A Period of Adjustment
Oops! That large hissing audio is the gaming balloon that had been developing above the a long time, slowly getting rid of air. But, it has not been a tide that decreased all ships nevertheless, as some rising and expanding gaming jurisdictions showed sturdy growth in 2008.
All round, the business and racetrack on line casino sectors (excluding Indian gaming), skilled a three.5 per cent decrease 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 confirmed a gain of practically $one billion in 2008, thereby bringing the Commercial sector market place decrease to $1.eight billion, or 6.7 per cent. Nevada was the biggest loser in 2008, dropping almost $1.3 billion, more than half of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most part, on line casino operators ended up caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not right up until the third and fourth quarters when it genuinely nosedived. Riding the crest of yr more than 12 months market place development throughout the nation and the availability of ample credit and fairness resources, new design and expansion proliferated in modern a long time. Right now, confronted with the realities of declining, or at ideal stagnant need, numerous of these initiatives are now deemed more than-leveraged and/or more than-sized. As a outcome several gaming organizations are making an attempt to renegotiate their debt – created much more tough by reduce valuations – although also paring down operational expenses. The latter has grow to be a really problematic conundrum when working with the competition, specifically in these jurisdictions that are now vying for market shares with new emerging on line casino projects in neighboring areas. A subject matter we talk about more totally in the Point out by Condition examination segment of this publication.
As a outcome of these conditions the gaming industry landscape is now strewn with impending fatalities. Among the more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows every week.
“How lengthy will these economic problems persist, and are we at the bottom however?” are inquiries no a single appears to be answering however. What is clear however is that most gaming jurisdictions will have to discover how to deal with a smaller pie.
Notice:
This analysis includes only gaming revenues of certified casinos and pari-mutuel shops that provide casino game titles, and not Indian gaming operations, card rooms, or small non-casino sort slot areas. The entire write-up, like earnings tables is accessible on our world wide web web page.
Enter/Output Product
A essential facet that would seem to have arisen from the ashes of this current pattern is that many casino projects ended up just also large to assist on their own. The enter, in phrases of investment bucks, was not proportional to the output, in terms of internet profit right after personal debt service, compared to formerly achieved final results. A lot more and/or larger is not often much better. Observing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of a lot more thorough amenities in many other jurisdictions. The flaw in this strategy nonetheless is that the costs linked with widening market place penetration and occasioned-use, are significantly greater than individuals incurred to appeal to the foundation market.
As daytripper marketplaces become much more competitive, casino venues will have to rely more and far more on their in-residence resort patrons, and dimensions their properties (and expectations) appropriately. Whilst Steve Wynn started a key development in producing up-market place mega-places, there basically was not sufficient need on the Strip to warrant the many other similar initiatives that followed that aimed at the exact same niche.
The trick is to strike a content medium in task configurations which of system call for less of a ‘seat-of-pants’ strategy, and one particular that is much more examined. A shameless plug for development consultants like ourselves.
Other Gaming Pursuits
Despite the fact that there are no released in depth information of American Indian gaming revenues, anecdotal proof appears to advise that this section has been as tough strike as the Business sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, symbolizing a drop of about seven %, or practically $114 million, a lot more than doubling the 3.5 p.c fall from the 12 months prior to. This market is evidently nevertheless 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 Division of Gaming reports that contributions dependent on a gaming income method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in comparison to the previous calendar year decreasing .8 percent in the very first quarter, 7.5 % in the second quarter, nine.five per cent in the 3rd quarter, and 16.one p.c in the fourth quarter.
Some SEC reporting Indian gaming qualities report related decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, studies that whilst calendar yr 2008 confirmed an practically 2 per cent development price in gaming revenues, there was an eight.seven per cent decline in the third quarter and an virtually ten per cent drop in the fourth quarter of 2008, in contrast with 2007. Gaming profits trends at nearby Niagara Falls, Ontario had been down one.five% in 2008 in contrast with 2007.
It’s been a blended-bag for point out lotteries across the place. The North American Affiliation of State & Provincial Lotteries studies that U.S. lotteries generated a total of $60.6 billion in product sales in fiscal 2008, up about three percent from the prior year but some jurisdictions noted decreases, most notably California, which confirmed an eight per cent drop. Inasmuch as some of these states are on different fiscal 12 months ends, it would seem to be that the data does not reflect the effect of third and/or fourth quarter results.
According to information offered by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping seven p.c 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 yearly on line casino/racino revenues more than the a long time, and their influence is apt to continue into the close to potential.
Florida
Miami Dade voters approved a ballot problem that makes it possible for every single of three pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has nevertheless to declared its strategies. There are numerous other proposals currently being regarded that would more expand on line casino advancement throughout the state.
Illinois
The state lastly got around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ game on line casino situated in Des Plaines just east of O’Hare. The new facility is not likely to open right up until 2010. There has also been some dialogue about permitting an increase in for every location 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 permits for the growth of four casino gaming zones and slots at present horse and dog tracks appears mired, as only a single facility is presently underneath development, whilst 3 other proposals have been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so shut to the condition line that its parking great deal is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk games, together with a second phase owing to open up in 2011 with 875 slots and twenty table online games. The state has extended the application approach for the other three zones until April, 2009.
Kentucky
There is even now a whole lot of ‘jockeying’ likely on, but the prospect of as a lot of as eight slot parlors and racinos appears to be again on the entrance-burner, but very likely not fixed for the duration of the present legislative session.
Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most recent currently being the 390 place M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Challenging Rock and new accommodations include two components of the Metropolis Middle task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino growth tasks in Baton Rouge and Lake Charles, while delayed, are reported to nevertheless be on-monitor for opening this yr and/or early 2010.
