A Interval of Adjustment
Oops! That large hissing audio is the gaming balloon that experienced been increasing above the many years, slowly and gradually dropping air. But, it has not been a tide that decreased all ships nevertheless, as some rising and growing gaming jurisdictions confirmed strong progress in 2008.
General, the professional and racetrack on line casino sectors (excluding Indian gaming), experienced a three.5 percent drop in gaming revenues for 2008, making a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a achieve of almost $1 billion in 2008, therefore bringing the Industrial sector market decline to $one.eight billion, or 6.seven per cent. Nevada was the most significant loser in 2008, dropping practically $1.3 billion, more than fifty percent of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most part, casino operators were caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not until finally the third and fourth quarters when it actually nosedived. Riding the crest of calendar year in excess of yr marketplace growth throughout the nation and the availability of ample credit score and fairness resources, new construction and growth proliferated in latest several years. These days, faced with the realities of declining, or at very best stagnant need, a lot of of these projects are now deemed over-leveraged and/or more than-sized. As a consequence numerous gaming businesses are making an attempt to renegotiate their debt – manufactured more difficult by reduced valuations – although also paring down operational fees. The latter has become a quite problematic conundrum when dealing with the competitors, specially in these jurisdictions that are now vying for industry shares with new emerging on line casino assignments in neighboring regions. A topic we go over a lot more fully in the Condition by Point out evaluation segment of this publication.
As a result of these conditions the gaming sector landscape is now strewn with impending fatalities. Between the far more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the list grows every single week.
“How long will these financial conditions persist, and are we at the bottom but?” are queries no one particular appears to be answering yet. What is very clear nevertheless is that most gaming jurisdictions will have to discover how to offer with a more compact pie.
Be aware:
This investigation consists of only gaming revenues of certified casinos and pari-mutuel shops that offer on line casino video games, and not Indian gaming operations, card rooms, or modest non-on line casino variety slot places. The entire report, like revenue tables is accessible on our net webpage.
Enter/Output Design
A key aspect that looks to have arisen from the ashes of this existing craze is that a lot of on line casino assignments have been just also huge to support by themselves. The enter, in conditions of investment decision pounds, was not proportional to the output, in terms of net revenue soon after personal debt provider, compared to beforehand accomplished final results. A lot more and/or bigger is not always better. Seeing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the advancement of much more comprehensive facilities in numerous other jurisdictions. The flaw in this method nonetheless is that the expenses associated with widening industry penetration and occasioned-use, are drastically greater than people incurred to entice the base market.
As daytripper marketplaces turn into much more aggressive, on line casino venues will have to count far more and a lot more on their in-property hotel patrons, and dimension their properties (and expectations) accordingly. Although Steve Wynn started out a main craze in making up-market mega-destinations, there simply was not enough need on the Strip to warrant the several other comparable projects that adopted that aimed at the exact same market.
The trick is to strike a happy medium in project configurations which of system call for considerably less of a ‘seat-of-pants’ approach, and 1 that is far more examined. A shameless plug for development consultants like ourselves.
Other Gaming Routines
Despite the fact that there are no released detailed info of American Indian gaming revenues, anecdotal proof appears to advise that this section has been as tough hit as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $one.six billion in 2008, symbolizing a drop of about seven %, or practically $114 million, a lot more than doubling the 3.five % drop from the yr prior to. This marketplace is seemingly still reeling from the ripple-result of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Section of Gaming stories that contributions based on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the previous year lowering .eight % in the initial quarter, seven.five percent in the 2nd quarter, nine.5 percent in the third quarter, and 16.1 p.c in the fourth quarter.
Some SEC reporting Indian gaming houses report equivalent decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, studies that whilst calendar calendar year 2008 confirmed an virtually 2 percent growth rate in gaming revenues, there was an 8.7 percent decline in the 3rd quarter and an practically ten p.c decrease in the fourth quarter of 2008, compared with 2007. Gaming revenue developments at close by Niagara Falls, Ontario were down 1.five% in 2008 in contrast with 2007.
It really is been a blended-bag for state lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries studies that U.S. lotteries generated a overall of $sixty.6 billion in sales in fiscal 2008, up about 3 p.c from the previous yr however some jurisdictions noted decreases, most notably California, which confirmed an 8 per cent drop. Inasmuch as some of these states are on different fiscal yr finishes, it would seem that the info does not replicate the influence of third and/or fourth quarter benefits.
According to data provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 % to $13.7 billion in 2008, vs . $fourteen.seven billion in 2007.
Prepared & Proposed New Expansions
As beforehand noted, it has been new gaming jurisdictions that have spawned considerably of the progress in annual casino/racino revenues in excess of the many years, and their affect is apt to proceed into the around future.
Florida
Miami Dade voters authorized a ballot concern that enables every single of a few pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Pet Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has however to announced its programs. There are several other proposals becoming considered that would even more grow casino improvement during the state.
Illinois
The state finally received around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,200+ match casino situated in Des Plaines just east of O’Hare. The new facility is not most likely to open right up until 2010. There has also been some discussion about enabling an enhance in per spot 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 system that enables for the improvement of four casino gaming zones and slots at existing horse and canine tracks appears mired, as only one particular facility is presently below construction, although three other proposals ended up rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is positioned so near to the point out line that its parking good deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table video games, together with a 2nd stage thanks to open in 2011 with 875 slots and 20 table games. The point out has prolonged the application approach for the other 3 zones until finally April, 2009.
Kentucky
There is still a great deal of ‘jockeying’ likely on, but the prospect of as many as 8 slot parlors and racinos appears to be back again on the front-burner, but very likely not resolved throughout the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most modern being the 390 area M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Tough Rock and new accommodations contain two factors of the City Middle venture, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino development tasks in Baton Rouge and Lake Charles, although delayed, are described to nonetheless be on-monitor for opening this yr and/or early 2010.
