A Time period of Adjustment
Oops! That big hissing sound is the gaming balloon that experienced been increasing above the years, gradually dropping air. But, it has not been a tide that lowered all ships however, as some emerging and increasing gaming jurisdictions confirmed strong development in 2008.
All round, the professional and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.five % decrease in gaming revenues for 2008, generating 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 achieve of practically $one billion in 2008, therefore bringing the Industrial sector marketplace decrease to $1.8 billion, or 6.7 per cent. Nevada was the biggest loser in 2008, dropping virtually $one.3 billion, a lot more than fifty percent of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most component, on line casino operators had been caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not till the third and fourth quarters when it actually nosedived. Driving the crest of year over year market expansion throughout the region and the availability of enough credit score and fairness money, new development and expansion proliferated in current a long time. Right now, confronted with the realities of declining, or at ideal stagnant demand, a lot of of these tasks are now regarded more than-leveraged and/or more than-sized. As a outcome several gaming businesses are attempting to renegotiate their financial debt – created more difficult by reduced valuations – even though also paring down operational charges. The latter has turn into a quite problematic conundrum when working with the competitiveness, particularly in those jurisdictions that are now vying for marketplace shares with new rising on line casino assignments in neighboring regions. A subject we go over more totally in the Condition by State analysis area of this publication.
As a consequence of these circumstances the gaming sector landscape is now strewn with impending fatalities. Among the a lot more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the list grows every single week.
“How long will these economic circumstances persist, and are we at the bottom however?” are concerns no a single appears to be answering yet. What is very clear nevertheless is that most gaming jurisdictions will have to discover how to offer with a smaller pie.
Be aware:
This analysis includes only gaming revenues of certified casinos and pari-mutuel retailers that provide on line casino game titles, and not Indian gaming operations, card rooms, or modest non-on line casino sort slot places. The total article, including revenue tables is accessible on our web page.
Input/Output Design
A important factor that appears to have arisen from the ashes of this recent development is that numerous on line casino initiatives had been just way too large to assistance on their own. The input, in terms of investment bucks, was not proportional to the output, in phrases of net profit soon after credit card debt services, in comparison to beforehand accomplished results. A lot more and/or even bigger is not constantly greater. Looking at the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of a lot more comprehensive facilities in many other jurisdictions. The flaw in this method however is that the charges linked with widening industry penetration and occasioned-use, are substantially higher than people incurred to entice the base marketplace.
As daytripper markets become more aggressive, casino venues will have to rely much more and a lot more on their in-property hotel patrons, and dimension their properties (and expectations) accordingly. Even though Steve Wynn started a main development in generating up-market place mega-locations, there simply was not ample desire on the Strip to warrant the a lot of other related initiatives that adopted that aimed at the very same specialized niche.
The trick is to strike a content medium in task configurations which of system demand considerably less of a ‘seat-of-pants’ strategy, and 1 that is more researched. A shameless plug for advancement consultants like ourselves.
Other Gaming Routines
Despite the fact that there are no released detailed information of American Indian gaming revenues, anecdotal evidence seems to recommend that this section has been as hard strike as the Business sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, representing a fall of about seven %, or practically $114 million, far more than doubling the three.five per cent fall from the yr before. This market is seemingly nonetheless reeling from the ripple-result of a on line casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Section of Gaming studies that contributions based mostly on a gaming revenue formula from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the earlier year lowering .eight percent in the 1st quarter, seven.five percent in the 2nd quarter, nine.five percent in the third quarter, and 16.one percent in the fourth quarter.
Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, studies that while calendar yr 2008 showed an almost two p.c growth rate in gaming revenues, there was an eight.seven % decrease in the 3rd quarter and an nearly ten % decrease in the fourth quarter of 2008, when compared with 2007. Gaming profits developments at nearby Niagara Falls, Ontario ended up down 1.5% in 2008 in contrast with 2007.
It really is been a mixed-bag for state lotteries across the country. The North American Association of Condition & Provincial Lotteries stories that U.S. lotteries generated a whole of $sixty.six billion in product sales in fiscal 2008, up about 3 p.c from the preceding year yet some jurisdictions reported decreases, most notably California, which confirmed an eight per cent drop. Inasmuch as some of these states are on various fiscal yr ends, it would seem to be that the information does not reflect the affect of 3rd and/or fourth quarter benefits.
According to information presented by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling seven per cent to $thirteen.seven billion in 2008, vs . $fourteen.7 billion in 2007.
Planned & Proposed New Expansions
As formerly mentioned, 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 impact is apt to carry on into the around long term.
Florida
Miami Dade voters accredited a ballot situation that permits each and every of 3 pari-mutuels to have a casino facility of up to two,000 slot devices. The Flagler Dog Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has yet to declared its programs. There are several other proposals getting deemed that would even more grow casino advancement through the state.
Illinois
The point out finally got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,200+ match on line casino positioned in Des Plaines just east of O’Hare. The new facility is not likely to open until 2010. There has also been some discussion about enabling an boost in per 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 allows for the advancement of four casino gaming zones and slots at current horse and puppy tracks seems mired, as only a single facility is presently underneath building, while a few other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is found so close to the state line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table game titles, alongside with a 2nd section due to open up in 2011 with 875 slots and twenty table online games. The state has extended the software approach for the other a few zones until finally April, 2009.
Kentucky
There is still a great deal of ‘jockeying’ likely on, but the prospect of as many as 8 slot parlors and racinos seems to be again on the entrance-burner, but likely not fixed for the duration of the existing legislative session.
Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most latest currently being the 390 room M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new hotels contain two components of the City Centre task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino advancement initiatives in Baton Rouge and Lake Charles, while delayed, are described to even now be on-keep track of for opening this calendar year and/or early 2010.
