A Period of time of Adjustment
Oops! That large hissing seem is the gaming balloon that had been increasing over the a long time, slowly and gradually getting rid of air. But, it has not been a tide that reduced all ships however, as some rising and expanding gaming jurisdictions confirmed robust expansion in 2008.
Total, the business and racetrack casino sectors (excluding Indian gaming), seasoned a 3.5 per cent drop in gaming revenues for 2008, creating a total of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a gain of virtually $one billion in 2008, therefore bringing the Business sector industry decline to $one.eight billion, or 6.seven %. Nevada was the greatest loser in 2008, dropping virtually $1.3 billion, much more than 50 % of which stemmed from the Las Vegas Strip phase.
For the most part, casino operators had been caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not till the third and fourth quarters when it actually nosedived. Riding the crest of yr over calendar year industry expansion throughout the region and the availability of ample credit history and fairness money, new development and expansion proliferated in latest many years. These days, faced with the realities of declining, or at ideal stagnant need, numerous of these tasks are now deemed above-leveraged and/or over-sized. As a end result several gaming organizations are trying to renegotiate their financial debt – manufactured more challenging by reduce valuations – while also paring down operational expenses. The latter has grow to be a extremely problematic conundrum when working with the opposition, particularly in people jurisdictions that are now vying for marketplace shares with new emerging casino initiatives in neighboring areas. A topic we examine much more totally in the Condition by State analysis segment of this publication.
As a end result of these circumstances the gaming industry landscape is now strewn with impending fatalities. Amongst the much more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the list grows every single 7 days.
“How long will these financial conditions persist, and are we at the base yet?” are inquiries no 1 seems to be answering nevertheless. What is distinct nonetheless is that most gaming jurisdictions will have to find out how to deal with a smaller sized pie.
This analysis consists of only gaming revenues of accredited casinos and pari-mutuel shops that offer you casino video games, and not Indian gaming operations, card rooms, or small non-on line casino sort slot spots. The entire report, which includes profits tables is obtainable on our net web page.
A key aspect that looks to have arisen from the ashes of this existing development is that several on line casino initiatives ended up just as well large to assist on their own. The input, in conditions of investment dollars, was not proportional to the output, in conditions of net income right after personal debt provider, when compared to formerly reached outcomes. Far more and/or even bigger is not always far better. Viewing the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the advancement of more complete facilities in numerous other jurisdictions. slotxo in this strategy nonetheless is that the costs linked with widening market penetration and occasioned-use, are drastically increased than people incurred to appeal to the foundation market place.
As daytripper marketplaces turn into a lot more aggressive, casino venues will have to count a lot more and much more on their in-residence hotel patrons, and dimensions their properties (and expectations) accordingly. Whilst Steve Wynn commenced a major pattern in making up-industry mega-destinations, there merely was not sufficient need on the Strip to warrant the many other comparable tasks that followed that aimed at the exact same area of interest.
The trick is to strike a satisfied medium in task configurations which of program require less of a ‘seat-of-pants’ approach, and one that is far more examined. A shameless plug for development consultants like ourselves.
Other Gaming Activities
Although there are no published comprehensive information of American Indian gaming revenues, anecdotal evidence seems to advise that this phase has been as hard strike as the Industrial sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, representing a drop of about seven p.c, or virtually $114 million, far more than doubling the 3.five % fall from the calendar year just before. This market place is seemingly nonetheless reeling from the ripple-influence of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Section of Gaming reports that contributions based on a gaming income system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the preceding 12 months lowering .eight p.c in the first quarter, seven.five p.c in the 2nd quarter, 9.5 per cent in the third quarter, and 16.one % in the fourth quarter.
Some SEC reporting Indian gaming qualities report comparable decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, stories that although calendar 12 months 2008 showed an almost 2 % expansion rate in gaming revenues, there was an eight.seven percent decline in the third quarter and an nearly ten percent decline in the fourth quarter of 2008, when compared with 2007. Gaming earnings trends at nearby Niagara Falls, Ontario have been down one.five% in 2008 in contrast with 2007.
