A Time period of Adjustment
Oops! That giant hissing audio is the gaming balloon that experienced been expanding above the many years, little by little dropping air. But, it has not been a tide that lowered all ships nevertheless, as some rising and growing gaming jurisdictions confirmed sturdy growth in 2008.
Total, the business and racetrack on line casino sectors (excluding Indian gaming), experienced a 3.5 % decrease in gaming revenues for 2008, producing a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a gain of virtually $1 billion in 2008, thus bringing the Industrial sector industry drop to $1.eight billion, or six.seven per cent. Nevada was the biggest loser in 2008, dropping practically $one.3 billion, a lot more than half of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most element, casino operators had been caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not until finally the 3rd and fourth quarters when it actually nosedived. Driving the crest of year in excess of year market growth across the place and the availability of sufficient credit score and equity money, new design and growth proliferated in modern many years. Nowadays, faced with the realities of declining, or at very best stagnant demand from customers, many of these initiatives are now regarded in excess of-leveraged and/or more than-sized. As a outcome many gaming organizations are making an attempt to renegotiate their credit card debt – manufactured far more challenging by reduce valuations – even though also paring down operational fees. The latter has become a extremely problematic conundrum when working with the competition, especially in individuals jurisdictions that are now vying for marketplace shares with new emerging on line casino initiatives in neighboring regions. A topic we talk about a lot more fully in the State by Condition examination area of this publication.
As a consequence of these circumstances the gaming market landscape is now strewn with impending fatalities. Among the far more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows every 7 days.
“How long will these financial conditions persist, and are we at the base nevertheless?” are queries no one particular appears to be answering however. What is distinct even so is that most gaming jurisdictions will have to discover how to deal with a smaller pie.
Notice:
This evaluation includes only gaming revenues of licensed casinos and pari-mutuel retailers that provide casino online games, and not Indian gaming operations, card rooms, or tiny non-on line casino variety slot locations. The complete post, including income tables is accessible on our net page.
Enter/Output Product
A essential element that appears to have arisen from the ashes of this recent pattern is that a lot of on line casino assignments were just as well huge to assistance them selves. The enter, in phrases of investment pounds, was not proportional to the output, in conditions of web profit soon after debt services, in contrast to beforehand attained final results. Far more and/or even bigger is not usually greater. Seeing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the advancement of a lot more complete amenities in numerous other jurisdictions. The flaw in this approach nonetheless is that the fees associated with widening industry penetration and occasioned-use, are significantly greater than people incurred to entice the base market place.
As daytripper markets become a lot more aggressive, casino venues will have to depend far more and far more on their in-home resort patrons, and size their houses (and expectations) appropriately. Whilst Steve Wynn started out a key development in generating up-market mega-destinations, there basically was not adequate need on the Strip to warrant the a lot of other similar assignments that adopted that aimed at the identical area of interest.
The trick is to strike a pleased medium in task configurations which of system call for significantly less of a ‘seat-of-pants’ strategy, and a single that is a lot more examined. A shameless plug for improvement consultants like ourselves.
Other Gaming Activities
Although there are no released comprehensive knowledge of American Indian gaming revenues, anecdotal evidence appears to advise that this phase has been as hard strike as the Commercial sector. The two Connecticut Indian gaming installations report slot earnings of $1.6 billion in 2008, symbolizing a fall of about seven per cent, or practically $114 million, a lot more than doubling the three.5 per cent fall from the year before. This market is apparently still reeling from the ripple-impact of a casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Division of Gaming stories that contributions based mostly on a gaming earnings method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in comparison to the prior yr lowering .eight % in the 1st quarter, 7.five p.c in the 2nd quarter, nine.five p.c in the 3rd quarter, and sixteen.one per cent in the fourth quarter.
Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, stories that while calendar calendar year 2008 showed an virtually 2 p.c expansion rate in gaming revenues, there was an 8.7 p.c drop in the third quarter and an virtually 10 percent decrease in the fourth quarter of 2008, in contrast with 2007. Gaming income trends at close by Niagara Falls, Ontario were down 1.five% in 2008 in comparison with 2007.
It is been a mixed-bag for state lotteries across the country. The North American Association of Point out & Provincial Lotteries reports that U.S. lotteries created a overall of $60.six billion in revenue in fiscal 2008, up about 3 percent from the prior calendar year yet some jurisdictions documented decreases, most notably California, which confirmed an eight per cent fall. Inasmuch as some of these states are on different fiscal yr ends, it would seem to be that the knowledge does not mirror the affect of 3rd and/or fourth quarter outcomes.
According to info offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling seven percent to $13.seven billion in 2008, compared to $14.7 billion in 2007.
Planned & Proposed New Expansions
As beforehand mentioned, it has been new gaming jurisdictions that have spawned a lot of the development in yearly on line casino/racino revenues more than the a long time, and their effect is apt to keep on into the near foreseeable future.
Florida
Miami Dade voters accredited a ballot concern that makes it possible for every single of 3 pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Dog Keep track of and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, whilst the Calder set up in Miami Gardens has but to introduced its strategies. There are numerous other proposals becoming regarded that would even more increase casino improvement during the condition.
Illinois
The condition ultimately got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ sport on line casino located in Des Plaines just east of O’Hare. The new facility is not probably to open up until finally 2010. There has also been some dialogue about enabling an improve in for every location gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.
Kansas
The state’s expanded lottery program that allows for the improvement of four casino gaming zones and slots at current horse and puppy tracks seems mired, as only one facility is presently underneath design, while three other proposals were 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 close to the state line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk games, along with a second stage due to open in 2011 with 875 slots and twenty table game titles. The point out has prolonged the application procedure for the other 3 zones right up until April, 2009.