Maine
There is a monthly bill under consideration that could far more than double Penn National’s slot devices to three,000, as effectively as a proposal that would take away the restriction that slots be found inside of 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing nearby people to let slots, might be thinking about shifting to a more hospitable town.
Maryland
A referendum was accredited in November, 2008 that makes it possible for for the growth of 5 casinos with a total of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the condition had predicted.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into various financing problems and even though the lodge portion is open up, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back again relatively, is even now on monitor to open up this calendar year.
New England
Massachusetts, a sleeping-huge in phrases of market likely, is nonetheless maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can’t seem to be to muster the political help. A current research accomplished by Dartmouth University estimates that Massachusetts resident invested much more than $920 million final yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an option to build casinos, nonetheless the topic is probably to be revisited, specially if Massachusetts decides to go forward. There are also attempts in Maine to rethink its alternatives.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by recently agreeing to keep on augmenting purses with an added tax. The governor nevertheless, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze section)
New York
Just when it looked as if Aqueduct’s 4,500 VLT facility would ultimately be designed, the profitable bidder indicated an lack of ability to make the needed $370 million fee, citing the present lending climate, and throwing the undertaking again into the lap of the governor. Even though the industry demand from customers in the spot could be deemed very robust, the prospect of additional competitiveness from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, specifically taking into consideration that slightly considerably less than 30% of the web win is retained by the operator.
Plans to relocate Monticello Raceway into a resort complicated are becoming reconsidered possibly owing to both the possible opening of at minimum a single or possibly two racino functions in the NY metro region, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.
Ohio
But an additional gaming proposal is being place forth in Ohio, right after final year’s model was turned down by the voters. This prepare calls for one particular on line casino every single in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision necessary of $250 million, as properly as an preliminary licensing charge of $50 million, and a 33 p.c tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is expected to be operational in August, ’09 even though Philadelphia’s two slot services even now wallow in a political mire, but are predicted to commence development this year.
WGBET at Deadwood is slated to open up in the Fall of 2009, and contain 300 online games, 140 rooms and a vast variety of amenities.
Texas
Legislators are proposing a voter referendum that would amend the condition structure to allow on line casino gambling in selected regions, as properly as permit gambling on American Indian lands in Texas and at current 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 offer you. Point out govt has proffered the idea of allowing the vacation resort to provide casino games, but this energy is in also early a stage to have any traction 1 way or yet another.
Indian Gaming
A recent Supreme Court ruling that restricts the taking of lands into trust on behalf of federally regarded American Indian tribes has additional stymied some new Course III gaming projects throughout the nation. Moreover, there were eleven Indian casino tasks rejected by the DOI previous 12 months since of its new rule that casinos have to be near ample to a reservation that tribal members can perform at them. It has been advised that the new Obama administration may possibly be much more sympathetic to the development of Indian gaming assignments, but this issue has but to be dealt with.
Meanwhile, there are other Class III assignments in the numerous levels of advancement. The Seneca on line casino venture in Buffalo, NY, although running a modest momentary facility, has delayed an presently underneath design long lasting facility until finally the market place rebounds. They have also expressed an curiosity in building a casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could effect their plans for more substantial assignments. There are new Indian gaming initiatives established to open in Michigan and Oklahoma this 12 months, and other individuals are in the arranging phase. Texas may permit the reopening of Indian gaming amenities and permit other location and there are plans afoot by the Navajos in Arizona to assemble additional casinos. California is poised to open two to three new Course III casinos in 2009/ten.
The Nor’easter Squeeze
Whole gaming earnings in Atlantic City has declined seven.6 %, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is finding by itself in an intense comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast ended up positioned in Atlantic Metropolis, where it appeared as if it may actually even eclipse the Las Vegas Strip’s yearly gaming revenues.
Slowly and gradually nonetheless its industry share was becoming encroached on, initial by the growth of a big Class III gaming operation 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 not too long ago Pennsylvania.
Now, with the prepared opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening about Atlantic City’s potential potential customers. It is reliance on day-trippers lulled it into a fake sense of safety, and it now finds itself possessing to redefine its mission statement to “vacation spot vacation resort.”
The only difficulty with this technique even so is that it is ill-geared up to pull it off. For all intents and purposes, Atlantic City is underneath-roomed and/or more than-gamed. There is simply not adequate working day-tripper market to go about, and their effective trading location is tightening, as the peripheral populations northward now/will have much more prepared obtain to a widened supply in New York (Yonkers, and quickly 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 aggressive rewards are its lodge potential and the availability of table video games, even though the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In order to sufficiently contend as a vacation spot vacation resort the city needs to build extra guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip houses – accurate gaming places, in that they do not have significantly of a day-excursion market place, other than for the ‘locals’ – have an average of .87 gaming positions per visitor space while Atlantic City’s average is 2.seventy four positions for each visitor space.
It is not a coincidence that Atlantic City’s two biggest resorts, the Borgata and Harrah’s Marina, equally of which extra new rooms in 2008, have been the minimum impacted by the most recent downturn. The Borgata skilled a gaming income drop of 1.6 %, whilst Harrah’s Marina reported a 4.nine % boost when compared to 2007. Furthermore, the toughest strike venues, specifically 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 houses and Resorts with the hoped for sale of the Tropicana has been even more delayed, and getting rid of valuation.
With a steady increase in gaming revenues via 2006, the town seemed prime for further advancement, which precipitated arranging for four new vacation resort assignments, every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.5 billion task remains an iron skeleton, Pinnacle Amusement has declared it may well seek to sell its razed Sands website, MGM Mirage has shelved its on line casino ideas, and Penn Countrywide appears to have stopped its pursuit of the Bader Area airport internet site.