A Period of Adjustment
Oops! That large hissing sound is the gaming balloon that had been growing in excess of the a long time, slowly dropping air. But, it has not been a tide that reduced all ships nevertheless, as some emerging and expanding gaming jurisdictions confirmed sturdy growth in 2008.
All round, the industrial and racetrack on line casino sectors (excluding Indian gaming), experienced a three.five per cent decline 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 fall, as they confirmed a obtain of virtually $1 billion in 2008, therefore bringing the Industrial sector market decrease to $1.eight billion, or six.7 percent. Nevada was the most significant loser in 2008, dropping nearly $one.3 billion, a lot more than fifty percent of which stemmed from the Las Vegas Strip segment.
For the most portion, on line casino operators ended up caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not until the third and fourth quarters when it truly nosedived. Riding the crest of yr over yr marketplace expansion throughout the region and the availability of ample credit rating and equity funds, new building and expansion proliferated in recent a long time. Right now, faced with the realities of declining, or at ideal stagnant desire, a lot of of these assignments are now regarded as over-leveraged and/or in excess of-sized. As a consequence many gaming firms are attempting to renegotiate their personal debt – manufactured much more tough by decrease valuations – while also paring down operational fees. The latter has turn out to be a really problematic conundrum when working with the opposition, especially in those jurisdictions that are now vying for market shares with new emerging casino tasks in neighboring locations. A subject matter we examine more entirely in the Condition by State analysis area of this publication.
As a result of these situations the gaming industry landscape is now strewn with impending fatalities. Among the more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the listing grows each and every 7 days.
“How prolonged will these economic situations persist, and are we at the base but?” are questions no 1 appears to be answering yet. What is very clear nevertheless is that most gaming jurisdictions will have to learn how to offer with a smaller sized pie.
This evaluation contains only gaming revenues of licensed casinos and pari-mutuel stores that offer on line casino game titles, and not Indian gaming operations, card rooms, or tiny non-casino variety slot places. The complete article, such as earnings tables is offered on our net webpage.
A crucial facet that would seem to have arisen from the ashes of this current pattern is that several on line casino initiatives have been just also massive to assist them selves. The enter, in terms of expense dollars, was not proportional to the output, in conditions of internet revenue following debt provider, compared to formerly achieved results. Far more and/or bigger is not often much better. Looking at the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of a lot more extensive facilities in many other jurisdictions. The flaw in this approach nevertheless is that the charges associated with widening industry penetration and occasioned-use, are considerably larger than people incurred to entice the base market.
As daytripper marketplaces grow to be more competitive, casino venues will have to rely far more and a lot more on their in-house lodge patrons, and size their houses (and anticipations) appropriately. Whilst Steve Wynn started a main pattern in making up-marketplace mega-locations, there just was not sufficient desire on the Strip to warrant the numerous other comparable tasks that adopted that aimed at the very same area of interest.
The trick is to strike a happy medium in undertaking configurations which of course demand less of a ‘seat-of-pants’ technique, and 1 that is much more examined. A shameless plug for development consultants like ourselves.
Other Gaming Actions
Although there are no printed thorough info of American Indian gaming revenues, anecdotal evidence appears to suggest that this segment has been as hard hit as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, symbolizing a drop of about 7 p.c, or almost $114 million, more than doubling the 3.five % fall from the yr before. This market place is apparently nonetheless reeling from the ripple-effect of a casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Division of Gaming stories that contributions based mostly on a gaming revenue formula from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in contrast to the prior year reducing .eight per cent in the 1st quarter, 7.5 % in the next quarter, nine.five percent in the third quarter, and sixteen.one % in the fourth quarter.
Some SEC reporting Indian gaming houses report related decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, stories that even though calendar yr 2008 confirmed an virtually 2 per cent development charge in gaming revenues, there was an eight.seven p.c drop in the third quarter and an practically ten p.c drop in the fourth quarter of 2008, in comparison with 2007. Gaming profits developments at close by Niagara Falls, Ontario were down one.five% in 2008 in contrast with 2007.
It’s been a blended-bag for condition lotteries across the region. The North American Affiliation of State & Provincial Lotteries reports that U.S. lotteries created a total of $60.6 billion in product sales in fiscal 2008, up about 3 % from the previous yr however some jurisdictions noted decreases, most notably California, which confirmed an 8 per cent drop. Inasmuch as some of these states are on various fiscal calendar year finishes, it would seem that the data does not replicate the impact of 3rd and/or fourth quarter outcomes.
According to data supplied by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling seven per cent to $13.seven billion in 2008, versus $14.7 billion in 2007.
Prepared & Proposed New Expansions
As beforehand observed, it has been new gaming jurisdictions that have spawned a lot of the growth in annual casino/racino revenues in excess of the a long time, and their influence is apt to carry on into the in close proximity to potential.
Miami Dade voters accepted a ballot issue that allows every single of three pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Dog Monitor and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has however to announced its plans. There are many other proposals becoming regarded that would additional grow on line casino growth all through the state.
