A Period of time of Adjustment
Oops! That giant hissing seem is the gaming balloon that had been growing in excess of the a long time, gradually getting rid of air. But, it has not been a tide that reduced all ships nonetheless, as some emerging and growing gaming jurisdictions confirmed robust expansion in 2008.
Total, the professional and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.five per cent decrease in gaming revenues for 2008, generating a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of practically $1 billion in 2008, therefore bringing the Commercial sector market decrease to $1.8 billion, or 6.seven %. Nevada was the largest loser in 2008, dropping practically $1.3 billion, much more than 50 % of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most component, on line casino operators have been caught comparatively flat-footed by the extent of the 2008 revenue downturn, as it was not until finally the 3rd and fourth quarters when it really nosedived. Using the crest of yr over year industry development throughout the region and the availability of enough credit score and fairness money, new building and expansion proliferated in recent years. These days, confronted with the realities of declining, or at very best stagnant demand from customers, a lot of of these projects are now considered above-leveraged and/or in excess of-sized. As a result several gaming firms are attempting to renegotiate their personal debt – manufactured a lot more challenging by decrease valuations – while also paring down operational fees. The latter has grow to be a really problematic conundrum when working with the opposition, specifically in those jurisdictions that are now vying for marketplace shares with new rising casino projects in neighboring locations. A subject matter we talk about more completely in the Condition by Condition investigation area of this publication.
As a consequence of these circumstances the gaming market landscape is now strewn with impending fatalities. Between the a lot more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the listing grows each and every 7 days.
“How long will these economic situations persist, and are we at the base but?” are questions no 1 seems to be answering nevertheless. What is clear however is that most gaming jurisdictions will have to learn how to offer with a more compact pie.
Note:
This analysis involves only gaming revenues of licensed casinos and pari-mutuel stores that offer you casino game titles, and not Indian gaming functions, card rooms, or little non-casino kind slot locations. The total article, including earnings tables is accessible on our net website page.
Input/Output Product
A key facet that looks to have arisen from the ashes of this existing trend is that several casino projects ended up just way too massive to assist on their own. The enter, in terms of investment pounds, was not proportional to the output, in phrases of internet profit following debt provider, when compared to formerly accomplished results. More and/or bigger is not often far better. Viewing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the growth of more extensive amenities in numerous other jurisdictions. The flaw in this technique nonetheless is that the costs related with widening market place penetration and occasioned-use, are substantially larger than these incurred to draw in the foundation market.
As daytripper marketplaces become a lot more competitive, on line casino venues will have to rely more and far more on their in-house resort patrons, and dimension their qualities (and expectations) appropriately. Even though Steve Wynn began a key development in creating up-market place mega-destinations, there just was not sufficient demand from customers on the Strip to warrant the several other comparable tasks that followed that aimed at the identical market.
The trick is to strike a content medium in venture configurations which of course require less of a ‘seat-of-pants’ strategy, and a single that is much more studied. A shameless plug for growth consultants like ourselves.
Other Gaming Pursuits
Although there are no revealed thorough knowledge of American Indian gaming revenues, anecdotal proof appears to advise that this segment has been as difficult strike as the Business sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, symbolizing a drop of about 7 p.c, or almost $114 million, much more than doubling the 3.five percent drop from the calendar year just before. This marketplace is evidently even now reeling from the ripple-influence of a casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Section of Gaming studies that contributions based mostly on a gaming income system from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in comparison to the earlier year reducing .eight % in the very first quarter, seven.5 p.c in the 2nd quarter, nine.5 % in the third quarter, and sixteen.one % in the fourth quarter.
Some SEC reporting Indian gaming houses report equivalent decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reviews that even though calendar year 2008 showed an almost two p.c expansion rate in gaming revenues, there was an 8.seven p.c decline in the 3rd quarter and an nearly ten percent decrease in the fourth quarter of 2008, when compared with 2007. Gaming profits traits at nearby Niagara Falls, Ontario had been down 1.five% in 2008 when compared with 2007.
