A Period of Adjustment
Oops! That giant hissing sound is the gaming balloon that experienced been developing more than the many years, slowly getting rid of air. But, it has not been a tide that decreased all ships nevertheless, as some rising and growing gaming jurisdictions showed robust progress in 2008.
Overall, the commercial and racetrack casino sectors (excluding Indian gaming), skilled a three.5 % decrease in gaming revenues for 2008, producing a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a gain of nearly $one billion in 2008, thus bringing the Industrial sector market place decrease to $1.8 billion, or six.seven per cent. Nevada was the greatest loser in 2008, dropping almost $one.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip segment.
For the most part, on line casino operators were caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not until the third and fourth quarters when it truly nosedived. Using the crest of 12 months more than yr market progress across the place and the availability of ample credit score and fairness resources, new development and enlargement proliferated in modern years. These days, confronted with the realities of declining, or at best stagnant desire, many of these assignments are now regarded as in excess of-leveraged and/or in excess of-sized. As a consequence numerous gaming organizations are making an attempt to renegotiate their financial debt – produced a lot more challenging by reduced valuations – whilst also paring down operational expenses. The latter has turn into a quite problematic conundrum when dealing with the opposition, especially in people jurisdictions that are now vying for market shares with new emerging casino projects in neighboring regions. A topic we talk about more completely in the Point out by Condition examination section of this publication.
As a outcome of these conditions the gaming market landscape is now strewn with impending fatalities. Among the much more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the record grows every single 7 days.
“How prolonged will these financial circumstances persist, and are we at the bottom nevertheless?” are questions no a single appears to be answering nevertheless. What is clear however is that most gaming jurisdictions will have to find out how to deal with a scaled-down pie.
This analysis contains only gaming revenues of accredited casinos and pari-mutuel outlets that offer on line casino video games, and not Indian gaming operations, card rooms, or small non-on line casino kind slot areas. The whole write-up, like revenue tables is available on our internet page.
A essential aspect that would seem to have arisen from the ashes of this present craze is that several on line casino initiatives were just as well large to assistance on their own. The input, in conditions of investment decision dollars, was not proportional to the output, in phrases of net profit following credit card debt services, compared to earlier achieved final results. A lot more and/or bigger is not constantly much better. Viewing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the advancement of far more thorough amenities in numerous other jurisdictions. The flaw in this strategy even so is that the fees related with widening market place penetration and occasioned-use, are significantly increased than individuals incurred to attract the base market place.
As daytripper marketplaces turn into much more competitive, casino venues will have to rely much more and much more on their in-residence hotel patrons, and dimensions their homes (and anticipations) appropriately. Although Steve Wynn began a significant development in generating up-market place mega-locations, there just was not enough need on the Strip to warrant the many other related tasks that adopted that aimed at the very same area of interest.
The trick is to strike a content medium in venture configurations which of system demand considerably less of a ‘seat-of-pants’ technique, and 1 that is a lot more researched. A shameless plug for development consultants like ourselves.
Other Gaming Activities
Even though there are no printed in depth knowledge of American Indian gaming revenues, anecdotal proof seems to advise that this section has been as difficult strike as the Industrial sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, representing a fall of about 7 per cent, or nearly $114 million, more than doubling the 3.5 per cent fall from the year prior to. This marketplace is evidently nevertheless reeling from the ripple-impact of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Department of Gaming reports that contributions based mostly on a gaming earnings system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 when compared to the previous year decreasing .8 p.c in the initial quarter, seven.five p.c in the second quarter, nine.five p.c in the 3rd quarter, and sixteen.1 percent in the fourth quarter.
Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reports that even though calendar calendar year 2008 showed an almost two p.c growth price in gaming revenues, there was an eight.7 per cent drop in the 3rd quarter and an practically ten percent drop in the fourth quarter of 2008, when compared with 2007. Gaming profits traits at nearby Niagara Falls, Ontario ended up down 1.five% in 2008 when compared with 2007.
It really is been a mixed-bag for condition lotteries throughout the nation. The North American Association of Condition & Provincial Lotteries studies that U.S. lotteries generated a complete of $sixty.6 billion in revenue in fiscal 2008, up about 3 % from the prior yr yet some jurisdictions noted decreases, most notably California, which confirmed an 8 p.c fall. Inasmuch as some of these states are on different fiscal yr ends, it would look that the info does not mirror the influence of 3rd and/or fourth quarter results.
According to information offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 % to $13.seven billion in 2008, as opposed to $fourteen.seven billion in 2007.
Planned & Proposed New Expansions
As beforehand noted, it has been new gaming jurisdictions that have spawned much of the progress in once-a-year casino/racino revenues more than the many years, and their impact is apt to keep on into the near future.
Miami Dade voters accepted a ballot situation that enables every of a few pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Dog Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has nevertheless to declared its programs. There are several other proposals becoming considered that would more increase on line casino improvement through the point out.
The point out ultimately got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ match casino found in Des Plaines just east of O’Hare. The new facility is not very likely to open up until 2010. There has also been some dialogue about permitting an boost in for every location gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.
The state’s expanded lottery system that allows for the development of 4 casino gaming zones and slots at current horse and puppy tracks appears mired, as only 1 facility is presently below building, even though a few other proposals were rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal 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 Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 table video games, alongside with a 2nd phase thanks to open up in 2011 with 875 slots and 20 desk online games. The state has extended the software procedure for the other a few zones right up until April, 2009.
There is still a whole lot of ‘jockeying’ going on, but the prospect of as a lot of as eight slot parlors and racinos seems to be back again on the entrance-burner, but probably not resolved for the duration of the recent legislative session.
There are about 14,000 rooms scheduled to come on line in 2009, with the most recent becoming the 390 room M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new lodges contain two components of the City Center project, and the Fountainebleau.
