A Interval of Adjustment
Oops! That big hissing seem is the gaming balloon that experienced been expanding over the years, slowly dropping air. But, it has not been a tide that lowered all ships however, as some emerging and increasing gaming jurisdictions showed robust progress in 2008.
All round, the business and racetrack on line casino sectors (excluding Indian gaming), experienced a three.5 percent drop in gaming revenues for 2008, making a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a achieve of nearly $one billion in 2008, thus bringing the Industrial sector market decline to $one.eight billion, or 6.7 %. Nevada was the largest loser in 2008, dropping virtually $1.three billion, more than 50 % of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most element, on line casino operators have been caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not till the 3rd and fourth quarters when it actually nosedived. Driving the crest of calendar year in excess of 12 months market place growth throughout the nation and the availability of enough credit and equity money, new development and growth proliferated in modern several years. Right now, confronted with the realities of declining, or at best stagnant demand, several of these initiatives are now deemed more than-leveraged and/or in excess of-sized. As a outcome several gaming businesses are making an attempt to renegotiate their debt – made much more challenging by lower valuations – whilst also paring down operational costs. The latter has become a really problematic conundrum when dealing with the competition, specifically in those jurisdictions that are now vying for market place shares with new emerging on line casino projects in neighboring locations. A matter we go over a lot more entirely in the State by Point out analysis segment of this publication.
As a end result of these problems the gaming business landscape is now strewn with impending fatalities. Amongst the far more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows every week.
“How prolonged will these financial situations persist, and are we at the base however?” are inquiries no one appears to be answering yet. What is obvious however is that most gaming jurisdictions will have to find out how to deal with a smaller sized pie.
Observe:
This investigation contains only gaming revenues of licensed casinos and pari-mutuel outlets that supply on line casino online games, and not Indian gaming operations, card rooms, or small non-casino kind slot places. The entire post, such as profits tables is obtainable on our net page.
Input/Output Product
A essential aspect that would seem to have arisen from the ashes of this present development is that many on line casino tasks had been just too large to help themselves. The enter, in conditions of investment dollars, was not proportional to the output, in phrases of internet revenue right after financial debt service, in comparison to formerly attained outcomes. More and/or even bigger is not usually much better. Seeing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of much more complete facilities in many other jurisdictions. The flaw in this method however is that the fees linked with widening marketplace penetration and occasioned-use, are substantially larger than these incurred to attract the base market place.
As daytripper marketplaces turn into much more competitive, casino venues will have to rely far more and a lot more on their in-home resort patrons, and dimension their properties (and anticipations) appropriately. Although Steve Wynn started a major craze in creating up-market place mega-places, there merely was not adequate need on the Strip to warrant the a lot of other equivalent assignments that followed that aimed at the same area of interest.
The trick is to strike a content medium in task configurations which of course demand much less of a ‘seat-of-pants’ technique, and one particular that is much more researched. A shameless plug for growth consultants like ourselves.
Other Gaming Pursuits
Despite the fact that there are no released thorough info of American Indian gaming revenues, anecdotal evidence seems to recommend that this phase has been as difficult 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 7 percent, or almost $114 million, much more than doubling the three.5 percent drop from the calendar year just before. This marketplace is seemingly even now reeling from the ripple-result of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Department of Gaming studies that contributions dependent on a gaming profits method from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the previous year reducing .eight per cent in the initial quarter, 7.five percent in the second quarter, nine.5 percent in the 3rd quarter, and 16.1 percent in the fourth quarter.
Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that while calendar year 2008 showed an virtually 2 percent progress fee in gaming revenues, there was an eight.7 percent decline in the 3rd quarter and an almost ten per cent decline in the fourth quarter of 2008, compared with 2007. Gaming income developments at nearby Niagara Falls, Ontario had been down 1.5% in 2008 compared with 2007.
It’s been a mixed-bag for point out lotteries throughout the nation. The North American Affiliation of State & Provincial Lotteries reviews that U.S. lotteries created a complete of $60.6 billion in sales in fiscal 2008, up about three p.c from the prior calendar year nevertheless some jurisdictions noted decreases, most notably California, which confirmed an eight per cent drop. Inasmuch as some of these states are on various fiscal year ends, it would appear that the knowledge does not reflect the effect of 3rd and/or fourth quarter benefits.
In accordance to knowledge provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling seven p.c to $13.7 billion in 2008, compared to $fourteen.seven billion in 2007.
Planned & Proposed New Expansions
As formerly mentioned, it has been new gaming jurisdictions that have spawned a lot of the progress in once-a-year on line casino/racino revenues in excess of the years, and their effect is apt to proceed into the near future.
Florida
Miami Dade voters accredited a ballot issue that enables every single of a few pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Pet Track and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has however to declared its strategies. There are several other proposals getting deemed that would additional grow casino growth throughout the point out.
Illinois
The condition ultimately acquired close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ recreation on line casino situated 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 making it possible for an improve in for each place 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 program that makes it possible for for the advancement of 4 casino gaming zones and slots at present horse and dog tracks seems mired, as only one particular facility is presently below construction, although 3 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 positioned so close to the point out line that its parking great deal is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 desk video games, alongside with a next stage because of to open in 2011 with 875 slots and twenty table games. The condition has prolonged the software method for the other a few zones till April, 2009.
Kentucky
There is even now a whole lot of ‘jockeying’ going on, but the prospect of as many as eight slot parlors and racinos seems to be again on the entrance-burner, but very likely not settled throughout the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most modern becoming the 390 place M Resort in Henderson. There are expansions underway at equally Caesars Palace and Hard Rock and new resorts include two components of the City Heart venture, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino growth tasks in Baton Rouge and Lake Charles, while delayed, are described to even now be on-monitor for opening this 12 months and/or early 2010.
