A Interval of Adjustment

Oops! That big hissing audio is the gaming balloon that had been growing over the years, slowly and gradually losing air. But, it has not been a tide that lowered all ships nonetheless, as some emerging and expanding gaming jurisdictions confirmed strong growth in 2008.

General, the commercial and racetrack on line casino sectors (excluding Indian gaming), experienced a three.five per cent decline in gaming revenues for 2008, making 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 achieve of virtually $1 billion in 2008, thereby bringing the Business sector market decrease to $1.eight billion, or 6.seven p.c. Nevada was the biggest loser in 2008, dropping nearly $1.3 billion, more than 50 % of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, casino operators were caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not till the 3rd and fourth quarters when it genuinely nosedived. Using the crest of calendar year above year market place expansion throughout the place and the availability of ample credit score and fairness money, new construction and enlargement proliferated in modern a long time. Right now, confronted with the realities of declining, or at ideal stagnant need, several of these tasks are now deemed above-leveraged and/or in excess of-sized. As a result numerous gaming companies are trying to renegotiate their credit card debt – made far more difficult by lower valuations – although also paring down operational costs. The latter has grow to be a really problematic conundrum when working with the opposition, specially in people jurisdictions that are now vying for marketplace shares with new rising casino initiatives in neighboring regions. A subject matter we examine more fully in the State by Condition examination area of this publication.

As mega888 apk of these situations the gaming industry landscape is now strewn with impending fatalities. Among the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows each and every 7 days.

“How prolonged will these financial circumstances persist, and are we at the bottom yet?” are questions no one appears to be answering nevertheless. What is distinct nevertheless is that most gaming jurisdictions will have to discover how to offer with a scaled-down pie.

Notice:
This analysis involves only gaming revenues of accredited casinos and pari-mutuel retailers that offer on line casino video games, and not Indian gaming functions, card rooms, or modest non-casino variety slot areas. The entire article, like earnings tables is accessible on our net website page.

Input/Output Model

A important facet that seems to have arisen from the ashes of this recent craze is that numerous on line casino projects were just too large to assistance on their own. The input, in conditions of investment decision bucks, was not proportional to the output, in conditions of internet earnings following personal debt provider, in comparison to previously achieved benefits. A lot more and/or larger is not often better. Seeing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of more extensive facilities in numerous other jurisdictions. The flaw in this method however is that the charges connected with widening marketplace penetration and occasioned-use, are drastically greater than individuals incurred to draw in the foundation marketplace.

As daytripper marketplaces grow to be a lot more competitive, casino venues will have to rely more and far more on their in-home hotel patrons, and dimension their houses (and expectations) accordingly. While Steve Wynn began a major pattern in creating up-market mega-places, there basically was not sufficient need on the Strip to warrant the numerous other similar projects that followed that aimed at the very same niche.

The trick is to strike a happy medium in task configurations which of system require much less of a ‘seat-of-pants’ approach, and 1 that is a lot more examined. A shameless plug for advancement consultants like ourselves.

Other Gaming Activities

Though there are no published in depth knowledge of American Indian gaming revenues, anecdotal proof appears to recommend that this section has been as challenging strike as the Industrial sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, representing a fall of about seven p.c, or almost $114 million, much more than doubling the 3.five per cent drop from the calendar year before. This marketplace is apparently nevertheless reeling from the ripple-effect of a on line casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section of Gaming reviews that contributions primarily based on a gaming earnings formula from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in comparison to the earlier calendar year reducing .8 % in the first quarter, 7.5 % in the next quarter, 9.five percent in the third quarter, and 16.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that while calendar calendar year 2008 showed an practically 2 percent progress charge in gaming revenues, there was an 8.seven p.c decline in the third quarter and an practically ten p.c decrease in the fourth quarter of 2008, compared with 2007. Gaming revenue trends at nearby Niagara Falls, Ontario ended up down 1.5% in 2008 in comparison with 2007.

It’s been a blended-bag for point out lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries produced a complete of $60.6 billion in product sales in fiscal 2008, up about three p.c from the prior 12 months but some jurisdictions documented decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on a variety of fiscal year finishes, it would look that the data does not mirror the affect of 3rd and/or fourth quarter results.

In accordance to data supplied by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 % to $thirteen.seven billion in 2008, versus $14.seven billion in 2007.

Planned & Proposed New Expansions

As beforehand mentioned, it has been new gaming jurisdictions that have spawned considerably of the development in yearly on line casino/racino revenues above the a long time, and their influence is apt to proceed into the around future.

Florida
Miami Dade voters accepted a ballot situation that enables every single of three pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Dog Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has but to declared its programs. There are many other proposals currently being considered that would even more grow casino improvement all through the point out.

Illinois
The point out finally obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ recreation casino found in Des Plaines just east of O’Hare. The new facility is not very likely to open right up until 2010. There has also been some dialogue about enabling an boost in for each 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 program that makes it possible for for the improvement of four casino gaming zones and slots at current horse and canine tracks appears mired, as only a single facility is presently under 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 on line casino in Oklahoma, which is located so near to the state 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 table game titles, alongside with a second section because of to open up in 2011 with 875 slots and 20 desk video games. The point out has prolonged the software process for the other 3 zones right up until April, 2009.

