A Interval of Adjustment
Oops! That large hissing sound is the gaming balloon that experienced been growing above the years, gradually losing air. But, it has not been a tide that reduced all ships however, as some rising and expanding gaming jurisdictions confirmed powerful growth in 2008.
General, the professional and racetrack on line casino sectors (excluding Indian gaming), experienced a three.five percent drop in gaming revenues for 2008, making a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a obtain of nearly $1 billion in 2008, thereby bringing the Commercial sector marketplace drop to $1.eight billion, or six.7 per cent. Nevada was the greatest loser in 2008, dropping virtually $one.three billion, far more than half of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most part, casino operators were caught fairly flat-footed by the extent of the 2008 income downturn, as it was not till the third and fourth quarters when it genuinely nosedived. Using the crest of yr more than year market development across the country and the availability of ample credit score and fairness money, new development and enlargement proliferated in modern many years. Today, confronted with the realities of declining, or at greatest stagnant demand, numerous of these assignments are now regarded as more than-leveraged and/or over-sized. As a outcome a lot of gaming companies are making an attempt to renegotiate their credit card debt – made a lot more hard by reduce valuations – whilst also paring down operational fees. The latter has turn into a really problematic conundrum when working with the competition, particularly in those jurisdictions that are now vying for marketplace shares with new emerging casino initiatives in neighboring areas. A topic we discuss a lot more totally in the Point out by Point out examination segment of this publication.
As a end result of these situations the gaming market landscape is now strewn with impending fatalities. Amongst the far more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the checklist grows each 7 days.
“How long will these financial situations persist, and are we at the bottom yet?” are queries no one appears to be answering but. What is obvious nonetheless is that most gaming jurisdictions will have to learn how to deal with a more compact pie.
Observe:
This analysis consists of only gaming revenues of licensed casinos and pari-mutuel outlets that supply casino games, and not Indian gaming operations, card rooms, or tiny non-casino kind slot places. The whole article, like earnings tables is available on our net page.
Enter/Output Design
A important facet that would seem to have arisen from the ashes of this recent development is that several on line casino projects ended up just way too large to assistance themselves. The enter, in phrases of investment decision pounds, was not proportional to the output, in terms of net income following debt services, compared to formerly accomplished outcomes. A lot more and/or greater is not constantly better. Seeing the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the development of far more extensive features in several other jurisdictions. The flaw in this strategy nonetheless is that the charges related with widening industry penetration and occasioned-use, are considerably higher than individuals incurred to draw in the foundation marketplace.
As daytripper markets become far more aggressive, casino venues will have to depend much more and far more on their in-house resort patrons, and measurement their properties (and expectations) accordingly. Whilst Steve Wynn began a main pattern in making up-industry mega-locations, there merely was not ample desire on the Strip to warrant the numerous other equivalent assignments that adopted that aimed at the same niche.
The trick is to strike a happy medium in project configurations which of course demand much less of a ‘seat-of-pants’ strategy, and one that is far more examined. A shameless plug for improvement consultants like ourselves.
Other Gaming Activities
Though there are no released detailed data of American Indian gaming revenues, anecdotal proof seems to recommend that this segment has been as challenging hit as the Industrial sector. The two Connecticut Indian gaming installations report slot revenue of $1.6 billion in 2008, symbolizing a fall of about 7 %, or almost $114 million, a lot more than doubling the three.five per cent drop from the yr ahead of. This marketplace is apparently even now reeling from the ripple-impact of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Office of Gaming reports that contributions based mostly on a gaming income formula 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 1st quarter, 7.5 p.c in the second quarter, 9.five per cent in the 3rd quarter, and 16.1 % in the fourth quarter.
Some SEC reporting Indian gaming qualities report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reviews that even though calendar calendar year 2008 showed an nearly two percent growth charge in gaming revenues, there was an eight.seven per cent drop in the third quarter and an nearly ten % decrease in the fourth quarter of 2008, when compared with 2007. Gaming revenue tendencies at nearby Niagara Falls, Ontario were down 1.five% in 2008 in comparison with 2007.
It is been a blended-bag for condition lotteries across the place. The North American Association of Condition & Provincial Lotteries reports that U.S. lotteries generated a whole of $sixty.six billion in sales in fiscal 2008, up about 3 p.c from the earlier year nevertheless some jurisdictions noted decreases, most notably California, which confirmed an eight per cent fall. Inasmuch as some of these states are on various fiscal 12 months ends, it would look that the knowledge does not replicate the affect of 3rd and/or fourth quarter final results.
In accordance to info presented by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling 7 percent to $13.seven billion in 2008, vs . $14.seven billion in 2007.
Prepared & Proposed New Expansions
As previously mentioned, it has been new gaming jurisdictions that have spawned considerably of the development in yearly casino/racino revenues above the several years, and their influence is apt to continue into the close to future.
Florida
Miami Dade voters authorized a ballot problem that permits each of three pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Dog Observe and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has however to announced its plans. There are quite a few other proposals being regarded that would more increase on line casino growth during the state.
Illinois
The condition finally received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ match on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open right up until 2010. There has also been some discussion about permitting an enhance in for each location gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.
Kansas
The state’s expanded lottery system that makes it possible for for the growth of 4 on line casino gaming zones and slots at current horse and dog tracks seems mired, as only 1 facility is presently below development, whilst 3 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 found so near to the condition line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 desk games, together with a 2nd period thanks to open up in 2011 with 875 slots and 20 table online games. The point out has prolonged the application procedure 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 many as 8 slot parlors and racinos seems to be again on the entrance-burner, but likely not settled throughout the current legislative session.
Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most current becoming the 390 room M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Hard Rock and new resorts incorporate two components of the Metropolis Heart project, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino development assignments in Baton Rouge and Lake Charles, even though delayed, are documented to nonetheless be on-observe for opening this year and/or early 2010.
