A Period of time of Adjustment
Oops! That big hissing audio is the gaming balloon that experienced been expanding more than the many years, slowly dropping air. But, Kakakjudi has not been a tide that decreased all ships even so, as some rising and increasing gaming jurisdictions confirmed powerful growth in 2008.
Total, the industrial and racetrack casino sectors (excluding Indian gaming), seasoned a 3.5 % 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 drop, as they showed a obtain of virtually $1 billion in 2008, therefore bringing the Commercial sector industry decrease to $one.eight billion, or six.seven per cent. Nevada was the largest loser in 2008, dropping nearly $one.three billion, far more than half of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most portion, on line casino operators have been caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not till the 3rd and fourth quarters when it actually nosedived. Riding the crest of year over year marketplace development across the region and the availability of ample credit history and equity cash, new development and enlargement proliferated in latest a long time. Nowadays, confronted with the realities of declining, or at ideal stagnant need, several of these tasks are now regarded over-leveraged and/or more than-sized. As a result several gaming organizations are trying to renegotiate their financial debt – made more tough by decrease valuations – even though also paring down operational fees. The latter has turn out to be a really problematic conundrum when dealing with the competitors, specifically in those jurisdictions that are now vying for marketplace shares with new emerging casino initiatives in neighboring places. A subject we talk about much more entirely in the Condition by Condition evaluation section of this publication.
As a consequence of these circumstances the gaming sector landscape is now strewn with impending fatalities. Between the more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the listing grows each week.
“How extended will these financial circumstances persist, and are we at the bottom nevertheless?” are inquiries no one particular appears to be answering nevertheless. What is obvious nonetheless is that most gaming jurisdictions will have to understand how to deal with a scaled-down pie.
Notice:
This examination involves only gaming revenues of accredited casinos and pari-mutuel outlets that offer casino games, and not Indian gaming operations, card rooms, or tiny non-casino sort slot areas. The total article, like revenue tables is available on our net page.
Input/Output Model
A essential facet that looks to have arisen from the ashes of this present development is that numerous on line casino initiatives had been just too large to help themselves. The input, in terms of investment decision bucks, was not proportional to the output, in phrases of internet revenue soon after personal debt service, in comparison to previously achieved final results. Much more and/or larger is not always better. Looking at the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the advancement of a lot more comprehensive features in several other jurisdictions. The flaw in this method even so is that the charges linked with widening market penetration and occasioned-use, are drastically increased than those incurred to appeal to the foundation marketplace.
As daytripper marketplaces become far more aggressive, on line casino venues will have to rely far more and a lot more on their in-house resort patrons, and dimension their homes (and expectations) accordingly. Whilst Steve Wynn commenced a main trend in creating up-industry mega-locations, there simply was not sufficient demand from customers on the Strip to warrant the many other equivalent projects that followed that aimed at the very same market.
The trick is to strike a satisfied medium in undertaking configurations which of training course need much less of a ‘seat-of-pants’ technique, and 1 that is far more researched. A shameless plug for advancement consultants like ourselves.
Other Gaming Actions
Although there are no revealed detailed knowledge of American Indian gaming revenues, anecdotal evidence appears to propose that this section has been as challenging strike as the Industrial sector. The two Connecticut Indian gaming installations report slot profits of $one.six billion in 2008, symbolizing a drop of about 7 per cent, or nearly $114 million, more than doubling the 3.five percent drop from the yr before. This marketplace is evidently even now reeling from the ripple-impact of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Section of Gaming studies that contributions dependent on a gaming earnings formula from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in comparison to the earlier 12 months decreasing .eight percent in the first quarter, seven.five p.c in the 2nd quarter, nine.5 percent in the 3rd quarter, and 16.1 per cent in the fourth quarter.
