A Period of Adjustment
Oops! That giant hissing sound is the gaming balloon that had been expanding above the a long time, slowly and gradually losing air. But, it has not been a tide that lowered all ships however, as some rising and increasing gaming jurisdictions showed strong growth in 2008.
All round, the professional and racetrack casino sectors (excluding Indian gaming), seasoned a 3.five per cent decrease in gaming revenues for 2008, producing a whole of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a obtain of nearly $one billion in 2008, thus bringing the Industrial sector industry drop to $one.8 billion, or six.seven per cent. Nevada was the biggest loser in 2008, dropping almost $one.three billion, more than 50 percent of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most part, casino operators were caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not right up until the third and fourth quarters when it really nosedived. Driving the crest of calendar year in excess of 12 months market place development across the country and the availability of enough credit history and equity resources, new building and enlargement proliferated in modern years. These days, faced with the realities of declining, or at greatest stagnant need, many of these assignments are now regarded as above-leveraged and/or over-sized. As a consequence numerous gaming businesses are attempting to renegotiate their personal debt – made much more challenging by decrease valuations – although also paring down operational costs. The latter has turn into a extremely problematic conundrum when working with the competitors, specifically in people jurisdictions that are now vying for industry shares with new emerging on line casino assignments in neighboring locations. A topic we discuss a lot more completely in the Condition by Condition evaluation area of this publication.
As a outcome of these problems the gaming market landscape is now strewn with impending fatalities. Among the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the checklist grows each 7 days.
“How extended will these economic problems persist, and are we at the bottom however?” are queries no a single appears to be answering nevertheless. What is very clear nonetheless is that most gaming jurisdictions will have to discover how to deal with a smaller pie.
Notice:
This evaluation contains only gaming revenues of licensed casinos and pari-mutuel retailers that provide on line casino games, and not Indian gaming functions, card rooms, or little non-on line casino type slot spots. The complete write-up, including income tables is available on our internet webpage.
Enter/Output Design
A important element that appears to have arisen from the ashes of this recent development is that numerous casino projects have been just way too big to assistance on their own. The input, in terms of expense pounds, was not proportional to the output, in terms of internet profit soon after credit card debt provider, in contrast to previously achieved final results. Much more and/or greater is not usually far better. Viewing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of far more thorough facilities in numerous other jurisdictions. The flaw in this approach nevertheless is that the costs linked with widening market penetration and occasioned-use, are substantially increased than individuals incurred to appeal to the foundation market.
As daytripper markets grow to be a lot more aggressive, on line casino venues will have to rely a lot more and more on their in-house resort patrons, and size their homes (and anticipations) accordingly. Whilst Steve Wynn started out a major pattern in creating up-industry mega-locations, there basically was not sufficient demand from customers on the Strip to warrant the several other equivalent assignments that adopted that aimed at the identical area of interest.
The trick is to strike a pleased medium in project configurations which of system demand much less of a ‘seat-of-pants’ method, and a single that is a lot more examined. A shameless plug for growth consultants like ourselves.
Other Gaming Activities
Though there are no printed thorough info of American Indian gaming revenues, anecdotal proof appears to advise that this section has been as challenging strike as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $one.six billion in 2008, symbolizing a drop of about seven per cent, or almost $114 million, more than doubling the 3.5 per cent drop from the year just before. This industry is evidently even now reeling from the ripple-result of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Section of Gaming reviews that contributions dependent on a gaming income system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the previous year decreasing .8 per cent in the first quarter, 7.five p.c in the second quarter, nine.5 percent in the 3rd quarter, and 16.1 per cent 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, reports that while calendar 12 months 2008 showed an nearly two p.c expansion charge in gaming revenues, there was an 8.seven per cent decline in the third quarter and an almost 10 % decline in the fourth quarter of 2008, in comparison with 2007. Gaming profits traits at nearby Niagara Falls, Ontario ended up down one.5% in 2008 in contrast with 2007.
It’s been a combined-bag for state lotteries throughout the country. The North American Association of Condition & Provincial Lotteries reports that U.S. lotteries produced a overall of $sixty.6 billion in revenue in fiscal 2008, up about three p.c from the prior yr nevertheless some jurisdictions reported decreases, most notably California, which showed an eight per cent drop. Inasmuch as some of these states are on numerous fiscal year ends, it would seem that the data does not replicate the impact of third and/or fourth quarter outcomes.
In accordance to data provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping 7 percent to $thirteen.seven billion in 2008, versus $fourteen.7 billion in 2007.
Planned & Proposed New Expansions
As previously noted, it has been new gaming jurisdictions that have spawned significantly of the progress in once-a-year casino/racino revenues above the years, and their impact is apt to carry on into the around long term.
Florida
Miami Dade voters accepted a ballot issue that permits every of three pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Pet Keep track of and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has nevertheless to declared its plans. There are numerous other proposals being considered that would further broaden on line casino improvement through the point out.
Illinois
The condition lastly received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,two hundred+ recreation casino located in Des Plaines just east of O’Hare. The new facility is not very likely to open up until finally 2010. There has also been some dialogue about making it possible for an increase in for every location 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 improvement of 4 on line casino gaming zones and slots at existing horse and pet tracks appears mired, as only a single facility is presently underneath building, while three 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 located so close to the state line that its parking lot is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table games, along with a next period because of to open up in 2011 with 875 slots and 20 desk games. The condition has prolonged the application method for the other 3 zones until finally April, 2009.
Kentucky
There is even now a lot of ‘jockeying’ heading on, but the prospect of as numerous as 8 slot parlors and racinos seems to be again on the entrance-burner, but most likely not resolved during the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most current becoming the 390 area M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Tough Rock and new lodges consist of two components of the City Heart venture, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino development tasks in Baton Rouge and Lake Charles, although delayed, are described to nevertheless be on-track for opening this yr and/or early 2010.
