A Interval of Adjustment

Oops! That big hissing sound is the gaming balloon that had been expanding above the several years, slowly losing air. But, it has not been a tide that decreased all ships even so, as some rising and expanding gaming jurisdictions showed robust growth in 2008.

All round, the business and racetrack casino sectors (excluding Indian gaming), seasoned a 3.5 % decline in gaming revenues for 2008, creating a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a acquire of almost $1 billion in 2008, therefore bringing the Industrial sector market place decline to $one.eight billion, or 6.7 p.c. Nevada was the biggest loser in 2008, dropping virtually $one.3 billion, much more than 50 % of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most part, on line casino operators were caught fairly flat-footed by the extent of the 2008 revenue downturn, as it was not till the 3rd and fourth quarters when it truly nosedived. Driving the crest of yr in excess of year marketplace development throughout the region and the availability of sufficient credit score and equity cash, new design and enlargement proliferated in latest a long time. Nowadays, faced with the realities of declining, or at best stagnant desire, a lot of of these initiatives are now regarded as over-leveraged and/or over-sized. As a result a lot of gaming businesses are trying to renegotiate their debt – made much more hard by decrease valuations – even though also paring down operational fees. The latter has turn out to be a very problematic conundrum when working with the competition, especially in people jurisdictions that are now vying for marketplace shares with new emerging on line casino projects in neighboring locations. A subject matter we go over a lot more entirely in the Condition by State examination area of this publication.

As a result of these circumstances the gaming business landscape is now strewn with impending fatalities. Between the much more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the record grows each and every 7 days.

“How long will these financial circumstances persist, and are we at the bottom yet?” are concerns no one appears to be answering nevertheless. What is obvious nevertheless is that most gaming jurisdictions will have to understand how to deal with a smaller pie.

Notice:
This examination includes only gaming revenues of accredited casinos and pari-mutuel stores that offer you casino games, and not Indian gaming operations, card rooms, or small non-casino type slot locations. The entire article, which includes income tables is accessible on our web website page.

Enter/Output Model

A important element that seems to have arisen from the ashes of this recent craze is that several on line casino assignments had been just too big to assist by themselves. The enter, in phrases of expense pounds, was not proportional to the output, in terms of web income right after personal debt service, compared to beforehand achieved outcomes. More and/or even bigger is not always much better. Looking at the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the improvement of more complete amenities in many other jurisdictions. The flaw in this technique even so is that the expenses linked with widening market penetration and occasioned-use, are substantially greater than individuals incurred to attract the base market place.

As daytripper marketplaces become more aggressive, casino venues will have to count far more and much more on their in-residence hotel patrons, and size their homes (and expectations) appropriately. Although Steve Wynn began a significant development in generating up-market mega-places, there simply was not sufficient desire on the Strip to warrant the numerous other equivalent projects that adopted that aimed at the very same area of interest.

The trick is to strike a content medium in venture configurations which of course need considerably less of a ‘seat-of-pants’ method, and one that is more researched. A shameless plug for development consultants like ourselves.

Other Gaming Activities

Although there are no printed comprehensive data of American Indian gaming revenues, anecdotal proof appears to advise that this section has been as tough hit as the Industrial sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, symbolizing a drop of about 7 p.c, or practically $114 million, a lot more than doubling the three.five percent fall from the calendar year just before. This industry is apparently nevertheless reeling from the ripple-influence of a casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Office of Gaming studies that contributions based on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in comparison to the earlier 12 months reducing .eight p.c in the initial quarter, seven.5 % in the next quarter, 9.5 percent in the third quarter, and sixteen.1 percent in the fourth quarter.

Some SEC reporting Indian gaming properties report related decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, studies that whilst calendar year 2008 confirmed an nearly two % expansion rate in gaming revenues, there was an 8.7 per cent decrease in the third quarter and an practically ten percent drop in the fourth quarter of 2008, in comparison with 2007. Gaming earnings trends at close by Niagara Falls, Ontario had been down one.five% in 2008 when compared with 2007.

It really is been a combined-bag for state lotteries across the region. The North American Association of Point out & Provincial Lotteries studies that U.S. lotteries generated a whole of $sixty.6 billion in product sales in fiscal 2008, up about 3 percent from the earlier calendar year but some jurisdictions noted decreases, most notably California, which showed an eight per cent fall. Inasmuch as some of these states are on a variety of fiscal year finishes, it would seem that the knowledge does not reflect the impact of third and/or fourth quarter results.

In accordance to information offered by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping 7 per cent to $13.seven billion in 2008, vs . $fourteen.7 billion in 2007.

Planned & Proposed New Expansions

As beforehand mentioned, it has been new gaming jurisdictions that have spawned much of the growth in annual on line casino/racino revenues over the many years, and their influence is apt to keep on into the in close proximity to foreseeable future.

Florida
Miami Dade voters authorized a ballot issue that allows every single of three pari-mutuels to have a casino facility of up to 2,000 slot devices. The Flagler Canine 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 however to announced its strategies. There are many other proposals getting considered that would further increase on line casino development through the state.

Illinois
The point out last but not least received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ recreation casino located in Des Plaines just east of O’Hare. The new facility is not likely to open until 2010. There has also been some discussion about making it possible for an improve in per place 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 system that permits for the advancement of 4 on line casino gaming zones and slots at current horse and dog tracks seems mired, as only a single facility is presently under development, although a few other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is located so shut to the state line that its parking great deal is in Kansas. The Boot Hill Casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table video games, along with a second period thanks to open in 2011 with 875 slots and twenty desk games. The point out has extended the software process for the other 3 zones right up until April, 2009.

