A Period of Adjustment
Oops! That big hissing audio is the gaming balloon that experienced been growing more than the years, slowly and gradually shedding air. But, it has not been a tide that decreased all ships nonetheless, as some rising and increasing gaming jurisdictions showed robust expansion in 2008.
General, the professional and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.five % decline in gaming revenues for 2008, producing a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a achieve of nearly $one billion in 2008, thereby bringing the Professional sector marketplace decline to $one.8 billion, or six.seven per cent. Nevada was the most significant loser in 2008, dropping virtually $one.3 billion, much more than fifty percent of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most component, on line casino operators have been caught fairly flat-footed by the extent of the 2008 profits downturn, as it was not till the 3rd and fourth quarters when it truly nosedived. Driving the crest of calendar year over calendar year industry development throughout the region and the availability of enough credit and equity cash, new construction and growth proliferated in recent several years. Right now, faced with the realities of declining, or at ideal stagnant demand from customers, a lot of of these projects are now deemed in excess of-leveraged and/or above-sized. As a end result several gaming firms are trying to renegotiate their credit card debt – created much more tough by reduced valuations – even though also paring down operational fees. The latter has turn into a very problematic conundrum when dealing with the competition, specifically in individuals jurisdictions that are now vying for market place shares with new rising casino assignments in neighboring places. A subject matter we talk about much more totally in the State by Point out examination segment of this publication.
As a end result of these conditions the gaming market landscape is now strewn with impending fatalities. Amongst the far more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the listing grows each 7 days.
“How lengthy will these financial situations persist, and are we at the bottom but?” are queries no one seems to be answering yet. What is distinct nonetheless is that most gaming jurisdictions will have to understand how to deal with a more compact pie.
Observe:
This examination consists of only gaming revenues of accredited casinos and pari-mutuel retailers that offer on line casino video games, and not Indian gaming functions, card rooms, or small non-casino sort slot areas. The total report, which includes revenue tables is obtainable on our web webpage.
Enter/Output Product
A crucial element that seems to have arisen from the ashes of this present pattern is that a lot of casino tasks ended up just way too big to assist them selves. The input, in phrases of expenditure bucks, was not proportional to the output, in terms of net earnings following debt service, in contrast to formerly attained final results. More and/or even bigger is not always much better. Looking at the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the advancement of much more comprehensive amenities in many other jurisdictions. The flaw in this approach however is that the costs linked with widening industry penetration and occasioned-use, are significantly higher than these incurred to entice the foundation market.
As daytripper marketplaces turn out to be more aggressive, casino venues will have to depend much more and more on their in-residence lodge patrons, and measurement their homes (and anticipations) accordingly. While Steve Wynn commenced a main development in generating up-industry mega-destinations, there basically was not enough demand from customers on the Strip to warrant the many other similar tasks that followed that aimed at the very same specialized niche.
The trick is to strike a satisfied medium in undertaking configurations which of program require significantly less of a ‘seat-of-pants’ strategy, and 1 that is more analyzed. A shameless plug for growth consultants like ourselves.
Other Gaming Actions
Even though there are no revealed in depth information of American Indian gaming revenues, anecdotal evidence appears to suggest that this section has been as challenging hit as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, representing a drop of about 7 %, or virtually $114 million, far more than doubling the 3.5 per cent fall from the 12 months before. This marketplace is seemingly nevertheless reeling from the ripple-influence of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Section of Gaming reports that contributions based on a gaming profits formula from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 when compared to the earlier yr decreasing .8 per cent in the first quarter, seven.5 p.c in the next quarter, 9.5 % in the 3rd quarter, and 16.one per cent in the fourth quarter.
Some SEC reporting Indian gaming qualities report equivalent decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reviews that although calendar 12 months 2008 showed an virtually 2 per cent development price in gaming revenues, there was an eight.seven % decline in the 3rd quarter and an almost ten % drop in the fourth quarter of 2008, when compared with 2007. Gaming revenue trends at close by Niagara Falls, Ontario had been down 1.5% in 2008 in contrast with 2007.
It is been a blended-bag for point out lotteries throughout the nation. The North American Affiliation of State & Provincial Lotteries reports that U.S. lotteries generated a complete of $60.six billion in income in fiscal 2008, up about three per cent from the previous year but some jurisdictions documented decreases, most notably California, which confirmed an 8 per cent drop. Inasmuch as some of these states are on different fiscal 12 months ends, it would seem that the data does not replicate the affect of 3rd and/or fourth quarter final results.
In accordance to data presented by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping seven per cent to $13.7 billion in 2008, as opposed to $14.seven billion in 2007.
Planned & Proposed New Expansions
As beforehand mentioned, it has been new gaming jurisdictions that have spawned a lot of the expansion in annual casino/racino revenues above the many years, and their impact is apt to carry on into the around long term.
Florida
Miami Dade voters accredited a ballot issue that makes it possible for every of a few pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Canine Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has yet to introduced its programs. There are several other proposals becoming deemed that would additional grow on line casino improvement throughout the state.
Illinois
The state lastly obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,two hundred+ recreation on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open up till 2010. There has also been some discussion about allowing an boost in for every area gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.
Kansas
The state’s expanded lottery software that makes it possible for for the growth of 4 on line casino gaming zones and slots at current horse and puppy tracks appears mired, as only a single facility is presently beneath building, even though 3 other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is located so close to the state line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk online games, along with a next phase owing to open in 2011 with 875 slots and 20 table online games. The condition has prolonged the application process for the other a few zones until April, 2009.
