A Time period of Adjustment

Oops! That huge hissing audio is the gaming balloon that experienced been growing in excess of the many years, gradually dropping air. But, it has not been a tide that lowered all ships however, as some emerging and growing gaming jurisdictions confirmed strong progress in 2008.

All round, the industrial and racetrack casino sectors (excluding Indian gaming), experienced a 3.5 p.c drop in gaming revenues for 2008, generating a complete 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 almost $1 billion in 2008, therefore bringing the Professional sector market place decrease to $one.eight billion, or 6.7 %. Nevada was the greatest loser in 2008, dropping almost $1.3 billion, more than fifty percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, casino operators had been caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not right up until the 3rd and fourth quarters when it really nosedived. Riding the crest of yr over yr marketplace growth throughout the place and the availability of enough credit score and equity money, new development and expansion proliferated in latest several years. Today, confronted with the realities of declining, or at ideal stagnant demand from customers, a lot of of these assignments are now considered over-leveraged and/or above-sized. As a end result numerous gaming firms are attempting to renegotiate their debt – created far more difficult by reduce valuations – even though also paring down operational charges. The latter has turn into a really problematic conundrum when working with the opposition, specifically in individuals jurisdictions that are now vying for market place shares with new emerging casino projects in neighboring regions. A matter we talk about a lot more totally in the Condition by State evaluation area of this publication.

As a result of these circumstances the gaming industry landscape is now strewn with impending fatalities. Amid the more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows each and every week.

“How long will these financial conditions persist, and are we at the base however?” are queries no a single seems to be answering nevertheless. What is clear however is that most gaming jurisdictions will have to understand how to deal with a smaller sized pie.

Note:
This analysis includes only gaming revenues of licensed casinos and pari-mutuel shops that provide on line casino games, and not Indian gaming operations, card rooms, or modest non-on line casino type slot places. The total post, like earnings tables is available on our web page.

Enter/Output Product

A important element that appears to have arisen from the ashes of this present pattern is that many on line casino tasks ended up just way too massive to support by themselves. The enter, in phrases of expense pounds, was not proportional to the output, in conditions of net income after debt provider, in contrast to previously attained final results. A lot more and/or even bigger is not constantly much better. Looking at the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the advancement of much more extensive features in a lot of other jurisdictions. Slot Bonus 100 To x3 x5 in this strategy however is that the costs linked with widening marketplace penetration and occasioned-use, are significantly larger than those incurred to draw in the foundation market.

As daytripper markets grow to be more competitive, on line casino venues will have to count much more and far more on their in-home lodge patrons, and size their homes (and expectations) accordingly. Although Steve Wynn commenced a main pattern in producing up-market place mega-places, there basically was not adequate demand on the Strip to warrant the many other equivalent tasks that adopted that aimed at the very same area of interest.

The trick is to strike a satisfied medium in task configurations which of training course need significantly less of a ‘seat-of-pants’ method, and one that is far more studied. A shameless plug for advancement consultants like ourselves.

Other Gaming Activities

Although there are no published comprehensive knowledge of American Indian gaming revenues, anecdotal evidence appears to propose that this segment has been as difficult strike as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, representing a drop of about 7 p.c, or practically $114 million, more than doubling the three.5 p.c drop from the yr ahead of. This market place is evidently nonetheless reeling from the ripple-influence of a on line casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Office of Gaming reports that contributions primarily based on a gaming revenue method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the prior 12 months lowering .8 per cent in the 1st quarter, 7.five percent in the 2nd quarter, 9.5 per cent in the 3rd quarter, and sixteen.1 percent in the fourth quarter.

Some SEC reporting Indian gaming qualities report related decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, studies that even though calendar yr 2008 showed an virtually two p.c progress charge in gaming revenues, there was an eight.7 per cent decrease in the third quarter and an almost 10 p.c decrease in the fourth quarter of 2008, in comparison with 2007. Gaming income tendencies at close by Niagara Falls, Ontario ended up down one.five% in 2008 when compared with 2007.

It truly is been a combined-bag for state lotteries across the nation. The North American Association of State & Provincial Lotteries reviews that U.S. lotteries generated a whole of $sixty.6 billion in revenue in fiscal 2008, up about 3 percent from the prior calendar year however some jurisdictions documented decreases, most notably California, which confirmed an 8 % drop. Inasmuch as some of these states are on various fiscal calendar year finishes, it would seem that the information does not mirror the impact of third and/or fourth quarter benefits.

In accordance to data provided by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping seven per cent to $13.7 billion in 2008, vs . $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As formerly observed, it has been new gaming jurisdictions that have spawned significantly of the expansion in yearly on line casino/racino revenues more than the several years, and their effect is apt to proceed into the near long term.

Florida
Miami Dade voters approved a ballot situation that permits every single of 3 pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Pet Track and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has but to declared its plans. There are many other proposals getting deemed that would further broaden on line casino growth all through the point out.

Illinois
The condition lastly received about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,200+ match casino found 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 boost in for each spot 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 enables for the advancement of four casino gaming zones and slots at present horse and canine tracks appears mired, as only one facility is presently under development, even though 3 other proposals were rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is positioned so near to the point out line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk online games, together with a 2nd section thanks to open in 2011 with 875 slots and 20 table games. The state has prolonged the application procedure for the other a few zones until April, 2009.

