A Time period of Adjustment

Oops! That giant hissing audio is the gaming balloon that experienced been developing in excess of the many years, slowly and gradually dropping air. But, it has not been a tide that reduced all ships even so, as some emerging and increasing gaming jurisdictions showed powerful development in 2008.

Total, the business and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.five percent drop in gaming revenues for 2008, producing 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 obtain of practically $one billion in 2008, thereby bringing the Professional sector market place drop to $1.eight billion, or six.seven %. Nevada was the greatest loser in 2008, dropping almost $one.3 billion, much more than 50 percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, casino operators have been caught fairly flat-footed by the extent of the 2008 income downturn, as it was not until the 3rd and fourth quarters when it truly nosedived. Driving the crest of 12 months above calendar year marketplace growth throughout the region and the availability of ample credit history and equity funds, new construction and growth proliferated in current years. Right now, confronted with the realities of declining, or at ideal stagnant demand from customers, a lot of of these initiatives are now considered more than-leveraged and/or more than-sized. As a outcome several gaming organizations are trying to renegotiate their credit card debt – created far more hard by reduced valuations – while also paring down operational fees. The latter has become a extremely problematic conundrum when working with the competitiveness, particularly in these jurisdictions that are now vying for industry shares with new rising on line casino initiatives in neighboring places. A subject we talk about a lot more entirely in the Condition by Point out examination area of this publication.

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

“How extended will these economic conditions persist, and are we at the base yet?” are concerns no one appears to be answering yet. What is obvious even so is that most gaming jurisdictions will have to find out how to offer with a more compact pie.

Notice:
This investigation consists of only gaming revenues of accredited casinos and pari-mutuel outlets that offer you casino games, and not Indian gaming operations, card rooms, or little non-casino sort slot locations. The complete report, which includes earnings tables is obtainable on our internet web page.

Input/Output Product

A essential aspect that appears to have arisen from the ashes of this current pattern is that numerous on line casino initiatives ended up just too huge to assistance themselves. The input, in phrases of investment dollars, was not proportional to the output, in phrases of net income after personal debt provider, in comparison to earlier achieved benefits. A lot more and/or bigger is not always greater. Looking at the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of far more extensive facilities in many other jurisdictions. The flaw in this technique even so is that the fees related with widening marketplace penetration and occasioned-use, are considerably increased than those incurred to entice the foundation marketplace.

As daytripper marketplaces turn out to be more competitive, casino venues will have to count much more and more on their in-residence lodge patrons, and size their properties (and expectations) appropriately. Although Steve Wynn commenced a major pattern in generating up-industry mega-places, there merely was not enough desire on the Strip to warrant the several other equivalent initiatives that adopted that aimed at the very same area of interest.

The trick is to strike a content medium in venture configurations which of program require significantly less of a ‘seat-of-pants’ method, and a single that is a lot more examined. A shameless plug for advancement consultants like ourselves.

Other Gaming Pursuits

Despite the fact that there are no revealed detailed info of American Indian gaming revenues, anecdotal evidence appears to advise that this section has been as tough strike as the Professional sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, representing a fall of about 7 percent, or almost $114 million, much more than doubling the three.five p.c drop from the yr before. This market place is apparently even now 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 Division of Gaming reports that contributions based mostly 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 year lowering .eight % in the initial quarter, seven.five percent in the second quarter, 9.5 per cent in the third quarter, and sixteen.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reports that while calendar calendar year 2008 confirmed an virtually 2 percent expansion charge in gaming revenues, there was an eight.seven p.c drop in the third quarter and an almost 10 per cent decrease in the fourth quarter of 2008, in contrast with 2007. Gaming revenue tendencies at close by Niagara Falls, Ontario were down one.five% in 2008 compared with 2007.

It is been a combined-bag for state lotteries across the place. The North American Affiliation 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 p.c from the previous calendar year but some jurisdictions reported decreases, most notably California, which confirmed an eight per cent drop. Inasmuch as some of these states are on a variety of fiscal 12 months ends, it would look that the information does not reflect the effect of third and/or fourth quarter final results.

In accordance to info presented by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling 7 percent to $13.seven billion in 2008, compared to $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have spawned considerably of the progress in yearly casino/racino revenues in excess of the many years, and their affect is apt to continue into the near long term.

Florida
Miami Dade voters accepted a ballot concern that makes it possible for every of three pari-mutuels to have a on line casino facility of up to 2,000 slot machines. The Flagler Canine Keep track of 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 introduced its ideas. There are numerous other proposals becoming regarded that would further grow on line casino development through the state.

Illinois
The condition lastly obtained all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ recreation on line casino positioned in Des Plaines just east of O’Hare. The new facility is not likely to open up until 2010. There has also been some dialogue about permitting an improve in per location 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 growth of four on line casino gaming zones and slots at existing horse and puppy tracks seems mired, as only 1 facility is presently below design, whilst a few other proposals had 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 found so close 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 ten table game titles, along with a next phase thanks to open up in 2011 with 875 slots and 20 desk game titles. The state has prolonged the software approach for the other three zones right up until April, 2009.

Kentucky
There is even now a great deal of ‘jockeying’ going on, but the prospect of as numerous as 8 slot parlors and racinos seems to be again on the entrance-burner, but probably not settled throughout the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most current currently being the 390 area M Resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new lodges include two parts of the Metropolis Heart undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino improvement projects in Baton Rouge and Lake Charles, while delayed, are documented to even now be on-monitor for opening this calendar year and/or early 2010.

