A Time period of Adjustment
Oops! That big hissing audio is the gaming balloon that had been expanding over the several years, slowly and gradually losing air. But, it has not been a tide that lowered all ships however, as some rising and growing gaming jurisdictions showed strong expansion in 2008.
Overall, the professional and racetrack on line casino sectors (excluding Indian gaming), skilled a 3.five percent drop in gaming revenues for 2008, making a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a achieve of practically $1 billion in 2008, thus bringing the Commercial sector market place drop to $1.8 billion, or six.7 percent. Nevada was the largest loser in 2008, dropping practically $1.three billion, much more than 50 % of which stemmed from the Las Vegas Strip section.
For the most portion, on line casino operators have been caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not right up until the third and fourth quarters when it actually nosedived. Driving the crest of yr over year industry expansion throughout the country and the availability of ample credit and equity cash, new design and enlargement proliferated in current several years. Today, confronted with the realities of declining, or at best stagnant demand, many of these assignments are now regarded above-leveraged and/or in excess of-sized. As a consequence a lot of gaming companies are trying to renegotiate their personal debt – produced much more tough by reduced valuations – while also paring down operational costs. The latter has turn out to be a very problematic conundrum when dealing with the competitiveness, specially in people jurisdictions that are now vying for market shares with new rising on line casino assignments in neighboring locations. A subject matter we discuss a lot more entirely in the State by Point out evaluation segment of this publication.
As a consequence of these circumstances the gaming business landscape is now strewn with impending fatalities. Among the much more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the listing grows every 7 days.
“How lengthy will these economic circumstances persist, and are we at the base but?” are questions no one particular appears to be answering yet. What is distinct nonetheless is that most gaming jurisdictions will have to discover how to offer with a smaller sized pie.
This evaluation consists of only gaming revenues of certified casinos and pari-mutuel outlets that supply on line casino online games, and not Indian gaming functions, card rooms, or small non-on line casino type slot spots. The complete report, such as profits tables is available on our world wide web webpage.
A crucial factor that would seem to have arisen from the ashes of this current pattern is that many on line casino tasks were just too huge to support by themselves. The input, in phrases of expense dollars, was not proportional to the output, in conditions of web earnings after credit card debt support, when compared to formerly achieved benefits. More and/or larger is not constantly greater. Seeing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of more complete facilities in several other jurisdictions. The flaw in this strategy however is that the fees related with widening industry penetration and occasioned-use, are significantly larger than people incurred to attract the base market.
As daytripper marketplaces turn out to be far more competitive, casino venues will have to depend far more and more on their in-property lodge patrons, and dimension their homes (and expectations) appropriately. Whilst Steve Wynn started out a significant trend in generating up-industry mega-destinations, there just was not ample demand on the Strip to warrant the many other similar assignments that followed that aimed at the identical area of interest.
The trick is to strike a happy medium in task configurations which of training course need considerably less of a ‘seat-of-pants’ method, and a single that is a lot more studied. A shameless plug for development consultants like ourselves.
Other Gaming Activities
Although there are no printed thorough info of American Indian gaming revenues, anecdotal evidence seems to recommend that this phase has been as challenging strike as the Commercial sector. The two Connecticut Indian gaming installations report slot earnings of $one.six billion in 2008, symbolizing a fall of about seven per cent, or nearly $114 million, a lot more than doubling the three.five percent fall from the 12 months just before. This industry is seemingly nevertheless 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 Office of Gaming stories that contributions primarily based on a gaming revenue formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in comparison to the previous yr decreasing .eight per cent in the initial quarter, 7.five per cent in the next quarter, nine.five percent in the third quarter, and sixteen.one % in the fourth quarter.
Some SEC reporting Indian gaming houses report related decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, reports that whilst calendar 12 months 2008 confirmed an virtually two p.c expansion price in gaming revenues, there was an eight.seven % decline in the third quarter and an nearly 10 % decrease in the fourth quarter of 2008, in comparison with 2007. Gaming income trends at close by Niagara Falls, Ontario ended up down one.5% in 2008 compared with 2007.
It truly is been a combined-bag for condition lotteries across the nation. The North American Affiliation of State & Provincial Lotteries reviews that U.S. lotteries created a overall of $sixty.six billion in revenue in fiscal 2008, up about 3 p.c from the previous yr yet some jurisdictions documented decreases, most notably California, which confirmed an 8 percent fall. Inasmuch as some of these states are on different fiscal calendar year finishes, it would appear that the info does not reflect the affect of 3rd and/or fourth quarter final results.
According to data provided by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping seven per cent to $13.7 billion in 2008, vs . $fourteen.seven billion in 2007.
Prepared & Proposed New Expansions
As previously observed, it has been new gaming jurisdictions that have spawned a lot of the development in annual on line casino/racino revenues in excess of the years, and their effect is apt to keep on into the in close proximity to future.
Miami Dade voters approved a ballot issue that permits each and every of three pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Dog Track and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has yet to announced its programs. There are several other proposals getting deemed that would additional broaden casino advancement through the point out.
The point out last but not least received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ recreation on line casino found 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 improve in for every spot gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.
The state’s expanded lottery program that allows for the advancement of four on line casino gaming zones and slots at present horse and canine tracks appears mired, as only 1 facility is presently beneath building, whilst 3 other proposals had been 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 situated so shut to the state line that its parking whole lot is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table video games, alongside with a 2nd stage because of to open up in 2011 with 875 slots and 20 table games. The state has extended the software process for the other 3 zones right up until April, 2009.
There is nevertheless a whole lot of ‘jockeying’ heading on, but the prospect of as many as 8 slot parlors and racinos appears to be back on the entrance-burner, but most likely not settled in the course of the present legislative session.
