A Time period of Adjustment
Oops! That huge hissing sound is the gaming balloon that had been expanding in excess of the several years, slowly getting rid of air. But, it has not been a tide that reduced all ships nonetheless, as some rising and growing gaming jurisdictions showed robust growth in 2008.
Overall, the industrial and racetrack casino sectors (excluding Indian gaming), skilled a three.5 p.c decline 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 achieve of nearly $1 billion in 2008, thereby bringing the Industrial sector industry decrease to $one.eight billion, or six.seven per cent. Nevada was the greatest 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 fairly 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. Using the crest of calendar year in excess of 12 months marketplace expansion throughout the nation and the availability of sufficient credit and equity money, new construction and expansion proliferated in recent years. Nowadays, faced with the realities of declining, or at best stagnant demand from customers, many of these assignments are now regarded more than-leveraged and/or more than-sized. As a result a lot of gaming companies are attempting to renegotiate their financial debt – created much more difficult by reduced valuations – whilst also paring down operational costs. The latter has turn into a extremely problematic conundrum when dealing with the opposition, particularly in people jurisdictions that are now vying for market shares with new emerging casino tasks in neighboring places. A matter we talk about much more completely in the Condition by State analysis part of this publication.
As a outcome of these situations the gaming business landscape is now strewn with impending fatalities. Amongst the more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the checklist grows each and every 7 days.
“How long will these economic situations persist, and are we at the bottom but?” are queries no 1 seems to be answering nevertheless. What is obvious even so is that most gaming jurisdictions will have to discover how to deal with a smaller sized pie.
Observe:
This examination consists of only gaming revenues of accredited casinos and pari-mutuel stores that provide casino online games, and not Indian gaming functions, card rooms, or little non-casino kind slot places. The complete write-up, such as income tables is available on our net webpage.
Input/Output Design
A important element that appears to have arisen from the ashes of this current craze is that numerous casino projects were just as well huge to assist by themselves. The input, in phrases of expense bucks, was not proportional to the output, in phrases of internet revenue following personal debt provider, compared to earlier reached outcomes. More and/or greater is not often much better. Viewing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the advancement of more complete facilities in many other jurisdictions. The flaw in this strategy even so is that the charges connected with widening industry penetration and occasioned-use, are significantly larger than people incurred to draw in the base market place.
As daytripper markets turn into far more aggressive, casino venues will have to rely a lot more and far more on their in-property lodge patrons, and measurement their qualities (and expectations) appropriately. Even though Steve Wynn started a main development in producing up-market place mega-destinations, there basically was not ample desire on the Strip to warrant the several other similar projects that adopted that aimed at the same market.
The trick is to strike a happy medium in task configurations which of program need less of a ‘seat-of-pants’ approach, and a single that is a lot more analyzed. A shameless plug for advancement consultants like ourselves.
Other Gaming Routines
Even though there are no printed thorough data of American Indian gaming revenues, anecdotal proof seems to advise that this segment has been as hard strike as the Industrial sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, symbolizing a drop of about seven percent, or nearly $114 million, much more than doubling the three.five percent fall from the 12 months before. This marketplace 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 Division of Gaming studies that contributions based mostly on a gaming profits method from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 when compared to the prior year reducing .eight p.c in the initial quarter, seven.five % in the 2nd quarter, nine.5 % in the 3rd quarter, and sixteen.one percent in the fourth quarter.
Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, studies that while calendar calendar year 2008 confirmed an almost 2 % expansion charge in gaming revenues, there was an eight.seven p.c drop in the 3rd quarter and an nearly ten percent decline in the fourth quarter of 2008, in contrast with 2007. Gaming profits trends at nearby Niagara Falls, Ontario have been down one.5% in 2008 in comparison with 2007.
It really is been a blended-bag for condition lotteries across the place. The North American Affiliation of State & Provincial Lotteries studies that U.S. lotteries generated a total of $60.six billion in income in fiscal 2008, up about 3 p.c from the prior 12 months but some jurisdictions noted decreases, most notably California, which showed an 8 percent fall. Inasmuch as some of these states are on numerous fiscal calendar year finishes, it would seem that the information does not mirror the impact of third and/or fourth quarter final results.
In accordance to knowledge offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping seven p.c to $13.seven billion in 2008, compared to $fourteen.seven billion in 2007.
Planned & Proposed New Expansions
As formerly noted, it has been new gaming jurisdictions that have spawned much of the expansion in annual casino/racino revenues in excess of the years, and their impact is apt to carry on into the close to long term.
Florida
Miami Dade voters accepted a ballot situation that permits every single of a few pari-mutuels to have a on line casino facility of up to 2,000 slot machines. The Flagler Pet Observe and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has yet to announced its programs. There are quite a few other proposals currently being regarded that would more increase casino improvement through the state.
Illinois
The condition lastly obtained around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ match on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open up until finally 2010. There has also been some dialogue about enabling an improve in per location gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.
Kansas
The state’s expanded lottery software that allows for the advancement of four casino gaming zones and slots at current horse and dog tracks seems mired, as only one particular facility is presently below construction, even though 3 other proposals ended up rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is located so shut to the point out line that its parking lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk online games, together with a next period thanks to open in 2011 with 875 slots and 20 desk video games. The state has extended the application process for the other three zones until April, 2009.
Kentucky
There is even now a great deal of ‘jockeying’ heading on, but the prospect of as many as 8 slot parlors and racinos seems to be back on the entrance-burner, but probably not resolved in the course of the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most modern currently being the 390 area M Resort in Henderson. There are expansions underway at both Caesars Palace and Hard Rock and new accommodations incorporate two parts of the Town Middle venture, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new on line casino development initiatives in Baton Rouge and Lake Charles, whilst delayed, are described to still be on-monitor for opening this calendar year and/or early 2010.