Kentucky
There is even now a good deal of ‘jockeying’ heading on, but the prospect of as numerous as 8 slot parlors and racinos appears to be back on the entrance-burner, but very likely not solved during the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most current being the 390 area M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new hotels include two elements of the City Heart project, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino growth projects in Baton Rouge and Lake Charles, while delayed, are reported to nevertheless be on-monitor for opening this yr and/or early 2010.

Maine
There is a invoice beneath thing to consider that could a lot more than double Penn National’s slot equipment to three,000, as nicely as a proposal that would get rid of the restriction that slots be located within five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local people to permit slots, may be considering moving to a much more hospitable city.

Maryland
A referendum was accepted in November, 2008 that enables for the growth of 5 casinos with a whole of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intensive as the state had anticipated.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open up in 2008, but has run into numerous financing troubles and even though the lodge portion is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled again somewhat, is still on observe to open this 12 months.

New England
Massachusetts, a sleeping-big in conditions of industry possible, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot seem to be to muster the political support. A modern examine finished by Dartmouth University estimates that Massachusetts resident put in more than $920 million very last year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an selection to build casinos, nevertheless the topic is very likely to be revisited, particularly if Massachusetts decides to go ahead. There are also tries in Maine to reconsider its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by just lately 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 system which ironically, can only be preserved by making it possible for the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it seemed as if Aqueduct’s four,500 VLT facility would lastly be created, the winning bidder indicated an inability to make the required $370 million charge, citing the present lending local climate, and throwing the venture back into the lap of the governor. Though the market need in the area could be regarded as fairly robust, the prospect of added competition from nearby Belmont could have an impact on Aqueduct’s underlining financial feasibility, particularly taking into consideration that a bit less than thirty% of the web acquire is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort complicated are being reconsidered perhaps owing to each the possible opening of at least a single or possibly two racino functions in the NY metro spot, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.

Ohio
But an additional gaming proposal is currently being place forth in Ohio, soon after very last year’s edition was turned down by the voters. This program calls for a single on line casino each in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure essential of $250 million, as nicely as an first licensing payment of $50 million, and a 33 per cent tax on gaming profits.

Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is predicted to be operational in August, ’09 while Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are expected to start off construction this year.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and consist of three hundred game titles, a hundred and forty rooms and a broad range of amenities.

Texas
Legislators are proposing a voter referendum that would amend the state structure to permit on line casino gambling in designated areas, as effectively as enable gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. State authorities has proffered the idea of allowing the vacation resort to offer casino video games, but this work is in also early a stage to have any traction 1 way or yet another.

Indian Gaming
A current Supreme Court ruling that restricts the taking of lands into have faith in on behalf of federally acknowledged American Indian tribes has even more stymied some new Course III gaming initiatives across the place. Moreover, there have been eleven Indian casino tasks turned down by the DOI previous calendar year due to the fact of its new rule that casinos have to be in close proximity to ample to a reservation that tribal customers can function at them. It has been suggested that the new Obama administration may well be a lot more sympathetic to the development of Indian gaming initiatives, but this problem has nevertheless to be tackled.

Meanwhile, there are other Course III initiatives in the a variety of levels of improvement. The Seneca casino undertaking in Buffalo, NY, although working a tiny momentary facility, has delayed an already under design everlasting facility until the market place rebounds. They have also expressed an fascination in establishing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could influence their ideas for greater initiatives. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this 12 months, and other people are in the arranging phase. Texas could allow the reopening of Indian gaming amenities and allow other location and there are strategies afoot by the Navajos in Arizona to build additional casinos. California is poised to open two to a few new Class III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming earnings in Atlantic Metropolis has declined 7.six %, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is finding alone in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast have been located in Atlantic City, where it looked as if it may well really even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly however its market share was currently being encroached upon, first by the development of a large Course III gaming operation in Connecticut, and then yet another 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 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 all around Atlantic City’s foreseeable future potential customers. It really is reliance on day-trippers lulled it into a fake feeling of protection, and it now finds alone possessing to redefine its mission statement to “location vacation resort.”

The only issue with this strategy however is that it is ill-outfitted to pull it off. For all intents and functions, Atlantic Metropolis is below-roomed and/or in excess of-gamed. There is simply not adequate working day-tripper market place to go about, and their effective investing region is tightening, as the peripheral populations northward now/will have a lot more prepared access to a widened supply in New York (Yonkers, and quickly at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean access, the city’s only real competitive benefits are its lodge ability and the availability of desk games, despite the fact that the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In purchase to sufficiently contend as a location vacation resort the city needs to produce added guest rooms and not always gaming potential. By comparison, the Las Vegas Strip homes – real gaming places, in that they do not have considerably of a day-trip market place, other than for the ‘locals’ – have an common of .87 gaming positions for each visitor place even though Atlantic City’s common is 2.74 positions for every guest place.

It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, have been the least impacted by the most current downturn. The Borgata knowledgeable a gaming profits drop of one.6 %, whilst Harrah’s Marina noted a four.9 p.c enhance in comparison to 2007. Furthermore, the hardest 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, like the the Trump properties and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.

With a continual increase in gaming revenues by way of 2006, the metropolis seemed key for further advancement, which precipitated planning for four new vacation resort tasks, every of which have now been indefinitely delayed. Revel Amusement Group’s $two.five billion venture remains an iron skeleton, Pinnacle Entertainment has introduced it might look for to sell its razed Sands website, MGM Mirage has shelved its on line casino plans, and Penn National seems to have stopped its pursuit of the Bader Field airport internet site.