There are about 14,000 rooms scheduled to appear on line in 2009, with the most latest becoming the 390 room M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Difficult Rock and new resorts incorporate two factors of the Town Heart project, and the Fountainebleau.
Pinnacle Entertainment’s new casino improvement projects in Baton Rouge and Lake Charles, even though delayed, are documented to nonetheless be on-keep track of for opening this year and/or early 2010.
There is a monthly bill beneath consideration that could more than double Penn National’s slot devices to three,000, as well as a proposal that would remove the restriction that slots be positioned inside 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing regional inhabitants to enable slots, may be thinking about moving to a far more hospitable city.
A referendum was accredited in November, 2008 that permits for the improvement of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot though it is not as powerful as the point out had anticipated.
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has operate into different funding problems and even though the hotel part is open up, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back again considerably, is even now on track to open this yr.
Massachusetts, a sleeping-large in conditions of market place potential, is still maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can not look to muster the political help. A recent examine completed by Dartmouth University estimates that Massachusetts resident invested a lot more than $920 million very last year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an choice to create casinos, even so the subject is most likely to be revisited, particularly if Massachusetts decides to go ahead. There are also makes an attempt in Maine to rethink its choices.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by recently 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 enabling the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze section)
Just when it seemed as if Aqueduct’s four,500 VLT facility would last but not least be produced, the successful bidder indicated an incapacity to make the essential $370 million price, citing the recent lending local climate, and throwing the project back again into the lap of the governor. Even though the marketplace demand in the area could be regarded as really sturdy, the prospect of added opposition from nearby Belmont could have an influence on Aqueduct’s underlining financial feasibility, specifically considering that slightly significantly less than thirty% of the net acquire is retained by the operator.
Strategies to relocate Monticello Raceway into a vacation resort complicated are becoming reconsidered perhaps owing to the two the probable opening of at the very least a single or possibly two racino functions in the NY metro spot, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.
Nevertheless another gaming proposal is becoming put forth in Ohio, after final year’s model was turned down by the voters. This program calls for one particular casino each and every in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment decision essential of $250 million, as nicely as an original licensing payment of $fifty million, and a 33 percent tax on gaming profits.
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 although Philadelphia’s two slot amenities nonetheless wallow in a political mire, but are predicted to start development this yr.
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and include three hundred game titles, one hundred forty rooms and a vast assortment of features.
Legislators are proposing a voter referendum that would amend the condition structure to enable on line casino gambling in designated areas, as properly as permit gambling on American Indian lands in Texas and at present racetracks.
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Condition govt has proffered the idea of enabling the vacation resort to supply on line casino games, but this effort is in also early a stage to have any traction 1 way or another.
A recent Supreme Court docket ruling that restricts the having of lands into trust on behalf of federally regarded American Indian tribes has further stymied some new Class III gaming tasks throughout the region. Furthermore, there had been eleven Indian on line casino projects turned down by the DOI final calendar year due to the fact of its new rule that casinos should be around enough to a reservation that tribal members can perform at them. It has been proposed that the new Obama administration might be far more sympathetic to the advancement of Indian gaming tasks, but this situation has but to be resolved.
Meanwhile, there are other Course III assignments in the a variety of stages of development. The Seneca on line casino venture in Buffalo, NY, although functioning a tiny momentary facility, has delayed an presently underneath development long term facility until the market rebounds. They have also expressed an curiosity in establishing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is being challenged, and could influence their ideas for larger assignments. There are new Indian gaming projects established to open up in Michigan and Oklahoma this yr, and other people are in the organizing phase. Texas could enable the reopening of Indian gaming services and permit other venue and there are strategies afoot by the Navajos in Arizona to assemble extra casinos. California is poised to open two to a few new Course III casinos in 2009/10.
The Nor’easter Squeeze
Complete gaming income in Atlantic City has declined seven.six percent, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is discovering alone in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast were located in Atlantic Metropolis, exactly where it looked as if it may possibly truly even eclipse the Las Vegas Strip’s yearly gaming revenues.
Gradually nevertheless its market place share was becoming encroached on, initial by the improvement of a huge Course III gaming procedure in Connecticut, and then one more slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.
Now, with the planned opening of slot functions 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 close to Atlantic City’s long term prospective customers. It really is reliance on working day-trippers lulled it into a fake perception of stability, and it now finds alone having to redefine its mission assertion to “vacation spot resort.”
The only difficulty with this approach nevertheless is that it is sick-equipped to pull it off. For all intents and needs, Atlantic Town is under-roomed and/or above-gamed. There is simply not adequate working day-tripper market to go around, and their successful buying and selling location is tightening, as the peripheral populations northward now/will have far more completely ready accessibility to a widened supply in New York (Yonkers, and shortly at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only real competitive benefits are its lodge potential and the availability of desk online games, despite the fact that the latter is very likely to eventuate in Pennsylvania, and probably Delaware. In purchase to adequately contend as a vacation spot vacation resort the city wants to produce added visitor rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip homes – real gaming places, in that they do not have a lot of a working day-trip industry, apart from for the ‘locals’ – have an typical of .87 gaming positions for each visitor area while Atlantic City’s common is two.74 positions for every guest space.
It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, the two of which extra new rooms in 2008, had been the minimum impacted by the most recent downturn. The Borgata experienced a gaming profits drop of 1.6 per cent, although Harrah’s Marina noted a four.nine percent boost when compared to 2007. Additionally, 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, which includes the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and dropping valuation.
With a continual increase in gaming revenues via 2006, the metropolis seemed prime for even more growth, which precipitated preparing for four new resort assignments, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.five billion task stays an iron skeleton, Pinnacle Enjoyment has declared it may well seek to sell its razed Sands site, MGM Mirage has shelved its on line casino ideas, and Penn Nationwide appears to have stopped its pursuit of the Bader Discipline airport website.