A Interval of Adjustment
Oops! That large hissing seem is the gaming balloon that had been developing in excess of the years, slowly and gradually shedding air. But, it has not been a tide that reduced all ships even so, as some emerging and growing gaming jurisdictions confirmed powerful progress in 2008.
Overall, the professional and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a 3.5 % decrease in gaming revenues for 2008, making 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 achieve of almost $1 billion in 2008, thus bringing the Business sector market place decline to $1.eight billion, or 6.7 percent. Nevada was the greatest loser in 2008, dropping almost $one.3 billion, a lot more than half of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most component, casino operators were caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not right up until the 3rd and fourth quarters when it genuinely nosedived. Driving the crest of yr over calendar year marketplace progress across the region and the availability of sufficient credit rating and equity resources, new construction and enlargement proliferated in current many years. Nowadays, faced with the realities of declining, or at ideal stagnant desire, a lot of of these initiatives are now deemed above-leveraged and/or more than-sized. As a end result many gaming organizations are trying to renegotiate their financial debt – produced far more tough by decrease valuations – even though also paring down operational costs. The latter has turn out to be a very problematic conundrum when working with the competitiveness, especially in people jurisdictions that are now vying for market place shares with new rising on line casino initiatives in neighboring locations. A matter we discuss far more entirely in the State by Point out analysis segment of this publication.
As a outcome of these problems the gaming sector landscape is now strewn with impending fatalities. Amid the more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows every week.
“How long will these financial conditions persist, and are we at the base however?” are concerns no one seems to be answering yet. What is very clear however is that most gaming jurisdictions will have to understand how to deal with a scaled-down pie.
Note:
This evaluation involves only gaming revenues of certified casinos and pari-mutuel retailers that provide casino games, and not Indian gaming functions, card rooms, or little non-on line casino type slot areas. The whole post, including income tables is obtainable on our net website page.
Enter/Output Design
A essential factor that looks to have arisen from the ashes of this recent trend is that several casino initiatives were just too huge to assistance by themselves. The enter, in conditions of investment pounds, was not proportional to the output, in phrases of net earnings following financial debt provider, in contrast to previously accomplished benefits. Much more and/or even bigger is not constantly better. Looking at the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the growth of a lot more comprehensive features in many other jurisdictions. The flaw in this strategy nonetheless is that the costs linked with widening market place penetration and occasioned-use, are substantially higher than these incurred to appeal to the foundation market place.
As daytripper markets turn out to be far more competitive, casino venues will have to depend more and a lot more on their in-residence lodge patrons, and size their houses (and anticipations) accordingly. Even though Steve Wynn started out a major development in making up-industry mega-locations, there just was not sufficient demand on the Strip to warrant the several other similar assignments that followed that aimed at the same area of interest.
The trick is to strike a content medium in venture configurations which of course require much less of a ‘seat-of-pants’ method, and 1 that is a lot more researched. A shameless plug for growth consultants like ourselves.
Other Gaming Pursuits
Although there are no released comprehensive data of American Indian gaming revenues, anecdotal proof appears to propose that this section has been as hard strike as the Business sector. The two Connecticut Indian gaming installations report slot earnings of $one.six billion in 2008, representing a fall of about 7 %, or almost $114 million, a lot more than doubling the 3.5 p.c fall from the year prior to. This market is evidently nevertheless reeling from the ripple-effect of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Office of Gaming reviews that contributions based on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the earlier 12 months decreasing .eight % in the 1st quarter, 7.5 % in the 2nd quarter, nine.5 percent in the third quarter, and 16.1 p.c in the fourth quarter.
Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, stories that even though calendar yr 2008 showed an practically 2 per cent expansion rate in gaming revenues, there was an 8.7 per cent decrease in the 3rd quarter and an almost 10 % decrease in the fourth quarter of 2008, compared with 2007. Gaming income traits at nearby Niagara Falls, Ontario had been down one.five% in 2008 in comparison with 2007.
It truly is been a mixed-bag for state lotteries across the country. The North American Association of Point out & Provincial Lotteries studies that U.S. lotteries produced a whole of $60.six billion in income in fiscal 2008, up about three p.c from the prior calendar year however some jurisdictions documented decreases, most notably California, which confirmed an 8 per cent drop. Inasmuch as some of these states are on different fiscal yr ends, it would seem to be that the information does not mirror the influence of third and/or fourth quarter benefits.
In accordance to data presented by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping 7 percent to $13.seven billion in 2008, vs . $14.7 billion in 2007.
Planned & Proposed New Expansions
As earlier observed, it has been new gaming jurisdictions that have spawned considerably of the progress in yearly on line casino/racino revenues above the many years, and their impact is apt to carry on into the near future.
Florida
Miami Dade voters accepted a ballot concern that makes it possible for each of a few pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Pet Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has yet to introduced its programs. There are several other proposals currently being regarded that would additional increase casino growth all through the point out.
Illinois
The point out finally received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,two hundred+ sport on line casino situated in Des Plaines just east of O’Hare. The new facility is not likely to open until 2010. There has also been some dialogue about enabling an enhance in for each spot 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 growth of 4 casino gaming zones and slots at current horse and dog tracks appears mired, as only one particular facility is presently under design, even though 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 situated so close to the point out line that its parking great deal is in Kansas. www.betking777.com On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk online games, together with a 2nd phase because of to open in 2011 with 875 slots and 20 table game titles. The state has prolonged the application procedure for the other 3 zones till April, 2009.
Kentucky
There is still a good deal of ‘jockeying’ likely on, but the prospect of as numerous as eight slot parlors and racinos appears to be back again on the entrance-burner, but most likely not fixed for the duration of the existing legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most latest being the 390 room M Resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new hotels include two components of the Town Middle venture, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino improvement projects in Baton Rouge and Lake Charles, while delayed, are described to nevertheless be on-observe for opening this year and/or early 2010.