Maine
There is a monthly bill below thing to consider that could far more than double Penn National’s slot devices to three,000, as properly as a proposal that would remove the restriction that slots be positioned inside five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing regional people to permit slots, may be thinking about moving to a a lot more hospitable city.
Maryland
A referendum was authorized in November, 2008 that allows for the improvement of 5 casinos with a complete of 15,000 slots, and now the bidding war is afoot even though it is not as intense as the state had expected.
Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open up in 2008, but has operate into a variety of funding issues and even though the lodge portion is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back again fairly, is nonetheless on keep track of to open this 12 months.
New England
Massachusetts, a sleeping-big in conditions of market potential, is nevertheless maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can not seem to muster the political help. A latest research completed by Dartmouth University estimates that Massachusetts resident invested much more than $920 million previous yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an option to build casinos, nevertheless the subject is most likely to be revisited, specially if Massachusetts decides to go ahead. There are also tries in Maine to rethink its options.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by not too long ago agreeing to continue augmenting purses with an added tax. The governor however, has appointed a new panel to examine the state’s sagging racing software which ironically, can only be preserved by enabling the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze segment)
New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would ultimately be developed, the profitable bidder indicated an incapability to make the necessary $370 million fee, citing the recent lending climate, and throwing the venture back again into the lap of the governor. Although the industry demand in the area could be considered really powerful, the prospect of additional competitors from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, specially contemplating that somewhat significantly less than 30% of the internet get is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort intricate are getting reconsidered probably owing to the two the probable opening of at the very least one particular or probably two racino functions in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.
Ohio
However yet another gaming proposal is becoming place forth in Ohio, following final year’s version was turned down by the voters. This plan phone calls for one casino every single in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be ufa required of $250 million, as well as an preliminary licensing payment of $50 million, and a 33 per cent tax on gaming revenue.
Pennsylvania
The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is predicted to be operational in August, ’09 even though Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are anticipated to begin building this 12 months.
South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and consist of three hundred games, a hundred and forty rooms and a extensive range of features.
Texas
Legislators are proposing a voter referendum that would amend the point out constitution to allow on line casino gambling in selected places, as properly as permit gambling on American Indian lands in Texas and at existing racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer. Point out government has proffered the notion of enabling the resort to supply on line casino game titles, but this energy is in as well early a stage to have any traction a single way or one more.
Indian Gaming
A modern Supreme Court docket ruling that restricts the using of lands into trust on behalf of federally regarded American Indian tribes has even more stymied some new Course III gaming initiatives throughout the place. In addition, there had been eleven Indian casino tasks turned down by the DOI last yr simply because of its new rule that casinos need to be near sufficient to a reservation that tribal members can perform at them. It has been recommended that the new Obama administration may be more sympathetic to the advancement of Indian gaming projects, but this problem has but to be resolved.
Meanwhile, there are other Course III tasks in the a variety of stages of advancement. The Seneca on line casino venture in Buffalo, NY, even though operating a small temporary facility, has delayed an currently under design long lasting facility until finally the market place rebounds. They have also expressed an desire in establishing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could effect their programs for bigger assignments. There are new Indian gaming tasks set to open up in Michigan and Oklahoma this yr, and others are in the organizing phase. Texas might let the reopening of Indian gaming amenities and let other venue and there are ideas afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Whole gaming profits in Atlantic Metropolis has declined seven.six per cent, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is finding itself in an extreme comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast had been positioned in Atlantic Metropolis, in which it seemed as if it might actually even eclipse the Las Vegas Strip’s annual gaming revenues.
Gradually however its market place share was becoming encroached on, first by the development of a big Class III gaming operation in Connecticut, and then an additional 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 operations in Philadelphia, the noose is tightening around Atlantic City’s foreseeable future potential customers. It is reliance on working day-trippers lulled it into a untrue feeling of security, and it now finds alone having to redefine its mission statement to “destination vacation resort.”
The only issue with this strategy however is that it is ill-outfitted to pull it off. For all intents and reasons, Atlantic City is below-roomed and/or over-gamed. There is basically not ample day-tripper marketplace to go close to, and their effective trading spot is tightening, as the peripheral populations northward now/will have much more ready obtain to a widened provide 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 obtain, the city’s only genuine aggressive positive aspects are its resort capacity and the availability of table game titles, though the latter is very likely to eventuate in Pennsylvania, and perhaps Delaware. In order to adequately contend as a location vacation resort the town demands to develop additional guest rooms and not automatically gaming capacity. By comparison, the Las Vegas Strip qualities – correct gaming places, in that they do not have significantly of a working day-excursion industry, except for the ‘locals’ – have an regular of .87 gaming positions for each visitor space while Atlantic City’s typical is two.74 positions for each visitor area.
It is not a coincidence that Atlantic City’s two biggest resorts, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, had been the the very least impacted by the most recent downturn. The Borgata seasoned a gaming profits fall of one.6 p.c, whilst Harrah’s Marina reported a four.9 p.c boost compared to 2007. Furthermore, the toughest hit venues, particularly 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, including the the Trump homes and Resorts with the hoped for sale of the Tropicana has been further delayed, and dropping valuation.
With a regular rise in gaming revenues by means of 2006, the city appeared key for additional development, which precipitated arranging for 4 new vacation resort tasks, every single of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion task remains an iron skeleton, Pinnacle Enjoyment has declared it may look for to promote its razed Sands internet site, MGM Mirage has shelved its casino programs, and Penn Nationwide seems to have stopped its pursuit of the Bader Discipline airport web site.