It truly is been a blended-bag for state lotteries across the nation. The North American Association of State & Provincial Lotteries studies that U.S. lotteries produced a overall of $60.six billion in product sales in fiscal 2008, up about three p.c from the preceding calendar year but some jurisdictions described decreases, most notably California, which showed an 8 p.c fall. Inasmuch as some of these states are on a variety of fiscal yr finishes, it would seem that the data does not mirror the effect of third and/or fourth quarter final results.
In accordance to information supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping 7 % to $thirteen.seven billion in 2008, vs . $14.7 billion in 2007.
Prepared & Proposed New Expansions
As formerly mentioned, it has been new gaming jurisdictions that have spawned a lot of the growth in yearly on line casino/racino revenues in excess of the many years, and their influence is apt to continue into the around potential.
Miami Dade voters authorized a ballot issue that makes it possible for each and every of a few pari-mutuels to have a casino facility of up to 2,000 slot devices. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has but to declared its ideas. There are quite a few other proposals getting considered that would further increase on line casino development through the point out.
The point out last but not least acquired all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ sport casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open up till 2010. There has also been some dialogue about permitting an enhance in per location gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.
The state’s expanded lottery program that makes it possible for for the improvement of four on line casino gaming zones and slots at current horse and puppy tracks appears mired, as only 1 facility is presently underneath construction, even though 3 other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is positioned so shut to the condition line that its parking lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and 10 table video games, together with a 2nd phase because of to open up in 2011 with 875 slots and 20 desk game titles. The state has prolonged the application method for the other 3 zones until finally April, 2009.
There is still a great deal of ‘jockeying’ going on, but the prospect of as numerous as 8 slot parlors and racinos appears to be back on the front-burner, but most likely not resolved in the course of the recent legislative session.
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest becoming the 390 room M Resort in Henderson. There are expansions underway at both Caesars Palace and Challenging Rock and new lodges incorporate two parts of the Town Middle venture, and the Fountainebleau.
Pinnacle Entertainment’s new casino development initiatives in Baton Rouge and Lake Charles, while delayed, are described to nevertheless be on-observe for opening this year and/or early 2010.
There is a bill beneath thing to consider that could a lot more than double Penn National’s slot devices to 3,000, as effectively as a proposal that would eliminate the restriction that slots be located within five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional citizens to allow slots, may be considering transferring to a much more hospitable town.
A referendum was accepted in November, 2008 that makes it possible for for the development of 5 casinos with a total of fifteen,000 slots, and now the bidding war is afoot even though it is not as intensive as the point out had predicted.
Grand Soleil On line casino Resort in Natchez experienced been slated to open in 2008, but has run into a variety of financing concerns and whilst the hotel portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back fairly, is nevertheless on keep track of to open this yr.
Massachusetts, a sleeping-big in conditions of market possible, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to seem to muster the political support. A recent review concluded by Dartmouth University estimates that Massachusetts resident spent much more than $920 million last yr at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to create casinos, however the subject is most likely to be revisited, specially if Massachusetts decides to go forward. There are also tries in Maine to reconsider its alternatives.
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 additional tax. The governor however, has appointed a new panel to examine the state’s sagging racing software which ironically, can only be preserved by allowing the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze area)
Just when it appeared as if Aqueduct’s 4,500 VLT facility would finally be designed, the successful bidder indicated an incapacity to make the needed $370 million payment, citing the current lending local weather, and throwing the undertaking again into the lap of the governor. Although the industry need in the location could be deemed very sturdy, the prospect of further competition from nearby Belmont could have an effect on Aqueduct’s underlining economic feasibility, particularly taking into consideration that marginally much less than thirty% of the net earn is retained by the operator.