Maine
There is a invoice below thought that could much more than double Penn National’s slot equipment to three,000, as well as a proposal that would remove the restriction that slots be positioned inside of 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing nearby people to let slots, might be thinking about moving to a more hospitable city.
Maryland
A referendum was accredited in November, 2008 that makes it possible for for the advancement 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 intense as the condition had anticipated.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has operate into numerous financing issues and whilst the resort portion is open, the riverboat is documented to open in the Spring of ’09. Harrah’s https://fishtonga.com/category/%eb%a8%b9%ed%8a%80%ec%82%ac%ec%9d%b4%ed%8a%b8/ in Biloxi, even though scaled again fairly, is even now on keep track of to open this calendar year.
New England
Massachusetts, a sleeping-big in conditions of market place possible, is even now maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but cannot look to muster the political assistance. A modern examine finished by Dartmouth University estimates that Massachusetts resident spent much more than $920 million previous yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to build casinos, nonetheless the subject is probably to be revisited, especially if Massachusetts decides to go forward. There are also attempts in Maine to rethink its possibilities.
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 extra tax. The governor even so, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by making it possible for the tracks to have slot devices specially at the Meadowlands. (See The Nor’easter Squeeze section)
New York
Just when it looked as if Aqueduct’s 4,500 VLT facility would finally be developed, the successful bidder indicated an inability to make the necessary $370 million price, citing the current lending weather, and throwing the task back again into the lap of the governor. Even though the industry demand in the region could be deemed fairly powerful, the prospect of extra competitors from nearby Belmont could have an affect on Aqueduct’s underlining financial feasibility, especially contemplating that marginally less than thirty% of the internet get is retained by the operator.
Ideas to relocate Monticello Raceway into a resort sophisticated are becoming reconsidered perhaps owing to equally the possible opening of at minimum one or perhaps two racino functions in the NY metro location, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.
Ohio
However yet another gaming proposal is currently being place forth in Ohio, right after final year’s version was turned down by the voters. This prepare phone calls for one on line casino every single in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense essential of $250 million, as properly as an preliminary licensing price of $fifty million, and a 33 per cent tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are expected to start development this calendar year.
South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and incorporate 300 online games, 140 rooms and a extensive selection of amenities.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to let casino gambling in selected locations, as properly as allow gambling on American Indian lands in Texas and at current racetracks.
West Virginia
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. State govt has proffered the notion of enabling the resort to offer on line casino game titles, but this hard work is in as well early a phase to have any traction one way or another.
Indian Gaming
A latest Supreme Courtroom ruling that restricts the taking of lands into have faith in on behalf of federally identified American Indian tribes has further stymied some new Course III gaming initiatives across the place. Additionally, there were eleven Indian casino assignments rejected by the DOI final year since of its new rule that casinos have to be around enough to a reservation that tribal associates can function at them. It has been suggested that the new Obama administration may possibly be far more sympathetic to the advancement of Indian gaming assignments, but this situation has nevertheless to be dealt with.
Meanwhile, there are other Class III initiatives in the different stages of advancement. The Seneca on line casino undertaking in Buffalo, NY, whilst functioning a little short term facility, has delayed an presently below construction everlasting facility right up until the industry rebounds. They have also expressed an curiosity in developing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could effect their ideas for more substantial tasks. There are new Indian gaming projects established to open up in Michigan and Oklahoma this year, and other folks are in the preparing phase. Texas might allow the reopening of Indian gaming amenities and allow 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 revenue in Atlantic Town has declined 7.6 per cent, from $4.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining by itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been situated in Atlantic Metropolis, the place it appeared as if it might in fact even eclipse the Las Vegas Strip’s annual gaming revenues.
Gradually even so its industry share was being encroached on, 1st by the improvement of a large Class III gaming operation in Connecticut, and then yet another slots operations 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 planned 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 future potential customers. It really is reliance on working day-trippers lulled it into a fake perception of protection, and it now finds alone possessing to redefine its mission assertion to “location resort.”
The only problem with this technique nonetheless is that it is unwell-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 adequate day-tripper market to go close to, and their efficient buying and selling area is tightening, as the peripheral populations northward now/will have much more all set entry to a widened source in New York (Yonkers, and shortly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean access, the city’s only real competitive rewards are its resort ability and the availability of desk game titles, although the latter is very likely to eventuate in Pennsylvania, and possibly Delaware. In buy to sufficiently contend as a vacation spot vacation resort the town demands to build additional guest rooms and not essentially gaming ability. By comparison, the Las Vegas Strip homes – true gaming locations, in that they do not have much of a day-journey market place, apart from for the ‘locals’ – have an regular of .87 gaming positions for each guest area while Atlantic City’s common is 2.74 positions for every guest space.
It is not a coincidence that Atlantic City’s two biggest lodges, the Borgata and Harrah’s Marina, equally of which added new rooms in 2008, ended up the the very least impacted by the newest downturn. The Borgata experienced a gaming profits drop of one.six percent, although Harrah’s Marina reported a 4.9 % enhance in comparison to 2007. Moreover, the toughest hit venues, particularly 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, such as the the Trump properties and Resorts with the hoped for sale of the Tropicana has been more delayed, and losing valuation.
With a constant increase in gaming revenues through 2006, the city seemed primary for additional development, which precipitated arranging for four new resort assignments, each and every of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion venture continues to be an iron skeleton, Pinnacle Enjoyment has introduced it may well seek to sell its razed Sands web site, MGM Mirage has shelved its on line casino ideas, and Penn National appears to have stopped its pursuit of the Bader Field airport internet site.