Kentucky
There is nevertheless a good deal of ‘jockeying’ going on, but the prospect of as numerous as eight slot parlors and racinos seems to be back again on the entrance-burner, but likely not resolved throughout the recent legislative session.
Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most latest currently being the 390 area M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Hard Rock and new accommodations contain two factors of the City Middle task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino improvement projects in Baton Rouge and Lake Charles, although delayed, are documented to nevertheless be on-track for opening this year and/or early 2010.
Maine
There is a bill beneath thing to consider that could a lot more than double Penn National’s slot machines to three,000, as nicely as a proposal that would remove the restriction that slots be positioned in 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local people to enable slots, may be thinking about relocating to a far more hospitable city.
Maryland
A referendum was authorized in November, 2008 that permits for the development of 5 casinos with a total of fifteen,000 slots, and now the bidding war is afoot though it is not as intense as the state experienced predicted.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open up in 2008, but has run into different funding problems and even though the resort part is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled again relatively, is still on monitor to open this 12 months.
New England
Massachusetts, a sleeping-large in terms of market prospective, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to appear to muster the political assist. A latest study concluded by Dartmouth University estimates that Massachusetts resident invested more than $920 million last 12 months at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an selection to create casinos, nevertheless the subject matter is very likely to be revisited, particularly if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its choices.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by just lately agreeing to carry on augmenting purses with an additional tax. The governor nonetheless, has appointed a new panel to research the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze part)
New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would ultimately be developed, the winning bidder indicated an incapacity to make the needed $370 million payment, citing the existing lending weather, and throwing the task again into the lap of the governor. Although the market demand from customers in the region could be regarded really robust, the prospect of further competitiveness from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, specially considering that a bit significantly less than thirty% of the web get is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort sophisticated are becoming reconsidered probably owing to equally the probable opening of at minimum a single or maybe two racino functions in the NY metro spot, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.
Ohio
But another gaming proposal is becoming place forth in Ohio, right after last year’s version was turned down by the voters. This plan calls for one on line casino each in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment needed of $250 million, as properly as an preliminary licensing charge of $50 million, and a 33 per cent tax on gaming revenue.
Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers project in Pittsburgh is envisioned to be operational in August, ’09 whilst Philadelphia’s two slot services still wallow in a political mire, but are anticipated to start off development this 12 months.
South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and contain 300 games, a hundred and forty rooms and a wide variety of facilities.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to enable on line casino gambling in selected places, as properly as allow gambling on American Indian lands in Texas and at existing racetracks.
West Virginia
The Greenbriar, the state’s venerable vacation resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an supply. State federal government has proffered the notion of enabling the resort to provide on line casino online games, but this hard work is in too early a stage to have any traction one particular way or yet another.
Indian Gaming
A latest Supreme Court ruling that restricts the getting of lands into trust on behalf of federally recognized American Indian tribes has further stymied some new Class III gaming tasks throughout the nation. Furthermore, there had been eleven Indian casino assignments rejected by the DOI very last 12 months due to the fact of its new rule that casinos must be around sufficient to a reservation that tribal associates can operate at them. It has been advised that the new Obama administration may possibly be more sympathetic to the advancement of Indian gaming tasks, but this problem has however to be tackled.
Meanwhile, there are other Class III assignments in the various stages of development. The Seneca casino venture in Buffalo, NY, whilst working a little temporary facility, has delayed an already below development long lasting facility until the industry rebounds. They have also expressed an desire in establishing a casino in the Catskills. www.doge7casino.com gaming compact with Seminoles in Florida is getting challenged, and could influence their plans for greater tasks. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this 12 months, and other people are in the organizing phase. Texas might let the reopening of Indian gaming facilities and allow other venue and there are programs afoot by the Navajos in Arizona to construct further casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Total gaming profits in Atlantic City has declined seven.six percent, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is discovering itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were situated in Atlantic Town, in which it looked as if it may truly even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Little by little nonetheless its marketplace share was becoming encroached upon, initial by the development of a huge Class III gaming operation in Connecticut, and then one more slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently 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 functions in Philadelphia, the noose is tightening about Atlantic City’s future prospects. It truly is reliance on working day-trippers lulled it into a false feeling of safety, and it now finds alone possessing to redefine its mission statement to “spot resort.”
The only difficulty with this technique however is that it is ill-geared up to pull it off. For all intents and functions, Atlantic Town is below-roomed and/or more than-gamed. There is just not sufficient day-tripper industry to go all around, and their effective trading area is tightening, as the peripheral populations northward now/will have more prepared accessibility to a widened source in New York (Yonkers, and soon at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only real competitive benefits are its lodge capacity and the availability of table video games, though the latter is most likely to eventuate in Pennsylvania, and possibly Delaware. In purchase to sufficiently contend as a destination vacation resort the city wants to produce added visitor rooms and not automatically gaming potential. By comparison, the Las Vegas Strip homes – real gaming locations, in that they do not have considerably of a day-trip market, except for the ‘locals’ – have an common of .87 gaming positions for every visitor place while Atlantic City’s regular is two.seventy four positions for every visitor room.
It is not a coincidence that Atlantic City’s two largest lodges, the Borgata and Harrah’s Marina, each of which added new rooms in 2008, had been the minimum impacted by the most recent downturn. The Borgata skilled a gaming earnings drop of one.six %, even though Harrah’s Marina noted a 4.nine % boost in comparison to 2007. In addition, the most difficult hit venues, namely 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 steady rise in gaming revenues by way of 2006, the town appeared primary for even more growth, which precipitated planning for 4 new resort initiatives, each and every of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.five billion task remains an iron skeleton, Pinnacle Leisure has announced it may well seek out to market its razed Sands site, MGM Mirage has shelved its casino programs, and Penn Countrywide appears to have stopped its pursuit of the Bader Subject airport website.
