A Period of time of Adjustment
Oops! That large hissing audio is the gaming balloon that had been expanding over the years, little by little losing air. But, it has not been a tide that decreased all ships however, as some emerging and increasing gaming jurisdictions showed robust development in 2008.
Overall, the business and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.5 p.c decrease in gaming revenues for 2008, making a complete 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 nearly $1 billion in 2008, thus bringing the Business sector market place decrease to $one.eight billion, or 6.7 per cent. Nevada was the largest loser in 2008, dropping practically $one.three billion, far more than 50 % of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most part, casino operators were caught reasonably flat-footed by the extent of the 2008 earnings downturn, as it was not right up until the 3rd and fourth quarters when it truly nosedived. Using the crest of yr over yr marketplace development across the nation and the availability of enough credit history and fairness money, new building and enlargement proliferated in recent a long time. These days, confronted with the realities of declining, or at very best stagnant demand from customers, many of these initiatives are now regarded above-leveraged and/or above-sized. As a consequence numerous gaming businesses are attempting to renegotiate their debt – produced a lot more tough by lower valuations – although also paring down operational charges. The latter has become a really problematic conundrum when dealing with the competitiveness, particularly in individuals jurisdictions that are now vying for marketplace shares with new rising casino tasks in neighboring areas. A subject we examine more fully in the Condition by Point out analysis segment of this publication.
As a consequence of these problems the gaming industry landscape is now strewn with impending fatalities. Among the much more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the record grows every single week.
“How long will these financial circumstances persist, and are we at the bottom however?” are concerns no 1 seems to be answering nevertheless. What is clear nevertheless is that most gaming jurisdictions will have to learn how to offer with a smaller pie.
Observe:
This evaluation involves only gaming revenues of certified casinos and pari-mutuel stores that provide on line casino video games, and not Indian gaming operations, card rooms, or modest non-casino variety slot spots. The entire write-up, such as earnings tables is obtainable on our internet web page.
Input/Output Product
A crucial element that seems to have arisen from the ashes of this present trend is that several on line casino tasks have been just too huge to assistance by themselves. The enter, in phrases of investment pounds, was not proportional to the output, in conditions of web profit right after debt support, when compared to earlier accomplished outcomes. More and/or bigger is not constantly better. Observing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the growth of a lot more thorough features in several other jurisdictions. The flaw in this technique nevertheless is that the expenses linked with widening marketplace penetration and occasioned-use, are considerably larger than these incurred to attract the foundation marketplace.
As daytripper markets turn out to be more competitive, casino venues will have to depend much more and far more on their in-property lodge patrons, and dimensions their homes (and expectations) accordingly. Whilst Steve Wynn commenced a major development in creating up-industry mega-destinations, there just was not adequate desire on the Strip to warrant the several other comparable tasks that adopted that aimed at the identical niche.
The trick is to strike a satisfied medium in project configurations which of training course call for less of a ‘seat-of-pants’ strategy, and 1 that is more researched. A shameless plug for growth consultants like ourselves.
Other Gaming Routines
Despite the fact that there are no released detailed knowledge of American Indian gaming revenues, anecdotal evidence seems to recommend that this section has been as tough strike as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, symbolizing a fall of about 7 p.c, or nearly $114 million, far more than doubling the three.5 per cent drop from the yr before. This industry is evidently even now reeling from the ripple-influence of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Department of Gaming reviews that contributions based mostly on a gaming earnings method from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the prior yr lowering .eight p.c in the very first quarter, seven.five % in the 2nd quarter, nine.five p.c in the 3rd quarter, and 16.one p.c in the fourth quarter.
Some SEC reporting Indian gaming homes report related decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, studies that whilst calendar year 2008 confirmed an nearly 2 per cent growth fee in gaming revenues, there was an eight.7 p.c decrease in the 3rd quarter and an nearly ten percent decline in the fourth quarter of 2008, in contrast with 2007. Gaming revenue developments at nearby Niagara Falls, Ontario ended up down one.five% in 2008 in contrast with 2007.
It’s been a blended-bag for point out lotteries throughout the country. The North American Affiliation of Condition & Provincial Lotteries reports that U.S. lotteries produced a complete of $sixty.six billion in sales in fiscal 2008, up about 3 percent from the earlier year yet some jurisdictions noted decreases, most notably California, which showed an 8 % drop. Inasmuch as some of these states are on numerous fiscal calendar year ends, it would seem that the info does not reflect the effect of third and/or fourth quarter results.
In accordance to info presented by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping seven p.c to $thirteen.seven billion in 2008, compared to $14.seven billion in 2007.
Planned & Proposed New Expansions
As beforehand noted, it has been new gaming jurisdictions that have spawned significantly of the growth in once-a-year casino/racino revenues in excess of the years, and their impact is apt to proceed into the in close proximity to foreseeable future.
Florida
Miami Dade voters accredited a ballot situation that allows each and every of a few pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Canine Monitor and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has yet to announced its programs. There are numerous other proposals getting deemed that would more grow on line casino development all through the point out.
Illinois
The condition ultimately got around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ sport on line casino located in Des Plaines just east of O’Hare. The new facility is not most likely to open up right up until 2010. There has also been some discussion about making it possible for an enhance in per spot 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 software that allows for the development of four on line casino gaming zones and slots at existing horse and canine tracks appears mired, as only 1 facility is presently underneath design, although 3 other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is found so near to the point out line that its parking great deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk game titles, along with a next phase owing to open up in 2011 with 875 slots and 20 desk online games. The point out has prolonged the application procedure for the other 3 zones until finally April, 2009.