Maine
There is a bill under consideration that could much more than double Penn National’s slot machines to three,000, as effectively as a proposal that would take away the restriction that slots be positioned inside 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing regional inhabitants to enable slots, may be contemplating transferring to a a lot more hospitable town.
Maryland
A referendum was accredited in November, 2008 that enables for the development of 5 casinos with a complete of 15,000 slots, and now the bidding war is afoot even though it is not as extreme as the point out had predicted.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has operate into various funding issues and although the lodge part is open, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back again somewhat, is still on track to open this year.
New England
Massachusetts, a sleeping-huge in conditions of market potential, is nevertheless maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but are not able to appear to muster the political help. A recent examine accomplished by Dartmouth University estimates that Massachusetts resident expended 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 selection to build casinos, even so the matter is likely to be revisited, specifically if Massachusetts decides to go ahead. There are also tries in Maine to reconsider its alternatives.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by recently agreeing to proceed augmenting purses with an further tax. The governor nevertheless, has appointed a new panel to research the state’s sagging racing software which ironically, can only be preserved by enabling the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it looked as if Aqueduct’s 4,500 VLT facility would ultimately be created, the profitable bidder indicated an incapacity to make the essential $370 million payment, citing the recent lending climate, and throwing the undertaking again into the lap of the governor. Even though the market place need in the area could be regarded fairly robust, the prospect of extra opposition from nearby Belmont could have an affect on Aqueduct’s underlining financial feasibility, particularly contemplating that somewhat considerably less than thirty% of the internet acquire is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort sophisticated are being reconsidered maybe owing to both the possible opening of at least one particular or maybe two racino operations in the NY metro area, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.
Ohio
However an additional gaming proposal is currently being place forth in Ohio, following last year’s version was turned down by the voters. This prepare calls for 1 on line casino every single in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment required of $250 million, as nicely as an preliminary licensing payment of $50 million, and a 33 percent tax on gaming profits.
Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers project in Pittsburgh is expected to be operational in August, ’09 whilst Philadelphia’s two slot services nonetheless wallow in a political mire, but are predicted to begin building this yr.
South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and incorporate three hundred game titles, one hundred forty rooms and a extensive variety of features.
Texas
Legislators are proposing a voter referendum that would amend the state constitution to let on line casino gambling in specified places, as properly as let gambling on American Indian lands in Texas and at existing racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer you. Condition govt has proffered the idea of enabling the vacation resort to provide on line casino game titles, but this effort is in too early a phase to have any traction 1 way or an additional.
Indian Gaming
A modern Supreme Court docket ruling that restricts the having of lands into have faith in on behalf of federally regarded American Indian tribes has more stymied some new Course III gaming assignments throughout the region. Additionally, there ended up eleven Indian on line casino initiatives rejected by the DOI final 12 months due to the fact of its new rule that casinos need to be around enough to a reservation that tribal customers can function at them. It has been recommended that the new Obama administration might be much more sympathetic to the growth of Indian gaming tasks, but this situation has but to be dealt with.
In the meantime, there are other Course III assignments in the a variety of stages of growth. The Seneca casino venture in Buffalo, NY, although running a little short term facility, has delayed an currently below development permanent facility till the industry rebounds. They have also expressed an curiosity in building a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could influence their plans for more substantial assignments. There are new Indian gaming assignments established to open in Michigan and Oklahoma this 12 months, and other folks are in the arranging phase. Texas may possibly let the reopening of Indian gaming facilities and permit other venue and there are plans afoot by the Navajos in Arizona to construct further casinos. California is poised to open two to 3 new Class III casinos in 2009/10.
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Complete gaming earnings in Atlantic City has declined 7.6 p.c, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the metropolis is discovering itself in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast have been located in Atlantic Town, exactly where it looked as if it may possibly actually even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Little by little however its market share was getting encroached on, first by the advancement of a huge Class III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.
Now, with the planned opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening about Atlantic City’s foreseeable future potential customers. It really is reliance on working day-trippers lulled it into a false feeling of security, and it now finds itself possessing to redefine its mission assertion to “destination resort.”
The only dilemma with this strategy nonetheless is that it is unwell-geared up to pull it off. For all intents and reasons, Atlantic Metropolis is under-roomed and/or in excess of-gamed. There is simply not adequate working day-tripper industry to go around, and their powerful trading area is tightening, as the peripheral populations northward now/will have a lot more prepared accessibility to a widened source in New York (Yonkers, and soon 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 true competitive benefits are its resort ability and the availability of table games, though the latter is most likely to eventuate in Pennsylvania, and probably Delaware. In order to adequately compete as a spot resort the town demands to develop extra guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip homes – true gaming destinations, in that they do not have a lot of a working day-excursion industry, besides for the ‘locals’ – have an typical of .87 gaming positions per visitor space even though Atlantic City’s regular is two.seventy four positions for each guest room.
It is not a coincidence that Atlantic City’s two premier resorts, the Borgata and Harrah’s Marina, each of which included new rooms in 2008, had been the least impacted by the latest downturn. The Borgata experienced a gaming profits drop of 1.6 per cent, although Harrah’s Marina noted a 4.nine % enhance in comparison to 2007. Additionally, 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, including the the Trump properties and Resorts with the hoped for sale of the Tropicana has been even more delayed, and losing valuation.
With a regular rise in gaming revenues by way of 2006, the metropolis appeared key for additional growth, which precipitated planning for 4 new vacation resort projects, every single of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion task stays an iron skeleton, Pinnacle Enjoyment has introduced it might seek to offer its razed Sands web site, MGM Mirage has shelved its on line casino ideas, and Penn Countrywide seems to have stopped its pursuit of the Bader Area airport internet site.