A Period of Adjustment
Oops! That big hissing sound is the gaming balloon that had been developing over the a long time, slowly losing air. But, it has not been a tide that lowered all ships nevertheless, as some emerging and increasing gaming jurisdictions showed powerful growth in 2008.
Overall, the commercial and racetrack casino sectors (excluding Indian gaming), skilled a 3.5 p.c decline in gaming revenues for 2008, making 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 practically $1 billion in 2008, therefore bringing the Commercial sector marketplace drop to $one.8 billion, or 6.7 percent. Nevada was the most significant loser in 2008, dropping almost $1.3 billion, far more than fifty percent of which stemmed from the Las Vegas Strip section.
Hunkering Down
For the most part, on line casino operators ended up caught fairly flat-footed by the extent of the 2008 income downturn, as it was not until finally the third and fourth quarters when it genuinely nosedived. Using the crest of 12 months over 12 months marketplace expansion across the place and the availability of ample credit and equity resources, new building and enlargement proliferated in latest several years. Nowadays, faced with the realities of declining, or at best stagnant need, several of these projects are now regarded above-leveraged and/or in excess of-sized. As a result numerous gaming organizations are making an attempt to renegotiate their personal debt – produced much more difficult by reduce valuations – whilst also paring down operational charges. The latter has turn out to be a extremely problematic conundrum when dealing with the competitiveness, particularly in people jurisdictions that are now vying for marketplace shares with new rising on line casino initiatives in neighboring locations. A topic we go over a lot more entirely in the State by Condition evaluation segment of this publication.
As a end result of these conditions the gaming sector landscape is now strewn with impending fatalities. Among the far more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the record grows each and every 7 days.
“How lengthy will these financial situations persist, and are we at the bottom yet?” are questions no one particular appears to be answering nevertheless. What is very clear however is that most gaming jurisdictions will have to understand how to deal with a more compact pie.
Notice:
This investigation contains only gaming revenues of licensed casinos and pari-mutuel stores that provide on line casino game titles, and not Indian gaming operations, card rooms, or modest non-casino kind slot spots. The entire report, which includes earnings tables is obtainable on our world wide web page.
Enter/Output Product
A key facet that would seem to have arisen from the ashes of this existing trend is that many casino tasks had been just as well huge to help on their own. The input, in conditions of investment decision bucks, was not proportional to the output, in conditions of web earnings soon after financial debt service, when compared to previously achieved outcomes. Far more and/or greater is not constantly greater. Looking at the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the improvement of more comprehensive facilities in several other jurisdictions. The flaw in this method nonetheless is that the costs related with widening market penetration and occasioned-use, are considerably higher than people incurred to entice the foundation marketplace.
As daytripper marketplaces grow to be much more competitive, casino venues will have to depend more and much more on their in-property hotel patrons, and measurement their properties (and anticipations) accordingly. Even though Steve Wynn started a main development in generating up-industry mega-places, there simply was not ample demand on the Strip to warrant the several other equivalent tasks that followed that aimed at the same market.
The trick is to strike a pleased medium in task configurations which of system need significantly less of a ‘seat-of-pants’ method, and one particular that is more researched. A shameless plug for improvement consultants like ourselves.
Other Gaming Actions
Though there are no printed in depth info of American Indian gaming revenues, anecdotal proof seems to suggest that this section has been as hard hit as the Professional sector. The two Connecticut Indian gaming installations report slot earnings of $1.six billion in 2008, representing a drop of about 7 per cent, or almost $114 million, more than doubling the 3.5 p.c fall from the year prior to. This market place is evidently even now reeling from the ripple-impact of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Department of Gaming reports that contributions based mostly on a gaming income method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the prior calendar year reducing .8 % in the 1st quarter, 7.5 p.c in the 2nd quarter, nine.five percent in the 3rd quarter, and sixteen.1 p.c in the fourth quarter.
