A Period of Adjustment

Oops! That large hissing audio is the gaming balloon that experienced been expanding over the years, gradually shedding air. But, it has not been a tide that reduced all ships nevertheless, as some rising and increasing gaming jurisdictions showed sturdy development in 2008.

Overall, the commercial and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.5 p.c decline in gaming revenues for 2008, producing a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a acquire of almost $1 billion in 2008, therefore bringing the Commercial sector marketplace drop to $one.8 billion, or 6.7 per cent. Nevada was the biggest loser in 2008, dropping nearly $1.three billion, much more than 50 % of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, casino operators ended up caught fairly flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the third and fourth quarters when it really nosedived. Using the crest of 12 months in excess of calendar year market place progress across the region and the availability of sufficient credit history and fairness funds, new construction and growth proliferated in modern many years. Today, confronted with the realities of declining, or at best stagnant need, several of these projects are now regarded more than-leveraged and/or over-sized. As a result numerous gaming organizations are trying to renegotiate their personal debt – manufactured much more tough by reduce valuations – whilst also paring down operational charges. The latter has become a really problematic conundrum when working with the competitors, specially in those jurisdictions that are now vying for market place shares with new emerging casino tasks in neighboring places. A subject we discuss much more entirely in the Point out by State investigation area of this publication.

As a end result of these circumstances the gaming industry landscape is now strewn with impending fatalities. Between the a lot more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the list grows each and every week.

“How lengthy will these economic problems persist, and are we at the bottom yet?” are inquiries no one particular appears to be answering yet. What is distinct even so is that most gaming jurisdictions will have to learn how to offer with a smaller sized pie.

Be aware:
This analysis contains only gaming revenues of certified casinos and pari-mutuel shops that offer you on line casino online games, and not Indian gaming operations, card rooms, or modest non-on line casino sort slot locations. The entire write-up, including profits tables is available on our world wide web web page.

Enter/Output Product

A essential aspect that looks to have arisen from the ashes of this current trend is that numerous on line casino projects have been just way too large to support by themselves. The input, in phrases of expenditure pounds, was not proportional to the output, in terms of internet profit after credit card debt services, in contrast to beforehand attained final results. More and/or bigger is not always much better. Seeing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the improvement of much more complete facilities in several other jurisdictions. The flaw in this technique however is that the fees linked with widening marketplace penetration and occasioned-use, are drastically higher than these incurred to draw in the base market.

As daytripper marketplaces grow to be more aggressive, casino venues will have to count much more and a lot more on their in-house hotel patrons, and measurement their qualities (and expectations) appropriately. While Steve Wynn began a key development in generating up-market mega-destinations, there just was not enough demand from customers on the Strip to warrant the many other comparable projects that adopted that aimed at the same market.

The trick is to strike a pleased medium in task configurations which of course call for less of a ‘seat-of-pants’ technique, and one particular that is a lot more analyzed. A shameless plug for advancement consultants like ourselves.

Other Gaming Pursuits

Despite the fact that there are no printed thorough info of American Indian gaming revenues, anecdotal proof seems to advise that this section has been as tough hit as the Commercial sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, symbolizing a drop of about seven percent, or nearly $114 million, more than doubling the three.5 % drop from the year just before. This industry is seemingly even now reeling from the ripple-impact of a casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Office of Gaming studies that contributions based on a gaming revenue formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the preceding yr lowering .eight % in the first quarter, seven.5 % in the second quarter, nine.5 p.c in the third quarter, and sixteen.1 % in the fourth quarter.

Some SEC reporting Indian gaming homes report related decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reviews that although calendar year 2008 showed an nearly two % progress price in gaming revenues, there was an eight.7 p.c decline in the third quarter and an practically 10 % decline in the fourth quarter of 2008, in comparison with 2007. Gaming income tendencies at nearby Niagara Falls, Ontario have been down one.5% in 2008 in contrast with 2007.

It truly is been a mixed-bag for condition lotteries across the country. The North American Association of State & Provincial Lotteries reports that U.S. lotteries generated a overall of $60.6 billion in revenue in fiscal 2008, up about three per cent from the prior 12 months however some jurisdictions noted decreases, most notably California, which confirmed an eight per cent fall. Inasmuch as some of these states are on different fiscal year ends, it would seem that the info does not mirror the impact of 3rd and/or fourth quarter outcomes.

In accordance to knowledge presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 p.c to $thirteen.7 billion in 2008, as opposed to $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As earlier observed, it has been new gaming jurisdictions that have spawned considerably of the development in once-a-year casino/racino revenues more than the years, and their influence is apt to keep on into the near long term.

Florida
Miami Dade voters accredited a ballot situation that makes it possible for every of a few pari-mutuels to have a casino facility of up to two,000 slot devices. The Flagler Canine Observe and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has however to introduced its ideas. ONCAPAN There are quite a few other proposals currently being considered that would even more grow casino advancement during the state.

Illinois
The state ultimately acquired about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ game on line casino situated in Des Plaines just east of O’Hare. The new facility is not likely to open until 2010. There has also been some discussion about enabling an boost in for every area gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery program that allows for the development of 4 casino gaming zones and slots at present horse and canine tracks appears mired, as only one particular facility is presently underneath building, while 3 other proposals ended up rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so near to the state line that its parking whole lot is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk game titles, alongside with a next stage thanks to open in 2011 with 875 slots and twenty desk games. The condition has prolonged the application procedure for the other three zones right up until April, 2009.