It really is been a combined-bag for condition lotteries across the region. The North American Affiliation of State & Provincial Lotteries studies that U.S. lotteries created a total of $60.6 billion in sales in fiscal 2008, up about 3 p.c from the previous yr but some jurisdictions noted decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on a variety of fiscal calendar year ends, it would seem to be that the data does not mirror the affect of 3rd and/or fourth quarter outcomes.
According to information provided by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven per cent to $thirteen.seven billion in 2008, compared to $14.seven billion in 2007.
Prepared & Proposed New Expansions
As formerly observed, it has been new gaming jurisdictions that have spawned much of the growth in once-a-year on line casino/racino revenues over the several years, and their effect is apt to carry on into the close to long term.
Florida
Miami Dade voters authorized a ballot problem that allows each of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Canine Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has however to declared its ideas. There are several other proposals being deemed that would more expand on line casino development during the condition.
Illinois
The state finally acquired all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ match on line casino located in Des Plaines just east of O’Hare. The new facility is not likely to open up until 2010. There has also been some discussion about enabling an increase in for each 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 enables for the advancement of 4 on line casino gaming zones and slots at existing horse and canine tracks seems mired, as only one particular facility is presently under building, while a few other proposals ended up 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 found so near to the condition line that its parking lot 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 desk online games, along with a next phase owing to open in 2011 with 875 slots and twenty table online games. The state has prolonged the software method for the other a few zones until April, 2009.
Kentucky
There is even now a whole lot of ‘jockeying’ likely on, but the prospect of as many as 8 slot parlors and racinos seems to be back 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 come on line in 2009, with the most current currently being the 390 area M Resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new lodges consist of two parts of the Metropolis Center undertaking, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino improvement initiatives in Baton Rouge and Lake Charles, even though delayed, are documented to nevertheless be on-observe for opening this yr and/or early 2010.
Maine
There is a bill beneath thought that could much more than double Penn National’s slot devices to three,000, as properly as a proposal that would remove the restriction that slots be positioned inside five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional people to allow slots, might be thinking about shifting to a a lot more hospitable town.
Maryland
A referendum was accepted in November, 2008 that makes it possible for for the advancement of 5 casinos with a total of 15,000 slots, and now the bidding war is afoot although it is not as extreme as the condition experienced expected.
Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has run into a variety of funding problems and even though the hotel portion is open up, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back relatively, is still on monitor to open this yr.
New England
Massachusetts, a sleeping-big in terms of industry likely, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot appear to muster the political help. A recent study accomplished by Dartmouth University estimates that Massachusetts resident expended a lot more than $920 million last calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to produce casinos, nevertheless the subject is very likely to be revisited, specifically if Massachusetts decides to go forward. There are also makes an attempt in Maine to reconsider its alternatives.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by just lately agreeing to continue augmenting purses with an added tax. The governor nevertheless, has appointed a new panel to examine the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot machines especially at the Meadowlands. (See The Nor’easter Squeeze area)
New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would ultimately be created, the profitable bidder indicated an incapability to make the required $370 million price, citing the present lending climate, and throwing the venture back into the lap of the governor. Despite the fact that the market place demand from customers in the region could be deemed really powerful, the prospect of added competitors from close by Belmont could have an affect on Aqueduct’s underlining financial feasibility, specially contemplating that a bit significantly less than 30% of the net win is retained by the operator.
Ideas to relocate Monticello Raceway into a vacation resort complex are becoming reconsidered possibly owing to each the probable opening of at least a single or perhaps two racino operations in the NY metro region, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.
Ohio
Nevertheless an additional gaming proposal is being set forth in Ohio, following very last year’s variation was turned down by the voters. This program calls for one particular on line casino every single in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be sexy baccarat needed of $250 million, as well as an preliminary licensing price of $50 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 facilities even now wallow in a political mire, but are anticipated to start off development this yr.