Maine
There is a monthly bill below thought that could far more than double Penn National’s slot machines to three,000, as properly as a proposal that would get rid of the restriction that slots be situated in 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby people to enable slots, could be considering shifting to a more hospitable town.
Maryland
A referendum was accepted in November, 2008 that permits for the development of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intensive as the point out experienced predicted.
Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has operate into a variety of funding troubles and even though the resort portion is open, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled back again fairly, is nonetheless on track to open this 12 months.
New England
Massachusetts, a sleeping-huge in terms of industry likely, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can not look to muster the political assistance. A modern examine concluded by Dartmouth College estimates that Massachusetts resident expended much more than $920 million previous calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an choice to develop casinos, however the topic is likely to be revisited, specifically if Massachusetts decides to go ahead. There are also tries in Maine to rethink its choices.
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 continue augmenting purses with an extra tax. The governor even so, has appointed a new panel to examine the state’s sagging racing program which ironically, can only be preserved by making it possible for the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze part)
New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would finally be developed, the successful bidder indicated an incapability to make the needed $370 million price, citing the current lending local weather, and throwing the venture again into the lap of the governor. Despite the fact that the industry need in the spot could be deemed very powerful, the prospect of further competitors from close by Belmont could have an influence on Aqueduct’s underlining economic feasibility, particularly contemplating that marginally considerably less than 30% of the web win is retained by the operator.
Plans to relocate Monticello Raceway into a resort sophisticated are getting reconsidered maybe owing to equally the possible opening of at least 1 or possibly 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
But yet another gaming proposal is currently being put forth in Ohio, soon after previous year’s edition was turned down by the voters. This prepare calls for a single casino every single in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expense required of $250 million, as properly as an original licensing charge of $50 million, and a 33 percent tax on gaming income.
Pennsylvania
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is expected to be operational in August, ’09 whilst Philadelphia’s two slot facilities even now 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 Slide of 2009, and incorporate three hundred online games, one hundred forty rooms and a vast variety of facilities.
Texas
Legislators are proposing a voter referendum that would amend the condition structure to enable on line casino gambling in designated regions, as effectively as let gambling on American Indian lands in Texas and at existing racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. Point out government has proffered the idea of enabling the vacation resort to supply on line casino games, but this hard work is in way too early a stage to have any traction one particular way or an additional.
Indian Gaming
A modern Supreme Courtroom ruling that restricts the having of lands into have confidence in on behalf of federally recognized American Indian tribes has more stymied some new Class III gaming projects across the country. In addition, there had been eleven Indian on line casino projects rejected by the DOI very last year due to the fact of its new rule that casinos must be close to enough to a reservation that tribal members can perform at them. It has been advised that the new Obama administration may well be a lot more sympathetic to the development of Indian gaming assignments, but this concern has but to be tackled.
Meanwhile, there are other Class III tasks in the numerous stages of growth. The Seneca casino venture in Buffalo, NY, whilst working a tiny short term facility, has delayed an previously underneath construction long term facility until finally the market place rebounds. They have also expressed an desire in developing a casino in the Catskills. The point out gaming compact with Seminoles in Florida is getting challenged, and could influence their strategies for more substantial tasks. There are new Indian gaming initiatives set to open in Michigan and Oklahoma this year, and other people are in the preparing phase. Texas might allow the reopening of Indian gaming services and permit other venue and there are programs afoot by the Navajos in Arizona to assemble added casinos. California is poised to open two to 3 new Class III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming profits in Atlantic City has declined seven.six percent, from $4.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is finding by itself in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast ended up found in Atlantic City, the place it looked as if it may truly even eclipse the Las Vegas Strip’s yearly gaming revenues.
Little by little nonetheless its market place share was becoming encroached on, very first by the growth of a huge Course III gaming procedure in Connecticut, and then yet another slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately 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 operations in Philadelphia, the noose is tightening around Atlantic City’s potential potential clients. It’s reliance on day-trippers lulled it into a fake perception of protection, and it now finds by itself having to redefine its mission statement to “spot vacation resort.”
The only issue with this method however is that it is unwell-outfitted to pull it off. For all intents and purposes, Atlantic Town is underneath-roomed and/or more than-gamed. There is basically not adequate working day-tripper market to go around, and their successful trading region is tightening, as the peripheral populations northward now/will have much more ready access to a widened offer in New York (Yonkers, and before long 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 actual competitive advantages are its hotel capability and the availability of table game titles, even though the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately contend as a vacation spot resort the metropolis demands to develop extra 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 day-trip industry, apart from for the ‘locals’ – have an common of .87 gaming positions for every guest space although Atlantic City’s common is 2.74 positions for each visitor area.
It is not a coincidence that Atlantic City’s two greatest hotels, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, ended up the least impacted by the most recent downturn. The Borgata experienced a gaming income fall of 1.six p.c, while Harrah’s Marina noted a four.nine per cent enhance when compared to 2007. Moreover, the toughest strike venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest amount of rooms. In the meantime some of the venues are teetering on viability, including the the Trump properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and getting rid of valuation.
With a constant increase in gaming revenues by way of 2006, the metropolis appeared primary for more advancement, which precipitated planning for 4 new resort initiatives, each and every of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion undertaking continues to be an iron skeleton, Pinnacle Enjoyment has announced it may possibly seek out to sell its razed Sands site, MGM Mirage has shelved its on line casino strategies, and Penn Countrywide appears to have stopped its pursuit of the Bader Field airport website.