Some SEC reporting Indian gaming properties report comparable decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, stories that even though calendar 12 months 2008 showed an nearly two per cent progress fee in gaming revenues, there was an 8.seven percent drop in the 3rd quarter and an nearly ten p.c drop in the fourth quarter of 2008, when compared with 2007. Gaming revenue traits at close by Niagara Falls, Ontario had been down one.five% in 2008 when compared with 2007.
It really is been a mixed-bag for condition lotteries across the nation. The North American Affiliation of State & Provincial Lotteries stories that U.S. lotteries produced a total of $sixty.six billion in product sales in fiscal 2008, up about three percent from the preceding 12 months yet some jurisdictions noted decreases, most notably California, which showed an 8 p.c drop. Inasmuch as some of these states are on different fiscal 12 months finishes, it would look that the knowledge does not mirror the influence of third and/or fourth quarter final results.
In accordance to data supplied by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling 7 p.c to $thirteen.7 billion in 2008, compared to $fourteen.seven billion in 2007.
Planned & Proposed New Expansions
As formerly observed, it has been new gaming jurisdictions that have spawned a lot of the expansion in annual casino/racino revenues over the years, and their influence is apt to proceed into the near potential.
Florida
Miami Dade voters accredited a ballot issue that permits every single of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Pet Track and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has nevertheless to announced its plans. There are numerous other proposals getting deemed that would further increase casino growth all through the state.
Illinois
The state lastly got around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,two hundred+ game casino positioned in Des Plaines just east of O’Hare. The new facility is not likely to open up until 2010. There has also been some dialogue about allowing an boost in for every location gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.
Kansas
The state’s expanded lottery program that allows for the advancement of four on line casino gaming zones and slots at current horse and puppy tracks appears mired, as only one facility is presently underneath building, while three other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is found so near to the condition line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk video games, alongside with a 2nd phase because of to open up in 2011 with 875 slots and 20 desk game titles. The point out has prolonged the application approach for the other a few zones until finally April, 2009.
Kentucky
There is still a great deal of ‘jockeying’ going on, but the prospect of as numerous as 8 slot parlors and racinos seems to be back on the entrance-burner, but probably not resolved during the existing legislative session.
Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most latest currently being the 390 area M Resort in Henderson. There are expansions underway at the two Caesars Palace and Tough Rock and new lodges consist of two factors of the Town Heart task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino improvement projects in Baton Rouge and Lake Charles, even though delayed, are documented to nevertheless be on-keep track of for opening this year and/or early 2010.
Maine
There is a bill under thing to consider that could more than double Penn National’s slot devices to three,000, as effectively as a proposal that would eliminate the restriction that slots be situated inside of five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing nearby citizens to allow slots, could be taking into consideration transferring to a more hospitable city.
Maryland
A referendum was accredited in November, 2008 that makes it possible for for the improvement of five casinos with a whole of fifteen,000 slots, and now the bidding war is afoot though it is not as intensive as the point out experienced predicted.
Mississippi
Grand Soleil Casino Vacation resort in Natchez had been slated to open in 2008, but has run into different funding concerns and whilst the lodge part is open, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled again fairly, is even now on keep track of to open up this 12 months.
New England
Massachusetts, a sleeping-giant in conditions of market place likely, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can not seem to be to muster the political help. A modern study finished by Dartmouth University estimates that Massachusetts resident invested far more than $920 million previous calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to develop casinos, even so the subject matter is most likely to be revisited, specially if Massachusetts decides to go forward. There are also makes an attempt in Maine to reconsider its alternatives.
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 continue augmenting purses with an additional tax. The governor nonetheless, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by permitting the tracks to have slot machines particularly at the Meadowlands. (See The Nor’easter Squeeze part)
New York
Just when it looked as if Aqueduct’s four,500 VLT facility would finally be created, the winning bidder indicated an incapacity to make the necessary $370 million price, citing the recent lending local weather, and throwing the undertaking back again into the lap of the governor. Despite the fact that the market place need in the region could be regarded as fairly robust, the prospect of further competitors from close by Belmont could have an impact on Aqueduct’s underlining economic feasibility, especially contemplating that somewhat much less than thirty% of the net acquire is retained by the operator.