Some SEC reporting Indian gaming properties report related decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, studies that whilst calendar year 2008 confirmed an nearly 2 % development price in gaming revenues, there was an 8.seven per cent drop in the 3rd quarter and an nearly ten % decline in the fourth quarter of 2008, when compared with 2007. Gaming revenue traits at close by Niagara Falls, Ontario ended up down 1.five% in 2008 when compared with 2007.
It truly is been a blended-bag for point out lotteries throughout the place. The North American Affiliation of Point out & Provincial Lotteries reports that U.S. lotteries produced a total of $60.6 billion in sales in fiscal 2008, up about 3 per cent from the previous year but some jurisdictions described decreases, most notably California, which showed an 8 p.c fall. Inasmuch as some of these states are on a variety of fiscal year finishes, it would seem that the info does not replicate the impact of 3rd and/or fourth quarter results.
According to information presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping seven per cent to $thirteen.seven billion in 2008, as opposed to $14.seven billion in 2007.
Planned & Proposed New Expansions
As previously observed, it has been new gaming jurisdictions that have spawned much of the progress in once-a-year on line casino/racino revenues over the a long time, and their affect is apt to proceed into the close to future.
Florida
Miami Dade voters approved a ballot situation that makes it possible for each and every of 3 pari-mutuels to have a casino facility of up to 2,000 slot devices. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has however to announced its strategies. There are many other proposals currently being considered that would further expand casino improvement through the point out.
Illinois
The state 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 positioned in Des Plaines just east of O’Hare. The new facility is not most likely to open until finally 2010. There has also been some discussion about permitting an increase in per area gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.
Kansas
The state’s expanded lottery program that permits for the development of 4 casino gaming zones and slots at existing horse and pet tracks appears mired, as only one particular facility is presently under building, although 3 other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so near to the state line that its parking lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table games, together with a 2nd phase because of to open in 2011 with 875 slots and twenty table games. The point out has prolonged the application process for the other a few zones right up until April, 2009.
Kentucky
There is still a good deal of ‘jockeying’ going on, but the prospect of as a lot of as eight slot parlors and racinos seems to be back on the front-burner, but likely not solved for the duration of the existing legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most recent getting the 390 area M Resort in Henderson. There are expansions underway at the two Caesars Palace and Tough Rock and new hotels include two elements of the City Heart task, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino improvement tasks in Baton Rouge and Lake Charles, even though delayed, are noted to nonetheless be on-keep track of for opening this yr and/or early 2010.
Maine
There is a monthly bill underneath consideration that could more than double Penn National’s slot equipment to 3,000, as effectively as a proposal that would get rid of the restriction that slots be situated within 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to let slots, may possibly be contemplating shifting to a more hospitable town.
Maryland
A referendum was accepted in November, 2008 that makes it possible for for the growth of five casinos with a whole of fifteen,000 slots, and now the bidding war is afoot although it is not as intense as the point out experienced anticipated.
Mississippi
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open up in 2008, but has operate into numerous financing concerns and even though the lodge part is open up, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back again somewhat, is nonetheless on keep track of to open this yr.
New England
Massachusetts, a sleeping-large in conditions of marketplace likely, is nonetheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can’t seem to muster the political assist. A latest examine completed by Dartmouth College estimates that Massachusetts resident spent a lot more than $920 million very last year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an choice to build casinos, nonetheless the subject matter is very likely to be revisited, especially if Massachusetts decides to go ahead. There are also tries in Maine to rethink its choices.
New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by lately agreeing to keep on augmenting purses with an extra tax. The governor nevertheless, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze section)
New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would ultimately be designed, the winning bidder indicated an incapacity to make the necessary $370 million fee, citing the existing lending local weather, and throwing the undertaking again into the lap of the governor. Despite the fact that the market place demand in the region could be considered fairly powerful, the prospect of additional competition from nearby Belmont could have an influence on Aqueduct’s underlining financial feasibility, especially taking into consideration that somewhat much less than thirty% of the web acquire is retained by the operator.
