A Period of time of Adjustment

Oops! That huge hissing sound is the gaming balloon that experienced been expanding over the many years, slowly and gradually losing air. But, it has not been a tide that lowered all ships nevertheless, as some rising and increasing gaming jurisdictions confirmed robust growth in 2008.

General, the commercial and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.five per cent decrease in gaming revenues for 2008, generating a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a obtain of almost $one billion in 2008, thereby bringing the Industrial sector market decline to $1.eight billion, or 6.seven per cent. Nevada was the greatest loser in 2008, dropping nearly $1.3 billion, far more than 50 percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most component, on line casino operators ended up caught comparatively flat-footed by the extent of the 2008 profits downturn, as it was not till the third and fourth quarters when it truly nosedived. Using the crest of calendar year in excess of 12 months marketplace development across the region and the availability of ample credit and equity cash, new development and enlargement proliferated in latest many years. Nowadays, faced with the realities of declining, or at ideal stagnant need, many of these initiatives are now considered over-leveraged and/or over-sized. As a consequence many gaming companies are making an attempt to renegotiate their personal debt – made a lot more challenging by lower valuations – whilst also paring down operational costs. The latter has turn out to be a quite problematic conundrum when working with the competitors, specially in these jurisdictions that are now vying for industry shares with new rising casino initiatives in neighboring regions. A topic we discuss far more entirely in the State by State analysis area of this publication.

As a consequence of these situations the gaming sector landscape is now strewn with impending fatalities. Amid the a lot more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the record grows every week.

“How long will these financial conditions persist, and are we at the base yet?” are oncapan.com seems to be answering but. What is distinct nonetheless is that most gaming jurisdictions will have to find out how to deal with a smaller pie.

Be aware:
This evaluation involves only gaming revenues of certified casinos and pari-mutuel outlets that provide on line casino online games, and not Indian gaming functions, card rooms, or little non-casino type slot areas. The complete write-up, including revenue tables is offered on our web web page.

Input/Output Product

A essential aspect that appears to have arisen from the ashes of this current pattern is that a lot of casino projects had been just also big to assist on their own. The enter, in terms of expense bucks, was not proportional to the output, in terms of net income soon after debt provider, in comparison to formerly reached benefits. Much more and/or even bigger is not often greater. Viewing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of a lot more comprehensive amenities in numerous other jurisdictions. The flaw in this approach nevertheless is that the expenses linked with widening marketplace penetration and occasioned-use, are considerably higher than people incurred to appeal to the foundation industry.

As daytripper marketplaces turn into a lot more aggressive, on line casino venues will have to depend more and more on their in-property resort patrons, and measurement their houses (and expectations) accordingly. While Steve Wynn started out a major development in generating up-marketplace mega-destinations, there simply was not ample need on the Strip to warrant the several other comparable initiatives that adopted that aimed at the very same specialized niche.

The trick is to strike a satisfied medium in venture configurations which of course need less of a ‘seat-of-pants’ method, and 1 that is much more examined. A shameless plug for improvement consultants like ourselves.

Other Gaming Routines

Even though there are no released detailed knowledge of American Indian gaming revenues, anecdotal proof seems to recommend that this segment has been as challenging strike as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, representing a drop of about 7 percent, or nearly $114 million, more than doubling the 3.five % drop from the 12 months prior to. This marketplace is apparently nevertheless reeling from the ripple-effect of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming reviews that contributions primarily based on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the prior yr lowering .8 per cent in the first quarter, seven.5 % in the second quarter, 9.five p.c in the 3rd quarter, and 16.one percent in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, stories that whilst calendar yr 2008 confirmed an almost two percent growth price in gaming revenues, there was an 8.7 per cent drop in the third quarter and an nearly 10 percent decrease in the fourth quarter of 2008, when compared with 2007. Gaming earnings trends at close by Niagara Falls, Ontario had been down 1.5% in 2008 when compared with 2007.

It’s been a combined-bag for condition lotteries across the country. The North American Affiliation of Condition & Provincial Lotteries stories that U.S. lotteries produced a overall of $sixty.six billion in income in fiscal 2008, up about three percent from the prior year nevertheless some jurisdictions noted decreases, most notably California, which confirmed an eight percent drop. Inasmuch as some of these states are on various fiscal 12 months ends, it would appear that the knowledge does not reflect the effect of 3rd and/or fourth quarter final results.

According to data offered by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling seven per cent to $thirteen.7 billion in 2008, as opposed to $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As earlier mentioned, it has been new gaming jurisdictions that have spawned considerably of the progress in annual on line casino/racino revenues more than the a long time, and their influence is apt to continue into the in close proximity to foreseeable future.

Florida
Miami Dade voters authorized a ballot situation that permits each of 3 pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Pet Track and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has nevertheless to introduced its plans. There are many other proposals becoming deemed that would further grow casino development during the point out.

Illinois
The point out last but not least obtained about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ match on line casino found in Des Plaines just east of O’Hare. The new facility is not very likely to open till 2010. There has also been some discussion about enabling an boost in per spot 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 permits for the growth of four casino gaming zones and slots at present horse and dog tracks appears mired, as only one particular facility is presently below building, while a few other proposals have 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 positioned so shut to the condition line that its parking good deal is in Kansas. The Boot Hill Casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten desk games, along with a 2nd phase thanks to open in 2011 with 875 slots and twenty table video games. The condition has prolonged the application process for the other a few zones until finally April, 2009.