Maine
There is a monthly bill under thing to consider that could much more than double Penn National’s slot devices to three,000, as effectively as a proposal that would eliminate the restriction that slots be positioned in five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing regional residents to let slots, could be contemplating shifting to a more hospitable town.
Maryland
A referendum was authorized in November, 2008 that permits for the development of 5 casinos with a whole of fifteen,000 slots, and now the bidding war is afoot though it is not as intensive as the condition experienced expected.
Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has operate into various funding problems and whilst the hotel part is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s lipoqq in Biloxi, whilst scaled back somewhat, is even now on monitor to open this 12 months.
New England
Massachusetts, a sleeping-giant in terms of marketplace likely, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to seem to be to muster the political help. A latest examine concluded by Dartmouth University estimates that Massachusetts resident put in more than $920 million last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an choice to produce casinos, nevertheless the subject is probably to be revisited, specially if Massachusetts decides to go ahead. There are also tries in Maine to rethink its choices.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by recently agreeing to carry on augmenting purses with an extra tax. The governor however, has appointed a new panel to review the state’s sagging racing software which ironically, can only be preserved by permitting the tracks to have slot devices especially 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 finally be created, the successful bidder indicated an lack of ability to make the needed $370 million price, citing the current lending weather, and throwing the undertaking again into the lap of the governor. Even though the marketplace demand from customers in the spot could be regarded as quite robust, the prospect of further competitors from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, particularly taking into consideration that marginally considerably less than 30% of the net earn is retained by the operator.
Plans to relocate Monticello Raceway into a resort complicated are currently being reconsidered perhaps owing to both the possible opening of at the very least one particular or perhaps two racino functions in the NY metro spot, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.
Ohio
But yet another gaming proposal is currently being set forth in Ohio, after final year’s edition was turned down by the voters. This prepare calls for one particular casino each and every in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure necessary of $250 million, as effectively as an original licensing payment of $fifty million, and a 33 percent tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is expected to be operational in August, ’09 whilst Philadelphia’s two slot facilities even now wallow in a political mire, but are anticipated to begin building this calendar year.
South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and consist of 300 game titles, one hundred forty rooms and a wide assortment of facilities.
Texas
Legislators are proposing a voter referendum that would amend the state constitution to enable on line casino gambling in selected regions, as effectively as permit gambling on American Indian lands in Texas and at current racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. Condition authorities has proffered the notion of enabling the resort to offer you on line casino video games, but this effort is in way too early a phase to have any traction one particular way or yet another.
Indian Gaming
A current Supreme Court ruling that restricts the getting of lands into trust on behalf of federally identified American Indian tribes has further stymied some new Course III gaming initiatives throughout the country. In addition, there ended up eleven Indian casino projects turned down by the DOI final year because of its new rule that casinos have to be close to adequate to a reservation that tribal users can operate at them. It has been advised that the new Obama administration may well be much more sympathetic to the development of Indian gaming projects, but this situation has yet to be addressed.
Meanwhile, there are other Course III tasks in the numerous stages of advancement. The Seneca casino venture in Buffalo, NY, while running a modest momentary facility, has delayed an previously underneath construction long term facility right up until the industry rebounds. They have also expressed an curiosity in creating a casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could affect their plans for larger initiatives. There are new Indian gaming assignments set to open in Michigan and Oklahoma this calendar year, and other individuals are in the arranging phase. Texas could permit the reopening of Indian gaming amenities and enable other location and there are ideas 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/ten.
The Nor’easter Squeeze
Total gaming earnings in Atlantic Town has declined seven.6 p.c, from $4.9 billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the city is locating itself in an intensive comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been located in Atlantic City, the place it looked as if it may possibly in fact even eclipse the Las Vegas Strip’s annual gaming revenues.
Slowly and gradually however its market place share was getting encroached on, 1st by the growth of a huge Class III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then movie 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 eventually two functions in Philadelphia, the noose is tightening about Atlantic City’s long term potential clients. It is reliance on working day-trippers lulled it into a untrue perception of protection, and it now finds alone getting to redefine its mission assertion to “destination resort.”
The only difficulty with this strategy even so is that it is ill-equipped to pull it off. For all intents and functions, Atlantic Town is under-roomed and/or in excess of-gamed. There is simply not ample day-tripper market place to go around, and their successful buying and selling spot is tightening, as the peripheral populations northward now/will have much more ready accessibility to a widened offer in New York (Yonkers, and soon at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only real competitive rewards are its lodge potential and the availability of table video games, even though the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In get to sufficiently contend as a location resort the metropolis needs to create further guest rooms and not always gaming ability. By comparison, the Las Vegas Strip qualities – true gaming destinations, in that they do not have considerably of a day-journey market, besides for the ‘locals’ – have an typical of .87 gaming positions per visitor room although Atlantic City’s average is two.seventy four positions for each visitor room.
It is not a coincidence that Atlantic City’s two premier resorts, the Borgata and Harrah’s Marina, each of which included new rooms in 2008, were the minimum impacted by the newest downturn. The Borgata experienced a gaming revenue fall of 1.6 %, although Harrah’s Marina described a four.nine per cent increase in comparison to 2007. In addition, the hardest hit venues, particularly 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 additional delayed, and losing valuation.
With a constant increase in gaming revenues via 2006, the city seemed key for more development, which precipitated planning for four new vacation resort assignments, every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.5 billion project remains an iron skeleton, Pinnacle Enjoyment has announced it might seek to promote its razed Sands site, MGM Mirage has shelved its on line casino plans, and Penn National seems to have stopped its pursuit of the Bader Discipline airport web site.