way or one more.
Indian Gaming
A current Supreme Court docket ruling that restricts the having of lands into trust on behalf of federally regarded American Indian tribes has even more stymied some new Class III gaming assignments throughout the country. Moreover, there had been eleven Indian casino assignments turned down by the DOI previous yr due to the fact of its new rule that casinos should be near sufficient to a reservation that tribal users can operate at them. It has been advised that the new Obama administration may be far more sympathetic to the growth of Indian gaming tasks, but this situation has nevertheless to be resolved.
Meanwhile, there are other Course III assignments in the various stages of improvement. The Seneca on line casino task in Buffalo, NY, although functioning a small short-term facility, has delayed an already under design long lasting facility until finally the market place rebounds. They have also expressed an curiosity in establishing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could impact their ideas for greater initiatives. There are new Indian gaming initiatives established to open in Michigan and Oklahoma this calendar year, and others are in the arranging stage. Texas may allow the reopening of Indian gaming amenities and allow other venue and there are programs afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to three new Course III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming profits in Atlantic Metropolis has declined seven.6 p.c, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is discovering alone in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been positioned in Atlantic Metropolis, exactly where it appeared as if it may in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.
Little by little nevertheless its industry share was becoming encroached on, initial by the development of a huge Class III gaming operation in Connecticut, and then one more slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.
Now, with the prepared opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and sooner or later two functions in Philadelphia, the noose is tightening close to Atlantic City’s potential potential clients. It truly is reliance on day-trippers lulled it into a fake feeling of security, and it now finds by itself obtaining to redefine its mission assertion to “destination resort.”
The only difficulty with this technique however is that it is ill-equipped to pull it off. For all intents and purposes, Atlantic Town is underneath-roomed and/or in excess of-gamed. There is simply not enough day-tripper market place to go close to, and their powerful investing area is tightening, as the peripheral populations northward now/will have far more prepared access to a widened source in New York (Yonkers, and shortly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean obtain, the city’s only real competitive positive aspects are its resort capacity and the availability of table game titles, even though the latter is likely to eventuate in Pennsylvania, and possibly Delaware. In buy to adequately contend as a vacation spot vacation resort the city wants to build extra guest rooms and not essentially gaming ability. By comparison, the Las Vegas Strip houses – accurate gaming destinations, in that they do not have a lot of a day-trip market, except for the ‘locals’ – have an typical of .87 gaming positions for each visitor room while Atlantic City’s common is 2.74 positions for each guest place.
It is not a coincidence that Atlantic City’s two largest accommodations, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, have been the minimum impacted by the most current downturn. The Borgata experienced a gaming income drop of one.6 per cent, although Harrah’s Marina described a 4.nine percent increase when compared to 2007. Furthermore, the toughest hit venues, namely 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 more delayed, and shedding valuation.
With a continual rise in gaming revenues through 2006, the metropolis seemed prime for additional growth, which precipitated organizing for four new resort initiatives, each of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion task stays an iron skeleton, Pinnacle Enjoyment has declared it may well seek to market its razed Sands web site, MGM Mirage has shelved its on line casino plans, and Penn Nationwide seems to have stopped its pursuit of the Bader Discipline airport web site.