Strategies to relocate Monticello Raceway into a vacation resort complicated are becoming reconsidered possibly owing to each the possible opening of at minimum one particular 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
Yet one more gaming proposal is getting set forth in Ohio, soon after very last year’s variation was turned down by the voters. This prepare calls for one particular casino each and every in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment decision needed of $250 million, as well as an original licensing payment of $50 million, and a 33 p.c tax on gaming revenue.
Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 even though Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are expected to commence building this year.
South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and contain three hundred online games, 140 rooms and a extensive range of features.
Texas
Legislators are proposing a voter referendum that would amend the point out structure to permit casino gambling in specified regions, as nicely as allow gambling on American Indian lands in Texas and at present racetracks.
West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. Point out authorities has proffered the idea of making it possible for the vacation resort to supply casino online games, but this effort is in as well early a stage to have any traction one particular way or another.
Indian Gaming
A recent Supreme Court docket ruling that restricts the using of lands into have faith in on behalf of federally recognized American Indian tribes has further stymied some new Course III gaming initiatives throughout the nation. Furthermore, there have been eleven Indian on line casino initiatives turned down by the DOI last 12 months since of its new rule that casinos need to be in close proximity to sufficient to a reservation that tribal customers can perform at them. It has been recommended that the new Obama administration may possibly be much more sympathetic to the advancement of Indian gaming assignments, but this problem has but to be addressed.
In the meantime, there are other Class III projects in the a variety of phases of improvement. The Seneca casino project in Buffalo, NY, even though functioning a little momentary facility, has delayed an previously beneath design permanent facility till the market rebounds. They have also expressed an desire in building a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could affect their ideas for bigger projects. There are new Indian gaming projects established to open up in Michigan and Oklahoma this yr, and other folks are in the organizing phase. Texas could allow the reopening of Indian gaming services and enable other venue and there are ideas afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to a few new Course III casinos in 2009/10.
The Nor’easter Squeeze
Whole gaming profits in Atlantic City has declined seven.six %, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is obtaining itself in an intensive comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up positioned in Atlantic Town, the place it appeared as if it might in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.
Gradually nevertheless its market place share was becoming encroached on, first by the development of a massive Course III gaming operation in Connecticut, and then one more 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 sooner or later two operations in Philadelphia, the noose is tightening about Atlantic City’s foreseeable future potential customers. It’s reliance on day-trippers lulled it into a false perception of safety, and it now finds alone getting to redefine its mission statement to “location resort.”
The only problem with this approach nonetheless is that it is sick-outfitted to pull it off. For all intents and functions, Atlantic City is underneath-roomed and/or more than-gamed. There is simply not sufficient working day-tripper industry to go all around, and their successful investing area is tightening, as the peripheral populations northward now/will have more prepared access to a widened provide in New York (Yonkers, and quickly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean obtain, the city’s only genuine competitive advantages are its lodge capacity and the availability of desk video games, even though the latter is very likely to eventuate in Pennsylvania, and perhaps Delaware. In get to sufficiently contend as a spot vacation resort the town wants to produce extra visitor rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip homes – true gaming places, in that they do not have significantly of a day-journey industry, except for the ‘locals’ – have an typical of .87 gaming positions per guest place whilst Atlantic City’s average is two.74 positions for every guest place.
It is not a coincidence that Atlantic City’s two greatest hotels, the Borgata and Harrah’s Marina, each of which added new rooms in 2008, were the minimum impacted by the latest downturn. The Borgata experienced a gaming earnings fall of one.six %, even though Harrah’s Marina noted a 4.9 p.c enhance in contrast to 2007. In addition, the most difficult strike venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest number of rooms. In 贏家娛樂 of the venues are teetering on viability, such as the the Trump houses and Resorts with the hoped for sale of the Tropicana has been additional delayed, and shedding valuation.
With a constant increase in gaming revenues through 2006, the town seemed key for even more advancement, which precipitated organizing for four new resort initiatives, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion project stays an iron skeleton, Pinnacle Enjoyment has announced it might look for to offer its razed Sands internet site, MGM Mirage has shelved its casino programs, and Penn Nationwide appears to have stopped its pursuit of the Bader Discipline airport web site.