South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and incorporate three hundred games, one hundred forty rooms and a broad range of features.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to allow on line casino gambling in selected areas, as effectively as enable gambling on American Indian lands in Texas and at present racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer you. Condition authorities has proffered the idea of making it possible for the resort to offer casino online games, but this effort is in as well early a phase to have any traction one particular way or an additional.
Indian Gaming
A modern Supreme Court docket ruling that restricts the having of lands into have confidence in on behalf of federally acknowledged American Indian tribes has even more stymied some new Course III gaming tasks across the region. Moreover, there have been eleven Indian casino projects rejected by the DOI previous year simply because of its new rule that casinos need to be in close proximity to adequate to a reservation that tribal customers can perform at them. It has been advised that the new Obama administration may be a lot more sympathetic to the development of Indian gaming initiatives, but this problem has but to be resolved.
Meanwhile, there are other Course III projects in the different levels of improvement. The Seneca on line casino undertaking in Buffalo, NY, while running a little momentary facility, has delayed an already under building long term facility until finally the market place rebounds. They have also expressed an interest in building a casino in the Catskills. The condition gaming compact with Seminoles in Florida is getting challenged, and could impact their plans for larger tasks. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this calendar year, and others are in the planning stage. Texas may allow the reopening of Indian gaming facilities and enable other location and there are programs afoot by the Navajos in Arizona to build extra casinos. California is poised to open two to three new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Complete gaming earnings in Atlantic Metropolis has declined 7.six per cent, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is discovering itself in an extreme comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast ended up positioned in Atlantic Metropolis, in which it appeared as if it may well really even eclipse the Las Vegas Strip’s yearly gaming revenues.
Slowly and gradually nevertheless its marketplace share was getting encroached upon, first by the improvement of a big Class III gaming operation in Connecticut, and then yet another 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 on line casino in Bethlehem, PA, and sooner or later two functions in Philadelphia, the noose is tightening all around Atlantic City’s future potential customers. It is reliance on day-trippers lulled it into a fake feeling of protection, and it now finds by itself having to redefine its mission statement to “spot resort.”
The only difficulty with this technique nevertheless is that it is ill-outfitted to pull it off. For all intents and functions, Atlantic Town is beneath-roomed and/or more than-gamed. There is basically not enough day-tripper marketplace to go close to, and their efficient trading region is tightening, as the peripheral populations northward now/will have much more all set obtain to a widened offer in New York (Yonkers, and quickly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only genuine aggressive advantages are its resort ability and the availability of table video games, even though the latter is likely to eventuate in Pennsylvania, and probably Delaware. In buy to adequately compete as a destination vacation resort the town wants to produce additional visitor rooms and not automatically gaming ability. By comparison, the Las Vegas Strip houses – true gaming destinations, in that they do not have considerably of a working day-trip market place, besides for the ‘locals’ – have an common of .87 gaming positions for each guest place while Atlantic City’s typical is two.74 positions for each visitor place.
It is not a coincidence that Atlantic City’s two largest accommodations, the Borgata and Harrah’s Marina, equally of which extra new rooms in 2008, had been the minimum impacted by the most recent downturn. The Borgata skilled a gaming revenue fall of one.six p.c, even though Harrah’s Marina described a four.9 percent increase in contrast to 2007. In addition, the most difficult 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, like the the Trump homes and Resorts with the hoped for sale of the Tropicana has been more delayed, and dropping valuation.
With a constant rise in gaming revenues by means of 2006, the metropolis appeared prime for more advancement, which precipitated planning for four new vacation resort assignments, each and every of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion undertaking continues to be an iron skeleton, Pinnacle Enjoyment has announced it may seek out to sell its razed Sands internet site, MGM Mirage has shelved its on line casino ideas, and Penn National seems to have stopped its pursuit of the Bader Area airport internet site.