A Period of Adjustment
Oops! That giant hissing sound is the gaming balloon that experienced been increasing more than the several years, slowly losing air. But, it has not been a tide that decreased all ships nevertheless, as some rising and expanding gaming jurisdictions confirmed robust expansion in 2008.
General, the commercial and racetrack casino sectors (excluding Indian gaming), knowledgeable a three.5 percent decline in gaming revenues for 2008, making a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a obtain of virtually $one billion in 2008, thereby bringing the Commercial sector industry drop to $one.eight billion, or six.7 %. Nevada was the greatest loser in 2008, dropping nearly $1.three billion, much more than fifty percent of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most component, casino operators had been caught relatively flat-footed by the extent of the 2008 revenue downturn, as it was not till the 3rd and fourth quarters when it actually nosedived. Driving the crest of 12 months above year industry progress throughout the place and the availability of enough credit history and equity resources, new development and enlargement proliferated in latest many years. These days, confronted with the realities of declining, or at best stagnant demand, several of these tasks are now regarded more than-leveraged and/or above-sized. As a consequence a lot of gaming companies are making an attempt to renegotiate their financial debt – manufactured a lot more challenging by lower valuations – while also paring down operational fees. The latter has turn out to be a extremely problematic conundrum when dealing with the competition, specifically in individuals jurisdictions that are now vying for market shares with new emerging casino tasks in neighboring locations. A matter we go over a lot more totally in the State by Point out investigation area of this publication.
As a result of these circumstances the gaming industry landscape is now strewn with impending fatalities. Among the far more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows each and every week.
“How long will these economic problems persist, and are we at the base but?” are queries no one particular appears to be answering yet. What is distinct even so is that most gaming jurisdictions will have to find out how to deal with a smaller sized pie.
Note:
This analysis contains only gaming revenues of certified casinos and pari-mutuel retailers that provide casino games, and not Indian gaming functions, card rooms, or little non-casino kind slot spots. The whole article, which includes revenue tables is accessible on our net web page.
Enter/Output Design
A essential factor that looks to have arisen from the ashes of this existing craze is that a lot of on line casino assignments ended up just also big to assistance by themselves. The enter, in terms of expense dollars, was not proportional to the output, in conditions of web profit soon after debt support, in contrast to beforehand achieved outcomes. More and/or even bigger is not often far better. Looking at the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the advancement of a lot more thorough facilities in several other jurisdictions. The flaw in this strategy even so is that the costs related with widening industry penetration and occasioned-use, are substantially greater than these incurred to entice the base marketplace.
As daytripper markets turn into a lot more competitive, on line casino venues will have to rely more and a lot more on their in-residence hotel patrons, and size their properties (and anticipations) accordingly. Whilst Steve Wynn began a main craze in creating up-market place mega-destinations, there merely was not ample demand on the Strip to warrant the a lot of other equivalent assignments that adopted that aimed at the exact same area of interest.
The trick is to strike a pleased medium in project configurations which of course demand much less of a ‘seat-of-pants’ strategy, and 1 that is much more researched. A shameless plug for improvement consultants like ourselves.
Other Gaming Pursuits
Although there are no released thorough data of American Indian gaming revenues, anecdotal evidence seems to propose that this section has been as hard strike as the Business sector. The two Connecticut Indian gaming installations report slot profits of $1.six billion in 2008, representing a fall of about seven percent, or nearly $114 million, much more than doubling the 3.5 % drop from the 12 months prior to. This industry is evidently nonetheless reeling from the ripple-impact of a casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Department of Gaming reviews that contributions primarily based on a gaming profits method from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in contrast to the prior calendar year reducing .eight percent in the very first quarter, 7.5 p.c in the second quarter, 9.5 percent in the 3rd quarter, and 16.1 per cent in the fourth quarter.
Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, studies that whilst calendar 12 months 2008 confirmed an almost two per cent expansion charge in gaming revenues, there was an eight.seven % decline in the 3rd quarter and an practically ten percent decrease in the fourth quarter of 2008, when compared with 2007. Gaming revenue developments at close by Niagara Falls, Ontario had been down 1.five% in 2008 when compared with 2007.
It truly is been a blended-bag for state lotteries across the country. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries generated a total of $60.6 billion in product sales in fiscal 2008, up about three p.c from the preceding 12 months yet some jurisdictions described decreases, most notably California, which confirmed an eight percent fall. Inasmuch as some of these states are on a variety of fiscal year ends, it would seem that the information does not mirror the impact of third and/or fourth quarter benefits.
In accordance to info presented by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 percent to $13.seven billion in 2008, vs . $14.7 billion in 2007.
Planned & Proposed New Expansions
As earlier famous, it has been new gaming jurisdictions that have spawned considerably of the expansion in once-a-year casino/racino revenues more than the a long time, and their effect is apt to continue into the close to potential.
Florida
Miami Dade voters accepted a ballot issue that allows each and every of three pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Pet Track and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has nevertheless to introduced its plans. There are several other proposals currently being regarded that would even more expand on line casino growth all through the condition.
Illinois
The state last but not least received all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,two hundred+ sport on line casino found in Des Plaines just east of O’Hare. The new facility is not most likely to open up right up until 2010. There has also been some dialogue about making it possible for an enhance in for each location gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.
Kansas
The state’s expanded lottery software that enables for the development of 4 on line casino gaming zones and slots at existing horse and dog tracks seems mired, as only one facility is presently below building, even though three other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is situated so shut to the condition line that its parking good deal is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk game titles, together with a second phase owing to open in 2011 with 875 slots and twenty desk online games. The point out has prolonged the application approach for the other three zones right up until April, 2009.