Kentucky
There is even now a great deal of ‘jockeying’ likely on, but the prospect of as numerous as eight slot parlors and racinos appears to be back again on the entrance-burner, but most likely not solved for the duration of the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most latest currently being the 390 area M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Tough Rock and new accommodations contain two factors of the City Center undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino advancement assignments in Baton Rouge and Lake Charles, while delayed, are reported to still be on-track for opening this yr and/or early 2010.

Maine
There is a invoice beneath thing to consider that could far more than double Penn National’s slot equipment to three,000, as well as a proposal that would get rid of the restriction that slots be positioned within 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to let slots, could be taking into consideration moving to a much more hospitable town.

Maryland
A referendum was accepted in November, 2008 that makes it possible for for the advancement of 5 casinos with a complete of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the condition experienced anticipated.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open up in 2008, but has operate into a variety of funding problems and whilst the hotel part is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled back relatively, is even now on observe to open up this yr.

New England
Massachusetts, a sleeping-giant in conditions of market place possible, is nevertheless maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but cannot look to muster the political help. A current review concluded by Dartmouth College estimates that Massachusetts resident put in much more than $920 million previous year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an alternative to produce casinos, however the subject is most likely to be revisited, particularly if Massachusetts decides to go forward. There are also attempts in Maine to rethink its options.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by lately agreeing to proceed augmenting purses with an further tax. The governor nevertheless, has appointed a new panel to review the state’s sagging racing plan which ironically, can only be preserved by allowing the tracks to have slot devices specially at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would last but not least be produced, the successful bidder indicated an incapacity to make the needed $370 million payment, citing the existing lending weather, and throwing the task back again into the lap of the governor. Even though the market place need in the location could be considered very strong, the prospect of additional competitiveness from nearby Belmont could have an impact on Aqueduct’s underlining financial feasibility, specifically thinking about that a bit much less than 30% of the internet win is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort complicated are getting reconsidered probably owing to both the probable opening of at minimum 1 or perhaps 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
But one more gaming proposal is getting place forth in Ohio, after very last year’s model was turned down by the voters. This strategy calls for 1 on line casino every single in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expenditure needed of $250 million, as effectively as an preliminary licensing fee of $50 million, and a 33 p.c tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers project in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are anticipated to commence development this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Slide of 2009, and contain three hundred online games, one hundred forty rooms and a wide range of features.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to permit on line casino gambling in specified regions, as well as allow gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has submitted for bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer. State federal government has proffered the idea of allowing the vacation resort to offer casino online games, but this work is in way too early a stage to have any traction a single way or an additional.

Indian Gaming
A current Supreme Courtroom ruling that restricts the taking of lands into trust on behalf of federally identified American Indian tribes has even more stymied some new Course III gaming initiatives throughout the country. Moreover, there ended up eleven Indian casino projects rejected by the DOI last year because of its new rule that casinos need to be close to ample to a reservation that tribal users can function at them. It has been proposed that the new Obama administration may well be a lot more sympathetic to the development of Indian gaming projects, but this problem has however to be addressed.

Meanwhile, there are other Class III initiatives in the a variety of stages of improvement. The Seneca on line casino undertaking in Buffalo, NY, although operating a modest short-term facility, has delayed an presently beneath design everlasting facility until finally the market place rebounds. They have also expressed an interest in building a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could impact their strategies for more substantial projects. There are new Indian gaming assignments established to open in Michigan and Oklahoma this calendar year, and others are in the planning phase. Texas may let the reopening of Indian gaming facilities and allow other location and there are ideas afoot by the Navajos in Arizona to assemble extra casinos. California is poised to open two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming revenue in Atlantic Metropolis has declined seven.six percent, from $four.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the town is discovering by itself in an powerful comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast have been found in Atlantic Town, the place it appeared as if it may actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly nevertheless its marketplace share was being encroached upon, initial by the growth of a huge Class 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 just lately Pennsylvania.

Now, with the prepared opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening close to Atlantic City’s foreseeable future potential customers. It’s reliance on working day-trippers lulled it into a bogus sense of security, and it now finds itself possessing to redefine its mission statement to “location resort.”

The only dilemma with this strategy nevertheless is that it is sick-outfitted to pull it off. For all intents and functions, Atlantic Town is below-roomed and/or more than-gamed. There is just not enough working day-tripper market to go all around, and their successful trading spot is tightening, as the peripheral populations northward now/will have far more prepared access to a widened supply 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 accessibility, the city’s only genuine competitive advantages are its lodge capacity and the availability of table games, although the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In order to adequately contend as a vacation spot vacation resort the city wants to create extra guest rooms and not essentially gaming ability. By comparison, the Las Vegas Strip homes – correct gaming places, in that they do not have a lot of a day-trip market place, apart from for the ‘locals’ – have an regular of .87 gaming positions per visitor space while Atlantic City’s typical is two.seventy four positions per visitor room.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, ended up the least impacted by the most current downturn. The Borgata skilled a gaming revenue drop of 1.six percent, whilst Harrah’s Marina described a four.9 p.c improve when compared to 2007. Additionally, the hardest strike 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, including the the Trump properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.

With a constant rise in gaming revenues by way of 2006, the town appeared key for even more advancement, which precipitated preparing for 4 new resort projects, each and every of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion task stays an iron skeleton, Pinnacle Amusement has introduced it might seek out to sell its razed Sands web site, MGM Mirage has shelved its casino ideas, and Penn Nationwide seems to have stopped its pursuit of the Bader Discipline airport website.