Strategies to relocate Monticello Raceway into a resort sophisticated are currently being reconsidered possibly owing to each the probable opening of at minimum 1 or probably two racino functions in the NY metro location, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.
Ohio
But an additional gaming proposal is being put forth in Ohio, after previous year’s model was turned down by the voters. This program calls for 1 on line casino every in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision essential of $250 million, as nicely as an preliminary licensing payment of $fifty million, and a 33 percent tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 even though Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are anticipated 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 game titles, a hundred and forty rooms and a vast selection of amenities.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to allow casino gambling in specified areas, as nicely 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 filed for bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. Point out govt has proffered the notion of allowing the resort to offer you casino game titles, but this hard work is in as well early a phase to have any traction a single way or another.
Indian Gaming
A current Supreme Court ruling that restricts the having of lands into have confidence in on behalf of federally regarded American Indian tribes has additional stymied some new Course III gaming initiatives throughout the nation. Moreover, there had been eleven Indian casino tasks turned down by the DOI very last 12 months since of its new rule that casinos have to be close to adequate to a reservation that tribal members can function at them. It has been proposed that the new Obama administration may be more sympathetic to the advancement of Indian gaming initiatives, but this issue has nevertheless to be tackled.
In the meantime, there are other Course III initiatives in the numerous levels of development. The Seneca casino undertaking in Buffalo, NY, even though running a little short-term facility, has delayed an previously below building long lasting facility right up until the market place rebounds. They have also expressed an desire in establishing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could affect their plans for larger initiatives. There are new Indian gaming projects set to open in Michigan and Oklahoma this 12 months, and other folks are in the planning stage. Texas may possibly permit the reopening of Indian gaming amenities and permit other location and there are programs afoot by the Navajos in Arizona to build added casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Whole gaming revenue in Atlantic City has declined 7.six %, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the town is discovering alone in an intense comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast ended up located in Atlantic Metropolis, exactly where it appeared as if it may possibly in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.
Gradually however its market share was getting encroached on, 1st by the growth of a big Class III gaming procedure in Connecticut, and then another slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.
Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening around Atlantic City’s future prospective customers. It truly is reliance on working day-trippers lulled it into a untrue perception of security, and it now finds alone obtaining to redefine its mission assertion to “destination vacation resort.”
The only problem with this method however is that it is unwell-equipped to pull it off. For all intents and needs, Atlantic Metropolis is underneath-roomed and/or in excess of-gamed. There is simply not sufficient working day-tripper market place to go around, and their effective trading area is tightening, as the peripheral populations northward now/will have more prepared accessibility to a widened supply in New York (Yonkers, and soon at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean access, the city’s only genuine competitive advantages are its resort potential and the availability of desk video games, despite the fact that the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In get to sufficiently contend as a location resort the town demands to build additional guest rooms and not essentially gaming ability. By comparison, the Las Vegas Strip houses – correct gaming locations, in that they do not have much of a day-trip market, other than for the ‘locals’ – have an typical of .87 gaming positions for each visitor area whilst Atlantic City’s average is 2.74 positions per guest space.
It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, each of which included new rooms in 2008, have been the least impacted by the latest downturn. The Borgata experienced a gaming profits drop of 1.six p.c, whilst Harrah’s Marina reported a four.9 percent boost in contrast to 2007. In addition, the most difficult strike 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 homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.
With a continual increase in gaming revenues via 2006, the town appeared primary for additional growth, which precipitated arranging for four new resort initiatives, each and every of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion undertaking continues to be an iron skeleton, Pinnacle Entertainment has introduced it might seek to market its razed Sands web site, MGM Mirage has shelved its on line casino plans, and Penn National appears to have stopped its pursuit of the Bader Discipline airport site.