A Period of Adjustment
Oops! That huge hissing seem is the gaming balloon that experienced been growing more than the several years, slowly and gradually shedding air. But, it has not been a tide that reduced all ships nevertheless, as some rising and increasing gaming jurisdictions showed robust growth in 2008.
General, the industrial and racetrack on line casino sectors (excluding Indian gaming), experienced a 3.five p.c decline in gaming revenues for 2008, producing a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a obtain of practically $1 billion in 2008, thereby bringing the Professional sector market place decline to $one.8 billion, or 6.seven %. Nevada was the biggest loser in 2008, dropping nearly $one.3 billion, a lot more than half of which stemmed from the Las Vegas Strip segment.
Hunkering Down
For the most element, casino operators had been caught comparatively flat-footed by the extent of the 2008 income downturn, as it was not until finally the third and fourth quarters when it really nosedived. Using the crest of calendar year above 12 months industry progress across the nation and the availability of sufficient credit and fairness funds, new construction and growth proliferated in latest years. Today, faced with the realities of declining, or at ideal stagnant need, several of these assignments are now deemed in excess of-leveraged and/or in excess of-sized. As a result many gaming firms are trying to renegotiate their financial debt – produced more tough by reduced valuations – while also paring down operational expenses. The latter has turn into a very problematic conundrum when working with the competition, specially in these jurisdictions that are now vying for market place shares with new emerging on line casino projects in neighboring places. A subject we discuss much more completely in the Point out by Point out examination area of this publication.
As a end result of these circumstances the gaming sector landscape is now strewn with impending fatalities. Between the more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the list grows each 7 days.
“How long will these financial situations persist, and are we at the base nevertheless?” are questions no one particular appears to be answering yet. What is distinct nevertheless is that most gaming jurisdictions will have to understand how to offer with a smaller sized pie.
Be aware:
This evaluation includes only gaming revenues of certified casinos and pari-mutuel outlets that supply casino games, and not Indian gaming operations, card rooms, or tiny non-on line casino type slot locations. The whole post, which includes earnings tables is offered on our internet web page.
Enter/Output Design
A essential facet that looks to have arisen from the ashes of this recent pattern is that many on line casino projects were just way too massive to assist by themselves. The enter, in terms of expense bucks, was not proportional to the output, in conditions of internet revenue following debt support, in contrast to beforehand attained outcomes. Much more and/or even bigger is not constantly much better. Observing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the growth of a lot more comprehensive facilities in several other jurisdictions. The flaw in this method however is that the fees associated with widening market penetration and occasioned-use, are significantly increased than individuals incurred to draw in the foundation market place.
As daytripper marketplaces become far more competitive, on line casino venues will have to rely much more and a lot more on their in-house hotel patrons, and dimensions their qualities (and anticipations) accordingly. Even though Steve Wynn started out a major craze in making up-industry mega-locations, there just was not adequate demand on the Strip to warrant the several other similar initiatives that followed that aimed at the same market.
The trick is to strike a happy medium in project configurations which of program call for much less of a ‘seat-of-pants’ approach, and 1 that is more studied. A shameless plug for growth consultants like ourselves.
Other Gaming Routines
Even though there are no printed detailed info of American Indian gaming revenues, anecdotal proof seems to propose that this segment has been as challenging strike as the Industrial sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, symbolizing a fall of about 7 p.c, or practically $114 million, more than doubling the 3.5 per cent fall from the 12 months before. This market place is evidently nonetheless reeling from the ripple-impact of a casino enlargement 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 earnings method from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 when compared to the earlier calendar year lowering .eight per cent in the first quarter, 7.five p.c in the next quarter, nine.five per cent in the third quarter, and sixteen.1 p.c in the fourth quarter.
Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reviews that whilst calendar calendar year 2008 showed an virtually two percent expansion fee in gaming revenues, there was an 8.7 percent drop in the third quarter and an virtually ten percent decrease in the fourth quarter of 2008, in contrast with 2007. Gaming revenue developments at nearby Niagara Falls, Ontario were down one.five% in 2008 when compared with 2007.