Kentucky
There is nevertheless a good deal of ‘jockeying’ going on, but the prospect of as a lot of as eight slot parlors and racinos appears to be back again on the front-burner, but most likely not settled throughout the present legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most latest being the 390 place M Resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new hotels incorporate two factors of the Metropolis Centre venture, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino growth assignments in Baton Rouge and Lake Charles, although delayed, are documented to nonetheless be on-track for opening this calendar year and/or early 2010.
Maine
There is a monthly bill below consideration that could more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would get rid of the restriction that slots be located in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing local residents to allow slots, could be thinking about moving to a much more hospitable town.
Maryland
A referendum was approved in November, 2008 that allows for the improvement of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot though it is not as powerful as the condition had expected.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has run into different funding problems and even though the hotel portion is open, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back again considerably, is nonetheless on track to open up this year.
New England
Massachusetts, a sleeping-huge in phrases of marketplace prospective, 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 current study finished by Dartmouth College estimates that Massachusetts resident spent far more than $920 million final yr at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an option to create casinos, even so the subject is likely to be revisited, specifically if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its alternatives.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by just lately agreeing to keep on augmenting purses with an further tax. The governor nevertheless, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by permitting the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it appeared as if Aqueduct’s four,500 VLT facility would lastly be designed, the winning bidder indicated an incapacity to make the necessary $370 million charge, citing the present lending local weather, and throwing the venture back again into the lap of the governor. Even though the marketplace desire in the region could be deemed quite powerful, the prospect of additional competition from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, specifically thinking about that somewhat significantly less than 30% of the web win is retained by the operator.
Plans to relocate Monticello Raceway into a resort intricate are currently being reconsidered maybe owing to equally the probable opening of at minimum one particular or possibly two racino functions in the NY metro spot, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.
Ohio
However yet another gaming proposal is getting place forth in Ohio, following previous year’s variation was turned down by the voters. This strategy phone calls for 1 casino every in the state’s biggest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure required of $250 million, as well as an preliminary licensing payment of $fifty million, and a 33 per cent tax on gaming income.
Pennsylvania
The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot amenities still wallow in a political mire, but are anticipated to commence building this calendar 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 selection of amenities.
Texas
Legislators are proposing a voter referendum that would amend the condition constitution to enable on line casino gambling in designated areas, as nicely as permit gambling on American Indian lands in Texas and at present racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an provide. State government has proffered the idea of permitting the vacation resort to supply on line casino games, but this effort is in too early a stage to have any traction one way or one more.
Indian Gaming
A current Supreme Courtroom ruling that restricts the using of lands into trust on behalf of federally identified American Indian tribes has further stymied some new Course III gaming assignments across the country. Furthermore, there ended up eleven Indian casino projects turned down by the DOI very last calendar year since of its new rule that casinos have to be in close proximity to adequate to a reservation that tribal associates can work at them. It has been suggested that the new Obama administration may be much more sympathetic to the growth of Indian gaming projects, but this concern has yet to be tackled.
Meanwhile, there are other Course III projects in the numerous levels of growth. The Seneca casino task in Buffalo, NY, while functioning a tiny temporary facility, has delayed an previously underneath design long lasting facility until finally the market 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 getting challenged, and could impact their ideas for bigger projects. There are lapilanders casino review gaming projects set to open up in Michigan and Oklahoma this yr, and other individuals are in the planning stage. Texas may enable the reopening of Indian gaming services and enable other location and there are strategies afoot by the Navajos in Arizona to build further casinos. California is poised to open up two to three new Course III casinos in 2009/10.
The Nor’easter Squeeze
Overall gaming revenue in Atlantic Town has declined 7.6 p.c, from $4.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the metropolis is finding alone in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were positioned in Atlantic City, in which it seemed as if it may well truly even eclipse the Las Vegas Strip’s annual gaming revenues.
Little by little however its market place share was becoming encroached on, 1st by the improvement of a huge Class III gaming operation in Connecticut, and then yet another 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 functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening close to Atlantic City’s long term potential clients. It truly is reliance on day-trippers lulled it into a untrue perception of safety, and it now finds by itself having to redefine its mission assertion to “vacation spot resort.”
The only issue with this technique even so is that it is sick-outfitted to pull it off. For all intents and reasons, Atlantic Town is beneath-roomed and/or over-gamed. There is simply not sufficient day-tripper market place to go all around, and their efficient trading spot is tightening, as the peripheral populations northward now/will have much more ready entry to a widened source in New York (Yonkers, and shortly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only true competitive positive aspects are its resort potential and the availability of table games, though the latter is probably to eventuate in Pennsylvania, and probably Delaware. In buy to sufficiently compete as a destination vacation resort the metropolis wants to develop added guest rooms and not automatically gaming potential. By comparison, the Las Vegas Strip qualities – true gaming locations, in that they do not have considerably of a working day-journey industry, other than for the ‘locals’ – have an regular of .87 gaming positions for each visitor area even though Atlantic City’s typical is two.74 positions per visitor space.
It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, each of which extra new rooms in 2008, were the least impacted by the most recent downturn. The Borgata skilled a gaming revenue fall of 1.six percent, while Harrah’s Marina reported a 4.9 per cent improve when compared to 2007. Moreover, the most difficult strike 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, like the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been even more delayed, and dropping valuation.
With a constant increase in gaming revenues by means of 2006, the city seemed primary for more advancement, which precipitated preparing for four new vacation resort initiatives, every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion venture remains an iron skeleton, Pinnacle Leisure has announced it may possibly look for to offer its razed Sands internet site, MGM Mirage has shelved its casino strategies, and Penn National appears to have stopped its pursuit of the Bader Subject airport internet site.