Maine
There is a bill below thought that could far more than double Penn National’s slot machines to three,000, as effectively as a proposal that would take away the restriction that slots be positioned in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing regional citizens to allow slots, could be considering shifting to a far more hospitable town.

Maryland
A referendum was approved in November, 2008 that permits for the development of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot though it is not as intense as the condition had anticipated.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open up in 2008, but has operate into numerous funding issues and although the resort part is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled back considerably, is nevertheless on monitor to open this 12 months.

New England
Massachusetts, a sleeping-large in conditions of market potential, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can’t appear to muster the political support. A modern research completed by Dartmouth University estimates that Massachusetts resident spent more than $920 million previous year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an choice to build casinos, nevertheless the matter is likely to be revisited, specifically if Massachusetts decides to go forward. There are also attempts in Maine to rethink its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by recently agreeing to carry on augmenting purses with an added tax. The governor nonetheless, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot equipment particularly 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 last but not least be produced, the successful bidder indicated an incapacity to make the essential $370 million fee, citing the current lending local climate, and throwing the venture again into the lap of the governor. Even though the market need in the area could be considered really powerful, the prospect of added competitors from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, specially considering that a bit less than 30% of the internet acquire is retained by the operator.

Strategies to relocate Monticello Raceway into a vacation resort sophisticated are becoming reconsidered possibly owing to the two the probable opening of at the very least a single or maybe two racino operations in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Ohio
But an additional gaming proposal is being place forth in Ohio, after very last year’s model was turned down by the voters. This strategy phone calls for a single casino every in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment essential of $250 million, as properly as an initial licensing charge of $50 million, and a 33 p.c tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is envisioned to be operational in August, ’09 whilst Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are anticipated to start off building this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and contain three hundred video games, one hundred forty rooms and a broad variety of features.

https://nsesafoundation.org/ are proposing a voter referendum that would amend the state constitution to permit on line casino gambling in specified regions, as effectively as let 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 personal bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer you. State federal government has proffered the idea of making it possible for the resort to supply on line casino game titles, but this effort is in also early a stage to have any traction 1 way or one more.

Indian Gaming
A latest Supreme Court docket ruling that restricts the having of lands into have confidence in on behalf of federally regarded American Indian tribes has further stymied some new Class III gaming assignments across the place. Additionally, there have been eleven Indian on line casino projects turned down by the DOI previous yr since of its new rule that casinos must be in close proximity to enough to a reservation that tribal users can work at them. It has been proposed that the new Obama administration may well be much more sympathetic to the advancement of Indian gaming initiatives, but this issue has however to be resolved.

Meanwhile, there are other Class III assignments in the a variety of stages of growth. The Seneca casino undertaking in Buffalo, NY, while operating a little short-term facility, has delayed an currently beneath building long term facility right up until the industry rebounds. They have also expressed an curiosity in developing a casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could impact their plans for greater projects. There are new Indian gaming tasks set to open in Michigan and Oklahoma this year, and other people are in the arranging phase. Texas may enable the reopening of Indian gaming services and permit other venue and there are plans afoot by the Navajos in Arizona to construct additional casinos. California is poised to open up two to three new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming profits in Atlantic City has declined seven.6 %, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is locating itself in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been found in Atlantic City, exactly where it seemed as if it might truly even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually nevertheless its market place share was currently being encroached upon, first by the advancement of a large Course III gaming procedure in Connecticut, and then yet another slots operations 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 prepared 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 about Atlantic City’s foreseeable future prospective customers. It’s reliance on working day-trippers lulled it into a fake perception of protection, and it now finds itself having to redefine its mission assertion to “vacation spot vacation resort.”

The only problem with this approach however is that it is unwell-geared up to pull it off. For all intents and needs, Atlantic Town is under-roomed and/or in excess of-gamed. There is merely not ample day-tripper marketplace to go about, and their powerful buying and selling location is tightening, as the peripheral populations northward now/will have a lot more prepared accessibility to a widened supply in New York (Yonkers, and soon 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 actual aggressive positive aspects are its resort ability and the availability of desk game titles, even though the latter is very likely to eventuate in Pennsylvania, and probably Delaware. In order to adequately compete as a destination resort the town requirements to build additional guest rooms and not always gaming potential. By comparison, the Las Vegas Strip homes – real gaming locations, in that they do not have much of a day-journey industry, except for the ‘locals’ – have an common of .87 gaming positions per guest room although Atlantic City’s average is two.74 positions for every guest room.

It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, had been the the very least impacted by the latest downturn. The Borgata seasoned a gaming revenue fall of 1.6 per cent, although Harrah’s Marina documented a four.9 p.c boost in contrast to 2007. Moreover, the toughest hit venues, specifically 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 qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.

With a steady increase in gaming revenues through 2006, the city seemed prime for more growth, which precipitated arranging for four new vacation resort initiatives, each of which have now been indefinitely delayed. Revel Leisure Group’s $two.five billion project stays an iron skeleton, Pinnacle Leisure has announced it may possibly find to offer its razed Sands internet site, MGM Mirage has shelved its casino programs, and Penn Nationwide seems to have stopped its pursuit of the Bader Subject airport website.