Kentucky
There is nevertheless a lot 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 very likely not fixed during the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most modern becoming the 390 area M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new lodges incorporate two parts of the City Center task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino improvement assignments in Baton Rouge and Lake Charles, whilst delayed, are reported to nonetheless be on-observe for opening this year and/or early 2010.

Maine
There is a monthly bill beneath thing to consider that could far more than double Penn National’s slot machines to three,000, as effectively as a proposal that would eliminate the restriction that slots be located within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local people to permit slots, may be thinking about shifting to a a lot more hospitable city.

Maryland
A referendum was authorized in November, 2008 that makes it possible for for the growth of five casinos with a overall of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intensive as the state had anticipated.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open up in 2008, but has operate into a variety of funding concerns and although the hotel part is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back again somewhat, is nevertheless on keep track of to open up this yr.

New England
Massachusetts, a sleeping-giant in phrases of industry possible, is even now maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but are not able to look to muster the political support. A current research concluded by Dartmouth University estimates that Massachusetts resident expended more than $920 million very last yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to build casinos, however the matter is probably to be revisited, specifically if Massachusetts decides to go forward. There are also tries in Maine to reconsider its choices.

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 continue augmenting purses with an additional tax. The governor however, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot machines specially 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 winning bidder indicated an lack of ability to make the required $370 million charge, citing the present lending local weather, and throwing the venture back again into the lap of the governor. Despite the fact that the marketplace need in the region could be regarded as fairly powerful, the prospect of added competitiveness from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, particularly thinking about that a bit considerably less than 30% of the net acquire is retained by the operator.

Strategies to relocate Monticello Raceway into a resort sophisticated are getting reconsidered probably owing to each the possible opening of at minimum a single 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 an additional gaming proposal is currently being place 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 single in the state’s biggest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment necessary of $250 million, as properly as an preliminary licensing payment of $fifty million, and a 33 p.c tax on gaming income.

Pennsylvania
The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is envisioned to be operational in August, ’09 whilst Philadelphia’s two slot services nevertheless wallow in a political mire, but are anticipated to commence construction this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and contain 300 online games, 140 rooms and a extensive range of amenities.

Texas
Legislators are proposing a voter referendum that would amend the point out structure to enable on line casino gambling in selected areas, as effectively as permit gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an supply. Point out government has proffered the notion of permitting the resort to provide on line casino video games, but this energy is in way too early a phase to have any traction one way or an additional.

Indian Gaming
A current Supreme Courtroom ruling that restricts the having of lands into believe in on behalf of federally identified American Indian tribes has more stymied some new Class III gaming assignments across the place. In addition, there have been eleven Indian on line casino initiatives turned down by the DOI previous year simply because of its new rule that casinos have to be around sufficient to a reservation that tribal members can operate at them. It has been recommended that the new Obama administration might be a lot more sympathetic to the growth of Indian gaming assignments, but this issue has but to be addressed.

Meanwhile, there are other Course III assignments in the numerous stages of growth. The Seneca on line casino project in Buffalo, NY, whilst working a little momentary facility, has delayed an already beneath building long lasting facility right up until the market place rebounds. They have also expressed an fascination in developing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could affect their strategies for bigger projects. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this calendar year, and other folks are in the preparing phase. Texas may possibly permit the reopening of Indian gaming amenities and permit other location and there are plans afoot by the Navajos in Arizona to construct extra casinos. California is poised to open two to three new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming profits in Atlantic Town has declined 7.six percent, from $four.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the town is finding itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been found in Atlantic City, where it appeared as if it may possibly really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly and gradually nonetheless its market place share was becoming encroached upon, first by the growth of a large Class III gaming procedure in Connecticut, and then an additional 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 on line casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening about Atlantic City’s potential prospects. It truly is reliance on working day-trippers lulled it into a untrue feeling of security, and it now finds by itself possessing to redefine its mission assertion to “spot vacation resort.”

The only issue with this method however is that it is ill-geared up to pull it off. For all intents and reasons, Atlantic Metropolis is below-roomed and/or more than-gamed. There is simply not enough working day-tripper market place to go all around, and their successful trading spot is tightening, as the peripheral populations northward now/will have more prepared access to a widened offer in New York (Yonkers, and quickly 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 actual competitive benefits are its lodge capability and the availability of table game titles, even though the latter is very likely to eventuate in Pennsylvania, and potentially Delaware. In order to adequately contend as a spot resort the metropolis demands to produce further guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip houses – true gaming destinations, in that they do not have considerably of a day-trip market place, besides for the ‘locals’ – have an regular of .87 gaming positions for each guest space whilst Atlantic City’s typical is 2.seventy four positions for every guest space.

It is not a coincidence that Atlantic City’s two biggest resorts, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, have been the least impacted by the most recent downturn. The Borgata seasoned a gaming earnings fall of 1.6 p.c, whilst Harrah’s Marina reported a four.nine percent enhance in contrast to 2007. Additionally, the most difficult strike venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest variety of rooms. In the meantime some of the venues are teetering on viability, such as the the Trump properties and Resorts with the hoped for sale of the Tropicana has been further delayed, and losing valuation.

With a constant increase in gaming revenues via 2006, the town appeared primary for even more development, which precipitated organizing for four new vacation resort initiatives, each and every of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion task stays an iron skeleton, Pinnacle Amusement has declared it may possibly seek out to offer its razed Sands site, MGM Mirage has shelved its casino plans, and Penn Countrywide seems to have stopped its pursuit of the Bader Field airport website.