Kentucky
There is still a good deal of ‘jockeying’ going on, but the prospect of as numerous as eight slot parlors and racinos appears to be back again on the front-burner, but very likely not fixed during the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most current being the 390 area M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new resorts incorporate two components of the Metropolis Center task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino growth initiatives in Baton Rouge and Lake Charles, even though delayed, are documented to nonetheless be on-monitor for opening this calendar year and/or early 2010.

Maine
There is a monthly bill beneath thought that could much more than double Penn National’s slot machines to 3,000, as effectively as a proposal that would eliminate the restriction that slots be positioned inside 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing nearby people to let slots, could be considering transferring to a more hospitable town.

Maryland
A referendum was approved in November, 2008 that enables for the growth of five casinos with a total of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intense 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 operate into various financing issues and even though the resort portion is open, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back again considerably, is still on observe to open this yr.

New England
Massachusetts, a sleeping-large in phrases of market prospective, is nonetheless maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can’t look to muster the political assist. A latest review completed by Dartmouth College estimates that Massachusetts resident expended far more than $920 million previous yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to build casinos, however the topic is very likely to be revisited, especially if Massachusetts decides to go forward. 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 equipment at racetracks by recently agreeing to proceed augmenting purses with an added tax. The governor nonetheless, 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 devices specially at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would ultimately be created, the profitable bidder indicated an inability to make the required $370 million payment, citing the recent lending local weather, and throwing the project again into the lap of the governor. Though the industry demand from customers in the area could be considered really powerful, the prospect of further competitiveness from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, particularly contemplating that marginally much less than 30% of the internet win is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort complex are getting reconsidered maybe owing to each the possible opening of at the very least 1 or possibly two racino operations in the NY metro location, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

Ohio
Nevertheless an additional gaming proposal is being put forth in Ohio, right after last year’s variation was turned down by the voters. This plan phone calls for a single casino each in the state’s premier metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expense needed of $250 million, as nicely as an preliminary licensing charge of $fifty million, and a 33 p.c tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot services even now wallow in a political mire, but are anticipated to start off design this year.

South Dakota
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 broad assortment of facilities.

Texas
Legislators are proposing a voter referendum that would amend the condition constitution to enable casino gambling in selected regions, as nicely as enable gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. Point out govt has proffered the notion of allowing the vacation resort to offer on line casino online games, but this hard work is in too early a phase to have any traction 1 way or an additional.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the having of lands into trust on behalf of federally acknowledged American Indian tribes has additional stymied some new Class III gaming projects across the place. In addition, there had been eleven Indian casino initiatives rejected by the DOI very last calendar year since of its new rule that casinos should be close to adequate to a reservation that tribal users can operate at them. It has been recommended that the new Obama administration may possibly be far more sympathetic to the advancement of Indian gaming initiatives, but this issue has yet to be addressed.

Meanwhile, there are other Course III initiatives in the a variety of phases of development. The Seneca on line casino task in Buffalo, NY, although operating a small momentary facility, has delayed an presently under development long lasting facility till the market rebounds. They have also expressed an fascination in developing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could influence their plans for more substantial assignments. There are new Indian gaming projects set to open up in Michigan and Oklahoma this calendar year, and other individuals are in the preparing phase. Texas may possibly permit the reopening of Indian gaming facilities and allow other location and there are strategies afoot by the Navajos in Arizona to assemble further casinos. California is poised to open up two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming profits in Atlantic Metropolis has declined seven.six percent, from $4.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining alone in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast ended up situated in Atlantic Metropolis, in which it appeared as if it may well truly even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly even so its industry share was getting encroached on, very first by the growth of a big Class III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening all around Atlantic City’s future potential customers. It really is reliance on day-trippers lulled it into a false feeling of protection, and it now finds itself getting to redefine its mission statement to “spot resort.”

The only dilemma with this technique nonetheless is that it is unwell-equipped to pull it off. For all intents and reasons, Atlantic City is underneath-roomed and/or over-gamed. There is simply not ample day-tripper marketplace to go about, and their efficient trading spot is tightening, as the peripheral populations northward now/will have more ready access to a widened provide in New York (Yonkers, and before long at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only real competitive benefits are its lodge capacity and the availability of table video games, despite the fact that the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In order to sufficiently contend as a vacation spot resort the city wants to build further guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip properties – correct gaming locations, in that they do not have a lot of a day-trip market, apart from for the ‘locals’ – have an average of .87 gaming positions for every visitor place although Atlantic City’s regular is 2.74 positions for every guest area.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, were the minimum impacted by the most recent downturn. The Borgata skilled a gaming income drop of 1.six percent, while Harrah’s Marina reported a 4.9 percent improve in comparison to 2007. In addition, the hardest strike venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity 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 getting rid of valuation.

With a constant increase in gaming revenues through 2006, the metropolis seemed primary for further improvement, which precipitated arranging for 4 new vacation resort assignments, every single of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion undertaking stays an iron skeleton, Pinnacle Enjoyment has declared it might seek out to offer its razed Sands web site, MGM Mirage has shelved its casino strategies, and Penn Countrywide appears to have stopped its pursuit of the Bader Subject airport site.