Kentucky
There is still a whole lot of ‘jockeying’ going on, but the prospect of as many as eight slot parlors and racinos appears to be again on the entrance-burner, but likely not solved during the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most recent being the 390 space M Resort in Henderson. There are expansions underway at the two Caesars Palace and Hard Rock and new accommodations incorporate two parts of the Metropolis Heart undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino advancement tasks in Baton Rouge and Lake Charles, even though delayed, are described to nevertheless be on-keep track of for opening this year and/or early 2010.

Maine
There is a bill beneath consideration that could far more than double Penn National’s slot devices to three,000, as nicely as a proposal that would remove the restriction that slots be located within five miles of the track. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to let slots, might be considering relocating to a far more hospitable city.

Maryland
A referendum was approved in November, 2008 that enables for the development of five casinos with a total of 15,000 slots, and now the bidding war is afoot though it is not as extreme as the condition experienced anticipated.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has run into numerous funding concerns and whilst the lodge portion is open, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back again relatively, is even now on observe to open up this 12 months.

New England
Massachusetts, a sleeping-giant in phrases of market place possible, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but are not able to seem to muster the political help. A latest study accomplished by Dartmouth College estimates that Massachusetts resident put in a lot more than $920 million previous calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to develop casinos, however the topic is most likely to be revisited, especially if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its options.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by not too long ago agreeing to proceed augmenting purses with an added tax. The governor even so, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by enabling the tracks to have slot machines specifically at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would finally be produced, the successful bidder indicated an incapability to make the necessary $370 million price, citing the existing lending climate, and throwing the project again into the lap of the governor. Although the industry demand from customers in the spot could be deemed very powerful, the prospect of added competitiveness from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, particularly taking into consideration that slightly less than thirty% of the internet get is retained by the operator.

Strategies to relocate Monticello Raceway into a resort complex are becoming reconsidered maybe owing to the two the possible opening of at minimum one or probably two racino functions in the NY metro area, 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 place forth in Ohio, following previous year’s variation was turned down by the voters. This strategy calls for a single casino every in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expense necessary of $250 million, as nicely as an original licensing price of $50 million, and a 33 per cent tax on gaming profits.

Mega888 Game Tutorial 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 while Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are expected to start construction this yr.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and include 300 game titles, one hundred forty rooms and a vast variety of features.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to allow casino gambling in selected areas, as nicely as permit gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. Condition govt has proffered the notion of making it possible for the vacation resort to provide casino online games, but this effort is in also early a stage to have any traction 1 way or one more.

Indian Gaming
A recent Supreme Courtroom ruling that restricts the taking of lands into have faith in on behalf of federally regarded American Indian tribes has more stymied some new Class III gaming tasks throughout the place. Additionally, there were eleven Indian on line casino projects turned down by the DOI very last 12 months because of its new rule that casinos must be near adequate to a reservation that tribal associates can perform at them. It has been suggested that the new Obama administration may well be more sympathetic to the development of Indian gaming tasks, but this concern has however to be tackled.

In the meantime, there are other Class III assignments in the a variety of levels of advancement. The Seneca casino task in Buffalo, NY, while operating a modest temporary facility, has delayed an already under development long lasting facility until finally the industry rebounds. They have also expressed an desire in establishing a casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could impact their plans for more substantial projects. There are new Indian gaming projects set to open in Michigan and Oklahoma this calendar year, and others are in the preparing stage. Texas could enable the reopening of Indian gaming amenities and enable other venue and there are strategies afoot by the Navajos in Arizona to construct extra casinos. California is poised to open up two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming revenue in Atlantic Town has declined seven.6 %, from $4.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is discovering by itself in an intensive comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were situated in Atlantic Town, the place it looked as if it may well actually even eclipse the Las Vegas Strip’s annual gaming revenues.

Little by little however its market place share was currently being encroached upon, first by the improvement of a huge Course III gaming operation in Connecticut, and then an additional slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening about Atlantic City’s potential prospective customers. It is reliance on day-trippers lulled it into a untrue perception of security, and it now finds itself getting to redefine its mission assertion to “location vacation resort.”

The only dilemma with this approach even so is that it is sick-outfitted to pull it off. For all intents and purposes, Atlantic Metropolis is underneath-roomed and/or above-gamed. There is merely not enough day-tripper market to go all around, and their efficient investing region is tightening, as the peripheral populations northward now/will have much more prepared entry to a widened source in New York (Yonkers, and shortly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only genuine aggressive positive aspects are its resort capacity and the availability of desk game titles, despite the fact that the latter is probably to eventuate in Pennsylvania, and probably Delaware. In order to adequately compete as a destination resort the metropolis requirements to create extra visitor rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip properties – real gaming locations, in that they do not have considerably of a working day-journey industry, other than for the ‘locals’ – have an average of .87 gaming positions for each visitor area although Atlantic City’s average is two.74 positions for every visitor place.

It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, the two of which extra new rooms in 2008, were the the very least impacted by the most recent downturn. The Borgata skilled a gaming income drop of one.six p.c, even though Harrah’s Marina described a four.9 percent increase in contrast to 2007. Moreover, the most difficult strike venues, namely 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, which includes the the Trump properties and Resorts with the hoped for sale of the Tropicana has been even more delayed, and dropping valuation.

With a continual rise in gaming revenues via 2006, the metropolis appeared prime for additional development, which precipitated arranging for four new vacation resort projects, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.5 billion project remains an iron skeleton, Pinnacle Entertainment has introduced it may well look for to offer its razed Sands internet site, MGM Mirage has shelved its on line casino ideas, and Penn National seems to have stopped its pursuit of the Bader Field airport web site.