Maine
There is a monthly bill beneath thought that could more than double Penn National’s slot devices to 3,000, as well as a proposal that would get rid of the restriction that slots be positioned in five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing local inhabitants to allow slots, may be taking into consideration transferring to a far more hospitable city.
Maryland
A referendum was accepted in November, 2008 that permits for the improvement of 5 casinos with a whole of fifteen,000 slots, and now the bidding war is afoot although it is not as intensive as the state experienced anticipated.
Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has operate into a variety of financing concerns and even though the lodge portion is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back again relatively, is still on monitor to open up this yr.
New England
Massachusetts, a sleeping-large in conditions of industry possible, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but are not able to seem to muster the political help. A latest examine completed by Dartmouth College estimates that Massachusetts resident expended much more than $920 million final calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an option to build casinos, nevertheless the subject matter is probably to be revisited, especially if Massachusetts decides to go ahead. There are also tries in Maine to rethink its possibilities.
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 proceed augmenting purses with an extra tax. The governor nevertheless, has appointed a new panel to research the state’s sagging racing software which ironically, can only be preserved by allowing the tracks to have slot equipment especially at the Meadowlands. (See The Nor’easter Squeeze section)
New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would last but not least be created, the successful bidder indicated an lack of ability to make the necessary $370 million price, citing the present lending weather, and throwing the project back into the lap of the governor. Though the marketplace need in the spot could be considered fairly strong, the prospect of extra competitors from close by Belmont could have an affect on Aqueduct’s underlining economic feasibility, especially contemplating that a bit less than 30% of the internet get is retained by the operator.
Plans to relocate Monticello Raceway into a resort complex are currently being reconsidered possibly owing to each the probable opening of at least one particular or perhaps two racino functions in the NY metro spot, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.
Ohio
Nevertheless yet another gaming proposal is becoming put forth in Ohio, after last year’s edition was turned down by the voters. This strategy phone calls for a single casino every in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment needed of $250 million, as well as an preliminary licensing fee of $fifty million, and a 33 per cent tax on gaming earnings.
Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is predicted to be operational in August, ’09 while Philadelphia’s two slot amenities still wallow in a political mire, but are anticipated to begin design this 12 months.
South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and incorporate 300 video games, a hundred and forty rooms and a vast variety of facilities.
Texas
Legislators are proposing a voter referendum that would amend the state constitution to let casino gambling in selected areas, as nicely as enable gambling on American Indian lands in Texas and at existing racetracks.
West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer you. State authorities has proffered the idea of making it possible for the vacation resort to provide casino games, but this work is in way too early a phase to have any traction one particular way or one more.
Indian Gaming
A modern Supreme Court ruling that restricts the taking of lands into have confidence in on behalf of federally recognized American Indian tribes has more stymied some new Class III gaming tasks across the country. Additionally, there had been eleven Indian on line casino assignments rejected by the DOI very last yr because of its new rule that casinos need to be around ample to a reservation that tribal associates can perform at them. It has been advised that the new Obama administration may possibly be far more sympathetic to the advancement of Indian gaming tasks, but this concern has but to be dealt with.
In the meantime, there are other Class III projects in the a variety of phases of improvement. The Seneca casino undertaking in Buffalo, NY, even though working a small temporary facility, has delayed an currently under building everlasting facility until the market rebounds. They have also expressed an curiosity in establishing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could influence their ideas for larger assignments. There are new Indian gaming initiatives established to open in Michigan and Oklahoma this yr, and other individuals are in the organizing phase. Texas may allow the reopening of Indian gaming facilities and permit other location and there are strategies afoot by the Navajos in Arizona to construct additional casinos. California is poised to open up two to three new Course III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming earnings in Atlantic Metropolis has declined 7.6 percent, from $four.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is discovering itself in an intensive comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast were located in Atlantic City, where it seemed as if it may in fact even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Little by little however its market place share was being encroached on, initial by the improvement of a big Course III gaming procedure in Connecticut, and then 
yet another slots operations in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.
Now, with the planned 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 close to Atlantic City’s future potential customers. It’s reliance on day-trippers lulled it into a untrue feeling of security, and it now finds alone having to redefine its mission statement to “destination vacation resort.”
masterpoker88 with this strategy even so is that it is unwell-geared up to pull it off. For all intents and purposes, Atlantic Town is below-roomed and/or over-gamed. There is simply not enough day-tripper market place to go about, and their successful trading area is tightening, as the peripheral populations northward now/will have more ready accessibility to a widened offer 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 accessibility, the city’s only genuine competitive positive aspects are its resort ability and the availability of desk online games, though the latter is likely to eventuate in Pennsylvania, and potentially Delaware. In order to sufficiently contend as a destination vacation resort the metropolis demands to develop extra guest rooms and not always gaming potential. By comparison, the Las Vegas Strip qualities – accurate gaming locations, in that they do not have considerably of a working day-vacation market place, except for the ‘locals’ – have an common of .87 gaming positions for every visitor space although Atlantic City’s typical is 2.74 positions for every visitor room.
It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, the two of which extra new rooms in 2008, ended up the minimum impacted by the most recent downturn. The Borgata seasoned a gaming profits drop of one.6 percent, whilst Harrah’s Marina described a 4.9 % increase compared to 2007. In addition, the most difficult strike venues, particularly 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 qualities and Resorts with the hoped for sale of the Tropicana has been even more delayed, and shedding valuation.
With a constant rise in gaming revenues via 2006, the metropolis seemed primary for even more advancement, which precipitated organizing for four new vacation resort projects, each of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion project remains an iron skeleton, Pinnacle Entertainment has announced it may possibly seek out to promote its razed Sands site, MGM Mirage has shelved its on line casino ideas, and Penn Nationwide seems to have stopped its pursuit of the Bader Area airport website.