Kentucky
There is nevertheless a great deal of ‘jockeying’ heading on, but the prospect of as a lot of as 8 slot parlors and racinos appears to be again on the entrance-burner, but probably not fixed in the course of the existing legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most recent getting the 390 place M Resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new resorts include two components of the Town Heart task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino improvement tasks in Baton Rouge and Lake Charles, whilst delayed, are documented to nonetheless be on-keep track of for opening this yr and/or early 2010.
Maine
There is a invoice underneath thought that could a lot more than double Penn National’s slot devices to 3,000, as well as a proposal that would take away the restriction that slots be positioned inside 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby citizens to enable slots, might be taking into consideration transferring to a a lot more hospitable town.
Maryland
A referendum was approved in November, 2008 that enables for the advancement of five casinos with a whole of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as powerful as the point out experienced expected.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open up in 2008, but has run into various funding issues and whilst the resort portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back fairly, is even now on observe to open up this year.
New England
Massachusetts, a sleeping-big in conditions of market potential, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to seem to muster the political support. A recent review accomplished by Dartmouth University estimates that Massachusetts resident invested far more than $920 million very last yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to create casinos, nevertheless the topic is most likely to be revisited, especially if Massachusetts decides to go ahead. There are also tries in Maine to reconsider its options.
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 continue augmenting purses with an added tax. The governor however, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would lastly be designed, the winning bidder indicated an lack of ability to make the required $370 million fee, citing the present lending weather, and throwing the task back into the lap of the governor. Even though the industry demand in the location could be regarded very strong, the prospect of additional competitiveness from close by Belmont could have an influence on Aqueduct’s underlining economic feasibility, especially contemplating that somewhat significantly less than 30% of the web earn is retained by the operator.
Ideas to relocate Monticello Raceway into a resort complex are currently being reconsidered probably owing to each the possible opening of at least a single or probably two racino operations in the NY metro region, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.
Ohio
However another gaming proposal is becoming set forth in Ohio, after previous year’s version was turned down by the voters. This strategy phone calls for 1 on line casino every in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment decision required of $250 million, as properly as an original licensing charge of $fifty million, and a 33 percent tax on gaming profits.
Pennsylvania
The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot services still wallow in a political mire, but are expected to begin development this yr.
South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and incorporate 300 games, one hundred forty rooms and a wide selection of amenities.
Texas
Legislators are proposing a voter referendum that would amend the point out constitution to let on line casino gambling in selected locations, as effectively as permit gambling on American Indian lands in Texas and at present racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Point out govt has proffered the idea of allowing the vacation resort to offer you on line casino online games, but this work is in as well early a phase to have any traction one particular way or another.
Indian Gaming
A latest Supreme Courtroom ruling that restricts the using of lands into have faith in on behalf of federally regarded American Indian tribes has more stymied some new Class III gaming tasks across the country. Moreover, there have been eleven Indian casino projects rejected by the DOI very last calendar year simply because of its new rule that casinos have to be around sufficient to a reservation that tribal customers can function at them. It has been advised that the new Obama administration may well be a lot more sympathetic to the growth of Indian gaming initiatives, but this problem has but to be addressed.
In the meantime, there are other Class III initiatives in the numerous stages of growth. The Seneca casino venture in Buffalo, NY, even though operating a small short-term facility, has delayed an currently under design everlasting facility until finally the market place rebounds. They have also expressed an interest in building a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could effect their ideas for more substantial projects. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this 12 months, and other people are in the arranging phase. Texas could permit the reopening of Indian gaming facilities and permit other venue and there are programs afoot by the Navajos in Arizona to construct added casinos. California is poised to open up two to a few new Course III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming profits in Atlantic Town has declined 7.six %, from $four.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the town is discovering itself in an intense comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up found in Atlantic Metropolis, exactly where it seemed as if it may well in fact even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Gradually even so its industry share was being encroached on, first by the growth of a large Class III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.
Now, with the prepared opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and at some point two functions in Philadelphia, the noose is tightening around Atlantic City’s future prospects. It really is reliance on day-trippers lulled it into a false sense of stability, and it now finds by itself having to redefine its mission assertion to “vacation spot vacation resort.”
The only issue with this method nonetheless is that it is sick-outfitted to pull it off. For dewapoker and functions, Atlantic Town is beneath-roomed and/or in excess of-gamed. There is just not sufficient working day-tripper marketplace to go all around, and their successful buying and selling region is tightening, as the peripheral populations northward now/will have more prepared accessibility to a widened offer in New York (Yonkers, and quickly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only real competitive advantages are its resort capacity and the availability of table video games, even though the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In buy to sufficiently contend as a destination resort the metropolis wants to build further guest rooms and not essentially gaming potential. By comparison, the Las Vegas Strip homes – correct gaming places, in that they do not have much of a working day-trip industry, apart from for the ‘locals’ – have an average of .87 gaming positions for every visitor room although Atlantic City’s typical is two.seventy four positions for every guest place.
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, had been the the very least impacted by the most current downturn. The Borgata seasoned a gaming profits fall of one.6 p.c, whilst Harrah’s Marina reported a four.nine percent increase compared to 2007. In addition, the most difficult hit 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, such as the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.
With a steady rise in gaming revenues through 2006, the city appeared primary for further development, which precipitated arranging for 4 new vacation resort initiatives, every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion task continues to be an iron skeleton, Pinnacle Enjoyment has introduced it may well seek to offer its razed Sands web site, MGM Mirage has shelved its casino programs, and Penn National seems to have stopped its pursuit of the Bader Field airport internet site.