Plans to relocate Monticello Raceway into a resort intricate are currently being reconsidered perhaps owing to equally the possible opening of at the very least one or probably two racino operations in the NY metro spot, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.
But another gaming proposal is getting place forth in Ohio, after very last year’s edition was turned down by the voters. This strategy phone calls for one particular on line casino each and every in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expense essential of $250 million, as well as an first licensing fee of $fifty million, and a 33 p.c tax on gaming income.
The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers task in Pittsburgh is envisioned to be operational in August, ’09 even though Philadelphia’s two slot facilities even now wallow in a political mire, but are predicted to start off design this 12 months.
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and consist of three hundred online games, one hundred forty rooms and a extensive variety of features.
Legislators are proposing a voter referendum that would amend the condition constitution to let casino gambling in selected regions, as effectively as allow gambling on American Indian lands in Texas and at current racetracks.
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. Point out govt has proffered the notion of making it possible for the resort to offer you casino games, but this effort is in also early a phase to have any traction 1 way or yet another.
A modern Supreme Court docket ruling that restricts the taking of lands into have confidence in on behalf of federally recognized American Indian tribes has further stymied some new Class III gaming assignments throughout the nation. Additionally, there have been eleven Indian on line casino projects turned down by the DOI previous 12 months 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 proposed that the new Obama administration may possibly be a lot more sympathetic to the development of Indian gaming projects, but this situation has yet to be tackled.
In the meantime, there are other Class III projects in the various levels of advancement. The Seneca casino venture in Buffalo, NY, even though running a small short-term facility, has delayed an currently underneath construction permanent facility until the market rebounds. They have also expressed an curiosity in building a casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could effect their ideas for larger tasks. There are new Indian gaming projects set to open in Michigan and Oklahoma this calendar year, and other people are in the organizing phase. Texas could enable the reopening of Indian gaming facilities and enable other location and there are plans afoot by the Navajos in Arizona to build extra casinos. California is poised to open two to a few new Course III casinos in 2009/ten.
The Nor’easter Squeeze
Overall gaming revenue in Atlantic City has declined 7.6 percent, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is discovering by itself in an intense comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up situated in Atlantic Town, the place it looked as if it may possibly truly even eclipse the Las Vegas Strip’s annual gaming revenues.
Slowly and gradually nonetheless its industry share was becoming encroached on, very first by the development of a big Course III gaming operation in Connecticut, and then one more slots functions 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 operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening around Atlantic City’s foreseeable future prospective customers. It truly is reliance on day-trippers lulled it into a false feeling of safety, and it now finds itself obtaining to redefine its mission statement to “spot vacation resort.”
The only difficulty with this technique nevertheless is that it is sick-geared up to pull it off. For all intents and purposes, Atlantic City is below-roomed and/or in excess of-gamed. There is just not sufficient working day-tripper market to go all around, and their successful trading region is tightening, as the peripheral populations northward now/will have far more ready entry to a widened provide in New York (Yonkers, and soon 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 potential and the availability of table video games, though the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In get to adequately compete as a spot vacation resort the metropolis wants to build extra visitor rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip houses – real gaming locations, in that they do not have much of a day-journey marketplace, except for the ‘locals’ – have an regular of .87 gaming positions for each visitor space whilst Atlantic City’s average is two.seventy four positions per visitor room.
It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, have been the least impacted by the most current downturn. The Borgata seasoned a gaming revenue drop of one.six p.c, while Harrah’s Marina described a 4.9 % enhance when compared to 2007. Moreover, the hardest 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, including the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and shedding valuation.
With a continual rise in gaming revenues by means of 2006, the metropolis appeared prime for further advancement, which precipitated organizing for 4 new vacation resort projects, each of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion undertaking remains an iron skeleton, Pinnacle Leisure has introduced it may seek out to offer its razed Sands website, MGM Mirage has shelved its casino strategies, and Penn National seems to have stopped its pursuit of the Bader Discipline airport web site.