A Interval of Adjustment

Oops! That big hissing sound is the gaming balloon that had been expanding over the several years, little by little dropping air. But, it has not been a tide that lowered all ships however, as some emerging and expanding gaming jurisdictions showed powerful progress in 2008.

Total, the industrial and racetrack casino sectors (excluding Indian gaming), experienced a 3.five p.c decline in gaming revenues for 2008, creating a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a achieve of nearly $one billion in 2008, thereby bringing the Commercial sector market place decline to $one.eight billion, or six.seven %. Nevada was the largest loser in 2008, dropping nearly $1.three billion, more than 50 % of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, casino operators have been caught reasonably flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the 3rd and fourth quarters when it truly nosedived. Using the crest of yr over 12 months industry development across the region and the availability of enough credit score and fairness money, new building and expansion proliferated in recent years. Nowadays, confronted with the realities of declining, or at very best stagnant demand from customers, a lot of of these assignments are now regarded as in excess of-leveraged and/or in excess of-sized. As a result several gaming businesses are making an attempt to renegotiate their personal debt – produced much more hard by lower valuations – although also paring down operational costs. The latter has turn out to be a quite problematic conundrum when working with the competition, specifically in these jurisdictions that are now vying for market shares with new emerging on line casino initiatives in neighboring areas. A topic we talk about much more totally in the Point out by State evaluation segment of this publication.

As a consequence of these situations the gaming sector landscape is now strewn with impending fatalities. Amongst the more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the record grows each and every week.

“How extended will these financial conditions persist, and are we at the base however?” are questions no a single seems to be answering nevertheless. What is clear nonetheless is that most gaming jurisdictions will have to discover how to deal with a smaller sized pie.

Be aware:
This investigation consists of only gaming revenues of licensed casinos and pari-mutuel stores that supply casino video games, and not Indian gaming functions, card rooms, or tiny non-casino sort slot spots. The entire article, like revenue tables is obtainable on our web website page.

Input/Output Model

A essential facet that would seem to have arisen from the ashes of this current trend is that several on line casino assignments ended up just too massive to help on their own. The enter, in phrases of expenditure pounds, was not proportional to the output, in conditions of web earnings following credit card debt service, when compared to beforehand accomplished final results. A lot more and/or even bigger is not usually far better. Looking at the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of much more extensive features in many other jurisdictions. The flaw in this method nonetheless is that the costs linked with widening industry penetration and occasioned-use, are significantly larger than people incurred to entice the foundation market place.

As daytripper markets become much more competitive, casino venues will have to depend much more and a lot more on their in-home resort patrons, and measurement their properties (and expectations) accordingly. Even though Steve Wynn started a key craze in generating up-market mega-places, there basically was not sufficient demand on the Strip to warrant the many other similar tasks that followed that aimed at the very same area of interest.

The trick is to strike a content medium in undertaking configurations which of training course require much less of a ‘seat-of-pants’ method, and one particular that is a lot more researched. A shameless plug for growth consultants like ourselves.

Other Gaming Pursuits

Even though there are no printed thorough data of American Indian gaming revenues, anecdotal evidence appears to advise that this segment has been as difficult strike as the Industrial sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, representing a drop of about 7 %, or practically $114 million, much more than doubling the three.5 per cent fall from the yr prior to. This industry is seemingly still reeling from the ripple-result of a casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming studies that contributions primarily based on a gaming revenue method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in contrast to the earlier yr reducing .8 p.c in the first quarter, seven.5 per cent in the next quarter, nine.five p.c in the 3rd quarter, and 16.one % in the fourth quarter.

Some SEC reporting Indian gaming houses report equivalent decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, reviews that whilst calendar 12 months 2008 confirmed an virtually two percent expansion price in gaming revenues, there was an eight.seven % decline in the 3rd quarter and an nearly ten percent drop in the fourth quarter of 2008, compared with 2007. Gaming revenue traits at nearby Niagara Falls, Ontario had been down one.5% in 2008 in comparison with 2007.

It really is been a mixed-bag for condition lotteries throughout the country. The North American Association of State & Provincial Lotteries stories that U.S. lotteries produced a overall of $60.six billion in sales in fiscal 2008, up about three percent from the preceding year however some jurisdictions documented decreases, most notably California, which showed an 8 % fall. Inasmuch as some of these states are on numerous fiscal calendar year ends, it would look that the data does not mirror the effect of 3rd and/or fourth quarter results.

According to data presented by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping 7 p.c to $13.7 billion in 2008, compared to $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have spawned significantly of the progress in annual on line casino/racino revenues above the years, and their affect is apt to proceed into the in close proximity to potential.

Florida
Miami Dade voters accepted a ballot issue that makes it possible for every of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Dog Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has but to declared its ideas. There are many other proposals becoming considered that would even more increase on line casino advancement throughout the point out.

Illinois
The state lastly received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,200+ match casino located in Des Plaines just east of O’Hare. The new facility is not probably to open right up until 2010. There has also been some discussion about enabling an improve in for each spot gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that makes it possible for for the advancement of four on line casino gaming zones and slots at existing horse and dog tracks seems mired, as only a single facility is presently underneath design, while 3 other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is positioned so near to the point out line that its parking lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk online games, together with a next stage due to open up in 2011 with 875 slots and 20 table video games. The state has extended the application procedure for the other a few zones until April, 2009.