Pinnacle Entertainment’s new casino development assignments in Baton Rouge and Lake Charles, even though delayed, are described to nonetheless be on-monitor for opening this 12 months and/or early 2010.
There is a monthly bill under consideration that could a lot more than double Penn National’s slot equipment 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 keep track of. Scarborough Downs, which has been unsuccessful in convincing local inhabitants to permit slots, might be taking into consideration transferring to a far more hospitable town.
A referendum was authorized in November, 2008 that makes it possible for for the advancement of five casinos with a complete of 15,000 slots, and now the bidding war is afoot though it is not as extreme as the condition had predicted.
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has run into various financing troubles and whilst the hotel part is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled again fairly, is nevertheless on observe to open up this yr.
Massachusetts, a sleeping-large in conditions of industry possible, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can not seem to muster the political help. A modern review finished by Dartmouth College estimates that Massachusetts resident put in more than $920 million previous calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to produce casinos, even so the subject is most likely to be revisited, specially if Massachusetts decides to go forward. There are also tries in Maine to rethink its choices.
yoursite.com have imposed their political will on staving off the addition of slot equipment at racetracks by lately agreeing to continue augmenting purses with an added tax. The governor nonetheless, 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 machines especially at the Meadowlands. (See The Nor’easter Squeeze section)
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would lastly be designed, the winning bidder indicated an lack of ability to make the essential $370 million charge, citing the existing lending local weather, and throwing the venture back into the lap of the governor. Despite the fact that the market place need in the spot could be considered really powerful, the prospect of added competitiveness from close by Belmont could have an affect on Aqueduct’s underlining economic feasibility, specifically contemplating that slightly considerably less than thirty% of the web get is retained by the operator.
Plans to relocate Monticello Raceway into a vacation resort complex are becoming reconsidered probably owing to both the possible opening of at minimum 1 or perhaps two racino functions in the NY metro area, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.
Yet yet another gaming proposal is becoming place forth in Ohio, right after previous year’s edition was turned down by the voters. This strategy phone calls for a single on line casino every in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expenditure needed of $250 million, as effectively as an preliminary licensing fee of $fifty million, and a 33 % tax on gaming income.
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are anticipated to begin building this calendar year.
The Lodge at Deadwood is slated to open in the Fall of 2009, and incorporate three hundred video games, 140 rooms and a extensive range of facilities.
Legislators are proposing a voter referendum that would amend the condition structure to permit casino gambling in specified locations, as effectively as enable gambling on American Indian lands in Texas and at existing racetracks.
The Greenbriar, the state’s venerable vacation resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Condition govt has proffered the idea of allowing the resort to offer on line casino game titles, but this energy is in too early a phase to have any traction one way or another.
A current Supreme Court ruling that restricts the getting of lands into believe in on behalf of federally identified American Indian tribes has further stymied some new Course III gaming initiatives across the country. Moreover, there had been eleven Indian casino initiatives rejected by the DOI very last year due to the fact of its new rule that casinos should be near sufficient to a reservation that tribal associates can function at them. It has been advised that the new Obama administration may be much more sympathetic to the growth of Indian gaming tasks, but this problem has nevertheless to be addressed.
In the meantime, there are other Course III initiatives in the numerous levels of development. The Seneca casino undertaking in Buffalo, NY, although working a little temporary facility, has delayed an previously beneath development permanent facility until the market place rebounds. They have also expressed an interest in developing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could affect their programs for bigger initiatives. There are new Indian gaming projects set to open up in Michigan and Oklahoma this yr, and other people are in the planning phase. Texas might enable the reopening of Indian gaming services and permit other venue and there are programs afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to three new Course III casinos in 2009/10.
The Nor’easter Squeeze
Complete gaming revenue in Atlantic Town has declined 7.six percent, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is finding itself in an powerful comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast have been located in Atlantic City, exactly where it seemed as if it might truly even eclipse the Las Vegas Strip’s yearly gaming revenues.
Little by little nonetheless its industry share was currently being encroached on, 1st by the improvement of a big Class III gaming operation in Connecticut, and then one more slots operations 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 planned 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 close to Atlantic City’s future prospective customers. It’s reliance on day-trippers lulled it into a fake feeling of stability, and it now finds itself possessing to redefine its mission statement to “spot resort.”
The only problem with this strategy however is that it is ill-geared up to pull it off. For all intents and needs, Atlantic City is beneath-roomed and/or in excess of-gamed. There is just not enough day-tripper marketplace to go all around, and their powerful buying and selling area is tightening, as the peripheral populations northward now/will have a lot more prepared entry to a widened offer in New York (Yonkers, and before long at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only genuine aggressive rewards are its hotel ability and the availability of table video games, though the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In buy to sufficiently contend as a destination resort the city needs to produce additional visitor rooms and not always gaming potential. By comparison, the Las Vegas Strip homes – true gaming destinations, in that they do not have much of a day-trip market, apart from for the ‘locals’ – have an typical of .87 gaming positions for each guest room while Atlantic City’s average is 2.74 positions for each visitor area.
It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, have been the least impacted by the most recent downturn. The Borgata skilled a gaming revenue drop of one.6 p.c, although Harrah’s Marina documented a 4.nine % enhance in comparison to 2007. In addition, the most difficult 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, which includes the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.
With a regular rise in gaming revenues by means of 2006, the town appeared key for additional development, which precipitated preparing for four new vacation resort assignments, each and every of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.5 billion project remains an iron skeleton, Pinnacle Enjoyment has introduced it might find to promote its razed Sands web site, MGM Mirage has shelved its casino ideas, and Penn National seems to have stopped its pursuit of the Bader Discipline airport web site.