It is been a blended-bag for point out lotteries across the place. The North American Association of Point out & Provincial Lotteries reports that U.S. lotteries produced a total of $60.6 billion in income in fiscal 2008, up about 3 per cent from the earlier calendar year nevertheless some jurisdictions documented decreases, most notably California, which confirmed an eight per cent drop. Inasmuch as some of these states are on different fiscal year ends, it would appear that the data does not replicate the effect of 3rd and/or fourth quarter outcomes.
According to info presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping 7 per cent to $13.seven billion in 2008, versus $fourteen.7 billion in 2007.
Planned & Proposed New Expansions
As beforehand observed, it has been new gaming jurisdictions that have spawned considerably of the development in once-a-year on line casino/racino revenues more than the a long time, and their effect is apt to proceed into the close to potential.
Florida
Miami Dade voters accredited a ballot problem that enables each and every of 3 pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has but to announced its programs. There are many other proposals getting deemed that would additional increase casino development throughout the condition.
Illinois
The point out ultimately obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ game casino situated in Des Plaines just east of O’Hare. The new facility is not probably to open up right up until 2010. There has also been some dialogue about permitting an increase in per location gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.
Kansas
The state’s expanded lottery plan that allows for the development of four casino gaming zones and slots at present horse and canine tracks appears mired, as only one facility is presently underneath building, while 3 other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is found so shut to the condition line that its parking good deal is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk video games, together with a 2nd period thanks to open in 2011 with 875 slots and 20 desk video games. The state has extended the application method for the other three zones right up until April, 2009.
Kentucky
There is nonetheless a lot of ‘jockeying’ likely on, but the prospect of as numerous as eight slot parlors and racinos appears to be again on the front-burner, but probably not resolved in the course of the existing legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most recent being the 390 room M Resort in Henderson. There are expansions underway at the two Caesars Palace and Challenging Rock and new resorts include two components of the Town Middle project, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino advancement initiatives in Baton Rouge and Lake Charles, even though delayed, are described to nonetheless be on-keep track of for opening this yr and/or early 2010.
Maine
There is a invoice under consideration that could a lot more than double Penn National’s slot machines to 3,000, as well as a proposal that would remove the restriction that slots be situated in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing neighborhood residents to let slots, may possibly be contemplating moving to a far more hospitable town.
Maryland
A referendum was approved in November, 2008 that makes it possible for for the advancement of five 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 experienced expected.
Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has run into numerous funding 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, whilst scaled again fairly, is nevertheless on track to open up this year.
New England
Massachusetts, a sleeping-giant in terms of industry possible, is still maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to seem to be to muster the political support. A modern review accomplished by Dartmouth College estimates that Massachusetts resident expended much more than $920 million previous year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an selection to produce casinos, however the subject matter is likely to be revisited, particularly if Massachusetts decides to go ahead. There are also makes an attempt in Maine to rethink its alternatives.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by lately agreeing to keep on augmenting purses with an additional tax. The governor even so, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would finally be designed, the successful bidder indicated an incapacity to make the necessary $370 million charge, citing the existing lending climate, and throwing the task back again into the lap of the governor. Though the market demand in the region could be deemed fairly sturdy, the prospect of added competition from close by Belmont could have an affect on Aqueduct’s underlining economic feasibility, particularly thinking about that slightly less than 30% of the internet win is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort sophisticated are currently being reconsidered probably owing to equally the probable opening of at minimum a single or maybe two racino functions in the NY metro location, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.
Ohio
But an additional gaming proposal is becoming put forth in Ohio, right after last year’s version was turned down by the voters. This plan phone calls for 1 casino each and every in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure required of $250 million, as effectively as an preliminary licensing charge of $fifty million, and a 33 per cent tax on gaming profits.
Pennsylvania
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers project in Pittsburgh is predicted to be operational in August, ’09 whilst Philadelphia’s two slot facilities still wallow in a political mire, but are anticipated to begin design this yr.