Maine
There is a invoice under thing to consider that could a lot more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would take away the restriction that slots be located inside of 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing local citizens to allow slots, might be taking into consideration relocating to a more hospitable city.
Maryland
A referendum was approved in November, 2008 that allows for the improvement of 5 casinos with a overall of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the condition experienced predicted.
Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has run into a variety of funding concerns and even though the resort part is open, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled again relatively, is even now on keep track of to open up this 12 months.
New England
Massachusetts, a sleeping-huge in phrases of industry possible, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to seem to be to muster the political assistance. A current review completed by Dartmouth College estimates that Massachusetts resident put in a lot more than $920 million very last yr at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to build casinos, nevertheless the topic is most likely to be revisited, particularly if Massachusetts decides to go ahead. There are also makes an attempt in Maine to rethink its choices.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by recently agreeing to keep on augmenting purses with an added tax. The governor nevertheless, has appointed a new panel to research the state’s sagging racing system which ironically, can only be preserved by making it possible for the tracks to have slot equipment especially at the Meadowlands. (See The Nor’easter Squeeze section)
New York
Just when it seemed as if Aqueduct’s four,five hundred VLT facility would last but not least be created, the profitable bidder indicated an inability to make the needed $370 million fee, citing the current lending local climate, and throwing the undertaking again into the lap of the governor. Although the marketplace need in the spot could be considered really powerful, the prospect of additional competition from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, particularly taking into consideration that a bit much less than 30% of the net get is retained by the operator.
Ideas to relocate Monticello Raceway into a vacation resort sophisticated are becoming reconsidered maybe owing to both the possible opening of at least one particular or maybe two racino functions in the NY metro spot, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.
Ohio
Nevertheless yet another gaming proposal is currently being put forth in Ohio, soon after very last year’s version was turned down by the voters. This prepare calls for one on line casino every in the state’s largest metropolitan areas: 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 percent tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 even though Philadelphia’s two slot amenities nonetheless wallow in a political mire, but are anticipated to start development this year.
South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and contain 300 video games, a hundred and forty rooms and a broad assortment of facilities.
Texas
Legislators are proposing a voter referendum that would amend the state constitution to allow on line casino gambling in specified regions, as nicely as enable gambling on American Indian lands in Texas and at present racetracks.
West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer. Point out govt has proffered the notion of allowing the resort to supply casino online games, but this hard work is in as well early a stage to have any traction a single way or another.
Indian Gaming
A recent Supreme Court ruling that restricts the taking of lands into trust on behalf of federally acknowledged American Indian tribes has additional stymied some new Class III gaming tasks throughout the place. Additionally, there ended up eleven Indian casino tasks rejected by the DOI final 12 months due to the fact of its new rule that casinos have to be close to adequate to a reservation that tribal customers can operate at them. It has been recommended that the new Obama administration may well be more sympathetic to the advancement of Indian gaming assignments, but this concern has yet to be tackled.
In the meantime, there are other Course III projects in the a variety of phases of development. The Seneca on line casino undertaking in Buffalo, NY, although functioning a tiny short-term facility, has delayed an currently under design permanent facility until finally the marketplace rebounds. They have also expressed an desire in creating a casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could effect their strategies for bigger tasks. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this calendar year, and other people are in the preparing stage. Texas may allow the reopening of Indian gaming facilities and enable other location and there are ideas afoot by the Navajos in Arizona to assemble further casinos. California is poised to open up two to three new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Whole gaming revenue in Atlantic City has declined seven.six %, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is finding itself in an powerful comp-war with the Pennsylvania venues. At yoursite.com in the Northeast were found in Atlantic Town, the place it appeared as if it might really even eclipse the Las Vegas Strip’s yearly gaming revenues.
Slowly and gradually nevertheless its market place share was becoming encroached upon, very first by the development of a big Course III gaming operation in Connecticut, and then one more slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.
Now, with the prepared opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening about Atlantic City’s future prospects. It’s reliance on day-trippers lulled it into a fake perception of protection, and it now finds alone possessing to redefine its mission statement to “vacation spot resort.”
The only issue with this strategy however is that it is unwell-outfitted to pull it off. For all intents and purposes, Atlantic Town is beneath-roomed and/or more than-gamed. There is basically not ample day-tripper industry to go close to, and their efficient buying and selling region is tightening, as the peripheral populations northward now/will have a lot more completely ready access to a widened offer 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 accessibility, the city’s only real competitive positive aspects are its lodge ability and the availability of desk games, although the latter is most likely to eventuate in Pennsylvania, and possibly Delaware. In get to adequately compete as a spot vacation resort the metropolis wants to create extra guest rooms and not essentially gaming capacity. By comparison, the Las Vegas Strip homes – accurate gaming locations, in that they do not have much of a working day-journey market, except for the ‘locals’ – have an common of .87 gaming positions per guest place while Atlantic City’s typical is 2.74 positions for each guest area.
It is not a coincidence that Atlantic City’s two biggest lodges, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, ended up the least impacted by the latest downturn. The Borgata knowledgeable a gaming profits drop of one.six percent, although Harrah’s Marina reported a 4.9 per cent improve in comparison to 2007. Additionally, the hardest hit venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity of rooms. In the meantime some of the venues are teetering on viability, like the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been additional delayed, and getting rid of valuation.
With a steady increase in gaming revenues by way of 2006, the city appeared prime for further advancement, which precipitated preparing for four new vacation resort assignments, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion project stays an iron skeleton, Pinnacle Leisure has introduced it may possibly find to market its razed Sands site, MGM Mirage has shelved its casino plans, and Penn National appears to have stopped its pursuit of the Bader Subject airport site.