Kentucky
There is still a lot of ‘jockeying’ heading on, but the prospect of as several as eight slot parlors and racinos seems to be again on the front-burner, but likely not fixed during the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most recent getting the 390 space M Resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new lodges incorporate two factors of the City Middle project, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino advancement assignments in Baton Rouge and Lake Charles, although delayed, are noted to nevertheless be on-observe for opening this calendar year and/or early 2010.

Maine
There is a invoice below thing to consider that could much more than double Penn National’s slot devices to three,000, as well as a proposal that would get rid of the restriction that slots be found inside five miles of the monitor. encaribe.org Scarborough Downs, which has been unsuccessful in convincing local residents to permit slots, could be taking into consideration transferring to a far more hospitable city.

Maryland
A referendum was accredited in November, 2008 that permits for the advancement of 5 casinos with a total of 15,000 slots, and now the bidding war is afoot although it is not as powerful as the state had expected.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has operate into a variety of financing troubles and while the hotel part is open, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back relatively, is even now on keep track of to open this year.

New England
Massachusetts, a sleeping-huge in phrases of marketplace possible, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to appear to muster the political assistance. A recent study finished by Dartmouth University estimates that Massachusetts resident expended much more than $920 million very last yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an option to produce casinos, even so the matter is most likely to be revisited, particularly if Massachusetts decides to go ahead. There are also attempts 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 carry on augmenting purses with an extra tax. The governor however, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by enabling the tracks to have slot equipment especially at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would ultimately be created, the profitable bidder indicated an incapability to make the essential $370 million charge, citing the existing lending climate, and throwing the undertaking back into the lap of the governor. Even though the industry demand in the area could be considered really robust, the prospect of additional competition from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, specially contemplating that marginally less than 30% of the internet win is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort complex are currently being reconsidered maybe owing to each the probable opening of at the very least 1 or maybe two racino functions in the NY metro area, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.

Ohio
However another gaming proposal is getting set forth in Ohio, following very last year’s variation was turned down by the voters. This prepare phone calls for one on line casino every in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment essential of $250 million, as well as an preliminary licensing charge of $50 million, and a 33 percent tax on gaming revenue.

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 even though Philadelphia’s two slot facilities even now wallow in a political mire, but are predicted to begin design this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and incorporate 300 game titles, 140 rooms and a broad range of amenities.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to allow casino gambling in designated regions, as nicely as enable gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an supply. State federal government has proffered the idea of allowing the resort to supply on line casino online games, but this energy is in also early a phase to have any traction a single way or yet another.

Indian Gaming
A current Supreme Courtroom ruling that restricts the using of lands into believe in on behalf of federally regarded American Indian tribes has additional stymied some new Course III gaming assignments throughout the place. In addition, there had been eleven Indian on line casino assignments turned down by the DOI final yr since of its new rule that casinos should be near sufficient to a reservation that tribal customers can perform at them. It has been advised that the new Obama administration may well be much more sympathetic to the growth of Indian gaming assignments, but this issue has but to be resolved.

Meanwhile, there are other Course III tasks in the different phases of improvement. The Seneca on line casino project in Buffalo, NY, whilst working a little momentary facility, has delayed an presently beneath building long term facility right up until the market rebounds. They have also expressed an curiosity in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could impact their ideas for greater assignments. There are new Indian gaming projects established to open up in Michigan and Oklahoma this calendar year, and others are in the arranging phase. Texas may let the reopening of Indian gaming amenities and allow other venue and there are ideas afoot by the Navajos in Arizona to assemble further casinos. California is poised to open two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming earnings in Atlantic City has declined seven.6 %, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is locating alone in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been positioned in Atlantic City, the place it appeared as if it may truly even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly and gradually however its marketplace share was being encroached on, very first by the development of a big Class III gaming operation in Connecticut, and then one more 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 functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening all around Atlantic City’s long term prospects. It is reliance on day-trippers lulled it into a untrue feeling of stability, and it now finds by itself having to redefine its mission statement to “spot resort.”

The only problem with this technique nevertheless is that it is ill-geared up to pull it off. For all intents and reasons, Atlantic City is underneath-roomed and/or over-gamed. There is simply not sufficient day-tripper market place to go around, and their efficient trading area is tightening, as the peripheral populations northward now/will have more completely ready access to a widened provide 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 obtain, the city’s only true competitive positive aspects are its hotel potential and the availability of desk game titles, although the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In order to sufficiently compete as a destination resort the town wants to create further visitor rooms and not always gaming capacity. By comparison, the Las Vegas Strip qualities – accurate gaming destinations, in that they do not have a lot of a day-journey market, except for the ‘locals’ – have an typical of .87 gaming positions for every guest space whilst Atlantic City’s regular is 2.74 positions per visitor area.

It is not a coincidence that Atlantic City’s two biggest 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 seasoned a gaming income drop of 1.6 per cent, even though Harrah’s Marina described a four.9 per cent boost in contrast to 2007. Additionally, the hardest hit venues, specifically 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 houses and Resorts with the hoped for sale of the Tropicana has been more delayed, and dropping valuation.

With a continual rise in gaming revenues by way of 2006, the town appeared prime for additional development, which precipitated arranging for 4 new resort initiatives, each of which have now been indefinitely delayed. Revel Amusement Group’s $two.five billion project remains an iron skeleton, Pinnacle Amusement has announced it may find to offer its razed Sands site, MGM Mirage has shelved its on line casino programs, and Penn National appears to have stopped its pursuit of the Bader Area airport site.