South Dakota
The Lodge at Deadwood is slated to open up in the Fall of 2009, and include three hundred game titles, one hundred forty rooms and a extensive assortment of features.
Texas
Legislators are proposing a voter referendum that would amend the condition structure to permit casino gambling in designated places, as well as let gambling on American Indian lands in Texas and at present racetracks.
West Virginia
The Greenbriar, the state’s venerable vacation resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. Point out government has proffered the notion of allowing the resort to provide on line casino game titles, but this work is in also early a stage to have any traction one particular way or yet another.
Indian Gaming
A modern Supreme Courtroom ruling that restricts the having of lands into have confidence in on behalf of federally identified American Indian tribes has even more stymied some new Course III gaming assignments across the region. Furthermore, there had been eleven Indian casino assignments rejected by the DOI very last yr simply because of its new rule that casinos need to be around ample to a reservation that tribal customers can perform at them. It has been advised that the new Obama administration may be a lot more sympathetic to the growth of Indian gaming projects, but this issue has however to be addressed.
Meanwhile, there are other Class III initiatives in the various levels of development. The Seneca casino venture in Buffalo, NY, although functioning a small short-term facility, has delayed an currently underneath construction long term facility until the industry rebounds. They have also expressed an fascination in establishing a casino in the Catskills. sbobet out gaming compact with Seminoles in Florida is becoming challenged, and could affect their ideas for bigger projects. There are new Indian gaming projects set to open up in Michigan and Oklahoma this 12 months, and others are in the planning stage. Texas may possibly permit the reopening of Indian gaming facilities and permit other venue and there are strategies afoot by the Navajos in Arizona to build extra casinos. California is poised to open two to a few new Class III casinos in 2009/10.
The Nor’easter Squeeze
Complete gaming revenue in Atlantic City has declined 7.six percent, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the city is finding by itself in an intense comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast ended up situated in Atlantic City, where it appeared as if it may well truly even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Slowly and gradually nonetheless its market place share was currently being encroached on, 1st by the advancement of a huge Class III gaming procedure 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 just lately Pennsylvania.
Now, with the prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening all around Atlantic City’s long term potential customers. It truly is reliance on day-trippers lulled it into a fake feeling of security, and it now finds itself getting to redefine its mission statement to “spot resort.”
The only difficulty with this technique nonetheless is that it is sick-equipped to pull it off. For all intents and functions, Atlantic Metropolis is under-roomed and/or above-gamed. There is basically not adequate working day-tripper industry to go close to, and their successful buying and selling location is tightening, as the peripheral populations northward now/will have a lot more all set entry to a widened supply in New York (Yonkers, and quickly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only genuine competitive positive aspects are its lodge ability and the availability of table game titles, despite the fact that the latter is probably to eventuate in Pennsylvania, and probably Delaware. In order to sufficiently contend as a location resort the metropolis wants to produce additional visitor rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip qualities – correct gaming locations, in that they do not have much of a working day-journey marketplace, besides for the ‘locals’ – have an typical of .87 gaming positions per visitor area even though Atlantic City’s average is 2.74 positions for each visitor area.
It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, equally of which included new rooms in 2008, had been the the very least impacted by the most recent downturn. The Borgata skilled a gaming revenue drop of 1.six %, even though Harrah’s Marina noted a four.9 p.c increase in contrast to 2007. Furthermore, the toughest hit venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest number of rooms. In the meantime some of the venues are teetering on viability, such as the the Trump properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.
With a regular rise in gaming revenues through 2006, the town seemed primary for more development, which precipitated preparing for 4 new resort initiatives, each of which have now been indefinitely delayed. Revel Amusement Group’s $two.5 billion task remains an iron skeleton, Pinnacle Enjoyment has introduced it may possibly seek to sell its razed Sands web site, MGM Mirage has shelved its casino plans, and Penn Countrywide appears to have stopped its pursuit of the Bader Area airport site.