Kentucky
There is nonetheless a lot of ‘jockeying’ going on, but the prospect of as several as 8 slot parlors and racinos appears to be back on the entrance-burner, but likely not settled during the recent legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most recent becoming the 390 space M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Tough Rock and new accommodations consist of two parts of the Town Middle venture, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino growth tasks in Baton Rouge and Lake Charles, while delayed, are described to nevertheless be on-monitor for opening this calendar year and/or early 2010.
Maine
There is a invoice under thought that could a lot more than double Penn National’s slot devices to three,000, as nicely as a proposal that would get rid of the restriction that slots be located inside of 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing local people to permit slots, could be taking into consideration shifting to a a lot more hospitable city.
Maryland
A referendum was accepted in November, 2008 that makes it possible for for the development of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot even though it is not as intense as the point out had anticipated.
Mississippi
Grand Soleil Casino Vacation resort in Natchez had been slated to open in 2008, but has run into numerous financing concerns and although the hotel portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled again somewhat, is still on observe to open this yr.
New England
Massachusetts, a sleeping-big in conditions of marketplace prospective, is even now maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but are not able to seem to be to muster the political assist. A recent research finished by Dartmouth University estimates that Massachusetts resident spent far more than $920 million previous year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an selection to build casinos, however the subject is likely to be revisited, particularly if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its possibilities.
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 carry on augmenting purses with an additional tax. The governor however, has appointed a new panel to examine the state’s sagging racing system which ironically, can only be preserved by permitting the tracks to have slot devices specifically 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 finally be created, the profitable bidder indicated an lack of ability to make the necessary $370 million price, citing the existing lending local climate, and throwing the project back again into the lap of the governor. Even though the industry demand from customers in the area could be considered quite sturdy, the prospect of extra competition from close by Belmont could have an affect on Aqueduct’s underlining economic feasibility, especially taking into consideration that marginally considerably less than thirty% of the internet earn is retained by the operator.
Strategies to relocate Monticello Raceway into a vacation resort intricate are becoming reconsidered perhaps owing to equally the probable opening of at minimum one particular or probably 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
But an additional gaming proposal is getting set forth in Ohio, soon after final year’s model was turned down by the voters. This program phone calls for one particular casino every single in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense essential of $250 million, as nicely as an original licensing fee of $50 million, and a 33 per cent tax on gaming profits.
Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is envisioned to be operational in August, ’09 even though Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are predicted to commence building this yr.
agen sbobet at Deadwood is slated to open up in the Drop of 2009, and incorporate three hundred game titles, a hundred and forty rooms and a vast range of amenities.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to enable on line casino gambling in designated areas, as well as allow 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 individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. State authorities has proffered the idea of allowing the vacation resort to provide on line casino games, but this hard work is in too early a stage to have any traction 1 way or yet another.
Indian Gaming
A modern Supreme Court ruling that restricts the taking 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 country. Additionally, there had been eleven Indian casino tasks turned down by the DOI previous 12 months simply because of its new rule that casinos have to be near adequate to a reservation that tribal members can perform at them. It has been proposed that the new Obama administration might be far more sympathetic to the development of Indian gaming initiatives, but this concern has but to be tackled.
In the meantime, there are other Course III projects in the different levels of improvement. The Seneca casino task in Buffalo, NY, even though working a little short term facility, has delayed an already beneath development permanent facility until finally the market rebounds. They have also expressed an desire in building a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could influence their ideas for more substantial assignments. There are new Indian gaming assignments established to open in Michigan and Oklahoma this 12 months, and others are in the planning phase. Texas could allow the reopening of Indian gaming services and let other location and there are ideas afoot by the Navajos in Arizona to assemble further casinos. California is poised to open up two to a few new Class III casinos in 2009/10.
The Nor’easter Squeeze
Complete gaming earnings in Atlantic Metropolis has declined 7.six per cent, from $4.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the metropolis is discovering by itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast ended up found in Atlantic Metropolis, the place it looked as if it may possibly in fact even eclipse the Las Vegas Strip’s annual gaming revenues.
Slowly and gradually nevertheless its market place share was becoming encroached on, first by the development of a huge Class III gaming procedure 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 operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening close to Atlantic City’s potential potential clients. It really is reliance on working day-trippers lulled it into a false perception of stability, and it now finds alone having to redefine its mission assertion to “destination resort.”
The only dilemma with this strategy nevertheless is that it is sick-equipped to pull it off. For all intents and needs, Atlantic Metropolis is below-roomed and/or above-gamed. There is simply not ample working day-tripper market place to go around, and their powerful investing area is tightening, as the peripheral populations northward now/will have more completely ready obtain to a widened provide in New York (Yonkers, and soon 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 actual competitive rewards are its lodge potential and the availability of desk online games, despite the fact that the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In get to sufficiently compete as a location vacation resort the city demands to build further guest rooms and not essentially gaming capability. By comparison, the Las Vegas Strip properties – real gaming places, in that they do not have a lot of a working day-vacation market, other than for the ‘locals’ – have an average of .87 gaming positions for each visitor place whilst Atlantic City’s typical is two.seventy four positions for every guest room.
It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, had been the least impacted by the most current downturn. The Borgata experienced a gaming profits drop of 1.six per cent, whilst Harrah’s Marina reported a 4.nine % improve in comparison to 2007. Moreover, the hardest 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 qualities and Resorts with the hoped for sale of the Tropicana has been more delayed, and dropping valuation.
With a steady increase in gaming revenues through 2006, the city seemed key for further improvement, which precipitated planning for 4 new resort assignments, every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.5 billion undertaking continues to be an iron skeleton, Pinnacle Enjoyment has announced it might seek to market its razed Sands website, MGM Mirage has shelved its casino strategies, and Penn Countrywide seems to have stopped its pursuit of the Bader Field airport web site.