A Time period of Adjustment
Oops! That huge hissing seem is the gaming balloon that had been expanding in excess of the years, little by little losing air. But, it has not been a tide that decreased all ships even so, as some emerging and increasing gaming jurisdictions showed robust growth in 2008.
Overall, the commercial and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.five p.c drop in gaming revenues for 2008, producing a total of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a acquire of virtually $1 billion in 2008, therefore bringing the Industrial sector marketplace decrease to $one.eight billion, or six.7 percent. Nevada was the greatest loser in 2008, dropping practically $one.3 billion, much more than fifty percent of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most component, casino operators were caught reasonably flat-footed by the extent of the 2008 earnings downturn, as it was not until finally the 3rd and fourth quarters when it really nosedived. Using the crest of year over calendar year market place progress throughout the place and the availability of sufficient credit and fairness funds, new building and expansion proliferated in recent many years. Right now, faced with the realities of declining, or at best stagnant desire, several of these projects are now considered over-leveraged and/or in excess of-sized. As a outcome many gaming firms are attempting to renegotiate their personal debt – produced much more challenging by lower valuations – whilst also paring down operational costs. The latter has turn into a very problematic conundrum when working with the competitors, particularly in those jurisdictions that are now vying for marketplace shares with new rising casino projects in neighboring areas. A topic we go over much more entirely in the State by Point out analysis area of this publication.
As a end result of these situations the gaming industry landscape is now strewn with impending fatalities. Among the far more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the list grows each week.
“How lengthy will these financial conditions persist, and are we at the bottom however?” are questions no 1 seems to be answering yet. What is very clear nevertheless is that most gaming jurisdictions will have to understand how to offer with a scaled-down pie.
Note:
This investigation involves only gaming revenues of accredited casinos and pari-mutuel stores that provide on line casino game titles, and not Indian gaming functions, card rooms, or tiny non-on line casino kind slot areas. The complete post, such as revenue tables is obtainable on our net website page.
Enter/Output Design
A crucial element that looks to have arisen from the ashes of this current craze is that a lot of on line casino projects ended up just also big to support by themselves. The input, in phrases of investment dollars, was not proportional to the output, in conditions of internet earnings after credit card debt service, in comparison to formerly achieved final results. Far more and/or bigger is not usually far better. Observing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the advancement of much more thorough amenities in numerous other jurisdictions. The flaw in this strategy nevertheless is that the expenses associated with widening market penetration and occasioned-use, are significantly greater than individuals incurred to appeal to the foundation market place.
As daytripper marketplaces grow to be far more aggressive, on line casino venues will have to count more and much more on their in-property resort patrons, and dimension their qualities (and expectations) accordingly. Even though Steve Wynn started out a significant development in making up-industry mega-locations, there basically was not sufficient desire on the Strip to warrant the a lot of other equivalent projects that adopted that aimed at the very same specialized niche.
The trick is to strike a content medium in venture configurations which of training course call for significantly less of a ‘seat-of-pants’ approach, and one particular that is a lot more studied. A shameless plug for improvement consultants like ourselves.
Other Gaming Actions
Even though there are no printed comprehensive data of American Indian gaming revenues, anecdotal evidence appears to recommend that this phase has been as tough strike as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, representing a fall of about seven p.c, or virtually $114 million, more than doubling the three.5 p.c fall from the year ahead of. This marketplace is apparently nonetheless reeling from the ripple-impact of a casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Section of Gaming reviews that contributions based mostly on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the prior yr decreasing .eight p.c in the 1st quarter, 7.5 % in the next quarter, 9.5 p.c in the 3rd quarter, and 16.1 % 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, reports that although calendar calendar year 2008 showed an almost two per cent development charge in gaming revenues, there was an eight.7 per cent drop in the third quarter and an almost ten percent decline in the fourth quarter of 2008, in contrast with 2007. Gaming earnings trends at nearby Niagara Falls, Ontario ended up down one.5% in 2008 compared with 2007.
It’s been a combined-bag for point out lotteries across the country. The North American Association of Point out & Provincial Lotteries stories that U.S. lotteries created a total of $sixty.six billion in product sales in fiscal 2008, up about 3 percent from the previous 12 months nevertheless some jurisdictions described decreases, most notably California, which confirmed an eight per cent fall. Inasmuch as some of these states are on different fiscal calendar year ends, it would seem that the information does not replicate the effect of third and/or fourth quarter final results.
In accordance to information presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping 7 percent to $13.seven billion in 2008, as opposed to $fourteen.seven billion in 2007.
Prepared & Proposed New Expansions
As previously famous, it has been new gaming jurisdictions that have spawned significantly of the progress in yearly casino/racino revenues above the a long time, and their affect is apt to continue into the around long term.
Florida
Miami Dade voters accepted a ballot concern that permits every single of three pari-mutuels to have a on line casino facility of up to 2,000 slot machines. The Flagler Puppy Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, whilst the Calder set up in Miami Gardens has yet to declared its plans. There are quite a few other proposals being deemed that would further expand casino improvement during the point out.
Illinois
The state finally obtained around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ recreation casino located in Des Plaines just east of O’Hare. The new facility is not probably to open up until 2010. There has also been some dialogue about allowing an enhance in for each place 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 allows for the improvement of four casino gaming zones and slots at current horse and pet tracks appears mired, as only 1 facility is presently below design, although a few other proposals ended up rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is positioned so near to the state line that its parking whole lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk game titles, together with a 2nd period owing to open in 2011 with 875 slots and twenty desk games. The state has extended the software process for the other 3 zones right up until April, 2009.
Kentucky
There is nevertheless a lot of ‘jockeying’ likely on, but the prospect of as many as 8 slot parlors and racinos appears to be back on the front-burner, but likely not fixed throughout the current legislative session.
Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most recent getting the 390 area M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new hotels incorporate two components of the City Middle undertaking, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino growth projects in Baton Rouge and Lake Charles, while delayed, are reported to still be on-monitor for opening this 12 months and/or early 2010.
Maine
There is a monthly bill under consideration that could far more than double Penn National’s slot equipment to three,000, as effectively as a proposal that would take away the restriction that slots be found in 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing local citizens to permit slots, could be considering moving to a more hospitable city.
Maryland
A referendum was accepted in November, 2008 that enables for the advancement of 5 casinos with a whole of 15,000 slots, and now the bidding war is afoot although it is not as powerful as the point out had predicted.
Mississippi
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into numerous funding problems and even though the resort part is open, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back fairly, is even now on track to open up this 12 months.
New England
Massachusetts, a sleeping-big in terms of market prospective, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t look to muster the political help. A modern review accomplished by Dartmouth University estimates that Massachusetts resident put in more than $920 million last year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an option to develop casinos, even so the topic is probably to be revisited, specially if Massachusetts decides to go ahead. 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 just lately agreeing to proceed augmenting purses with an added tax. The governor nevertheless, has appointed a new panel to study the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze section)
New York
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would finally be designed, the profitable bidder indicated an incapacity to make the essential $370 million charge, citing the present lending local weather, and throwing the venture again into the lap of the governor. Although the market place demand in the region could be considered quite powerful, the prospect of extra opposition from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, especially taking into consideration that marginally less than 30% of the web get is retained by the operator.
Plans to relocate Monticello Raceway into a vacation resort sophisticated are getting reconsidered perhaps owing to each the possible opening of at the very least a single or probably two racino operations in the NY metro location, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.
Ohio
But an additional gaming proposal is getting place forth in Ohio, right after very last year’s version was turned down by the voters. This prepare calls for a single casino each in the state’s premier metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment needed of $250 million, as properly as an first licensing payment of $fifty million, and a 33 % 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 predicted to be operational in August, ’09 while Philadelphia’s two slot services nevertheless wallow in a political mire, but are anticipated to start design this calendar year.
South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and include three hundred online games, a hundred and forty rooms and a broad variety of features.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to enable on line casino gambling in designated locations, as properly as allow gambling on American Indian lands in Texas and at current racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an supply. Condition federal government has proffered the notion of allowing the vacation resort to provide on line casino video games, but this work is in as well early a stage to have any traction a single way or yet another.
Indian Gaming
A recent Supreme Courtroom ruling that restricts the taking of lands into have faith in on behalf of federally identified American Indian tribes has even more stymied some new Course III gaming projects across the nation. Furthermore, there were eleven Indian on line casino initiatives turned down by the DOI final yr due to the fact of its new rule that casinos need to be around enough to a reservation that tribal members can operate at them. It has been proposed that the new Obama administration may possibly be far more sympathetic to the improvement of Indian gaming tasks, but this situation has nevertheless to be addressed.
In the meantime, there are other Course III projects in the numerous levels of development. The Seneca casino venture in Buffalo, NY, even though running a modest short term facility, has delayed an already underneath development long lasting facility until finally the marketplace rebounds. They have also expressed an interest in creating a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is currently being challenged, and could influence their ideas for more substantial assignments. There are new Indian gaming assignments set to open up in Michigan and Oklahoma this 12 months, and other people are in the arranging phase. Texas may permit the reopening of Indian gaming amenities and permit other venue and there are strategies afoot by the Navajos in Arizona to construct further casinos. California is poised to open two to three new Class III casinos in 2009/10.
The Nor’easter Squeeze
Overall gaming profits in Atlantic Town has declined 7.6 percent, from $4.9 billion in 2007 to $4.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 one time the only casinos in the Northeast have been located in Atlantic City, where it appeared as if it might truly even eclipse the Las Vegas Strip’s yearly gaming revenues.
Little by little nonetheless its market share was being encroached on, 1st by the advancement of a big Class III gaming operation in Connecticut, and then another slots operations 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 operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening about Atlantic City’s potential potential customers. It truly is reliance on working day-trippers lulled it into a fake perception of stability, and it now finds itself having to redefine its mission statement to “location resort.”
The only problem with this method nevertheless is that it is ill-equipped to pull it off. For all intents and needs, Atlantic City is below-roomed and/or more than-gamed. There is merely not ample day-tripper market place to go close to, and their successful investing area is tightening, as the peripheral populations northward now/will have far more prepared accessibility to a widened supply in New York (Yonkers, and before long at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only genuine aggressive positive aspects are its resort potential and the availability of desk game titles, although the latter is likely to eventuate in Pennsylvania, and perhaps Delaware. In order to adequately contend as a location vacation resort the city demands to produce further visitor rooms and not necessarily gaming capability. By 123slot.com , the Las Vegas Strip homes – correct gaming destinations, in that they do not have a lot of a day-excursion marketplace, besides for the ‘locals’ – have an typical of .87 gaming positions for every guest area even though Atlantic City’s average is two.74 positions for every visitor place.
It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, ended up the minimum impacted by the newest downturn. The Borgata skilled a gaming income drop of one.six p.c, while Harrah’s Marina reported a four.9 % boost in comparison to 2007. Furthermore, the most difficult strike venues, namely 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, including the the Trump houses and Resorts with the hoped for sale of the Tropicana has been even more delayed, and dropping valuation.
With a regular increase in gaming revenues by way of 2006, the city appeared prime for further improvement, which precipitated arranging for 4 new vacation resort assignments, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion task continues to be an iron skeleton, Pinnacle Amusement has announced it may possibly find to sell its razed Sands site, MGM Mirage has shelved its casino plans, and Penn Nationwide seems to have stopped its pursuit of the Bader Area airport site.