The condition lastly received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ recreation on line casino situated in Des Plaines just east of O’Hare. The new facility is not probably to open right up until 2010. There has also been some discussion about allowing an increase in per location gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.
The state’s expanded lottery program that makes it possible for for the advancement of four casino gaming zones and slots at current horse and pet tracks seems mired, as only one facility is presently below construction, whilst 3 other proposals ended up rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is located so close to the condition line that its parking great deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk online games, along with a second section because of to open up in 2011 with 875 slots and 20 table online games. The condition has extended the application approach for the other a few zones right up until April, 2009.
There is nevertheless a good deal of ‘jockeying’ likely on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be back again on the front-burner, but probably not fixed for the duration of the existing legislative session.
There are about 14,000 rooms scheduled to appear on line in 2009, with the most current currently being the 390 room M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Challenging Rock and new lodges include two components of the Town Heart task, and the Fountainebleau.
Pinnacle Entertainment’s new casino advancement assignments in Baton Rouge and Lake Charles, while delayed, are noted to nonetheless be on-track for opening this 12 months and/or early 2010.
There is a invoice below thing to consider that could far more than double Penn National’s slot devices to 3,000, as effectively as a proposal that would take away the restriction that slots be found inside 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing regional people to let slots, could be thinking about shifting to a more hospitable town.
A referendum was authorized 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 although it is not as powerful as the state had expected.
Grand Soleil On line casino Vacation resort in Natchez had been slated to open up in 2008, but has run into different financing problems and even though the lodge part is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back somewhat, is nonetheless on track to open up this calendar year.
Massachusetts, a sleeping-big in terms of market likely, is nevertheless maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but can’t appear to muster the political assist. A current examine finished by Dartmouth College estimates that Massachusetts resident put in far more than $920 million final year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to produce casinos, nevertheless the topic is likely to be revisited, particularly if Massachusetts decides to go ahead. There are also attempts in Maine to rethink its choices.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by lately agreeing to keep on augmenting purses with an additional tax. The governor nevertheless, has appointed a new panel to research the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot machines specifically at the Meadowlands. (See The Nor’easter Squeeze part)
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would lastly be produced, the successful bidder indicated an inability to make the required $370 million fee, citing the current lending local climate, and throwing the task back again into the lap of the governor. Although the market place need in the location could be regarded very strong, the prospect of extra competitiveness from nearby Belmont could have an effect on Aqueduct’s underlining economic feasibility, specially taking into consideration that a bit significantly less than thirty% of the web earn is retained by the operator.
Strategies to relocate Monticello Raceway into a resort complicated are being reconsidered maybe owing to each the probable opening of at minimum one particular or maybe two racino operations in the NY metro area, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.
Yet one more gaming proposal is getting put forth in Ohio, soon after final year’s model was turned down by the voters. This plan calls for 1 casino every in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision needed of $250 million, as well as an preliminary licensing charge of $50 million, and a 33 % tax on gaming earnings.
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is envisioned to be operational in August, ’09 even though Philadelphia’s two slot facilities nevertheless wallow in a political mire, but are expected to begin design this calendar year.
The Lodge at Deadwood is slated to open in the Fall of 2009, and incorporate three hundred game titles, a hundred and forty rooms and a broad assortment of amenities.
Legislators are proposing a voter referendum that would amend the state structure to let casino gambling in specified locations, as nicely as permit gambling on American Indian lands in Texas and at current racetracks.
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an supply. Point out federal government has proffered the notion of making it possible for the resort to provide on line casino games, but this energy is in way too early a phase to have any traction 1 way or one more.
A current Supreme Court ruling that restricts the taking of lands into have faith in on behalf of federally identified American Indian tribes has further stymied some new Course III gaming tasks throughout the country. Additionally, there ended up eleven Indian casino projects turned down by the DOI final year simply because of its new rule that casinos have to be near adequate to a reservation that tribal members can operate 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 situation has yet to be tackled.
In the meantime, there are other Course III tasks in the numerous phases of advancement. The Seneca on line casino undertaking in Buffalo, NY, although working a tiny temporary facility, has delayed an already below design permanent facility right up until the market place rebounds. They have also expressed an desire in establishing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could affect their programs for greater tasks. There are new Indian gaming projects established to open up in Michigan and Oklahoma this yr, and other people are in the planning phase. Texas may let the reopening of Indian gaming services and allow other location and there are programs afoot by the Navajos in Arizona to construct extra casinos. California is poised to open up two to a few new Course III casinos in 2009/10.
The Nor’easter Squeeze
Overall gaming income in Atlantic Town has declined seven.six %, from $4.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining itself in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast have been found in Atlantic Town, in which it seemed as if it may truly even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Slowly and gradually nonetheless its market share was being encroached on, first by the improvement of a huge Course III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.
Now, with www.aw8casino.com prepared opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and sooner or later two functions in Philadelphia, the noose is tightening around Atlantic City’s long term potential clients. It is reliance on working day-trippers lulled it into a false perception of protection, and it now finds itself possessing to redefine its mission statement to “spot vacation resort.”
The only dilemma with this method however is that it is ill-equipped to pull it off. For all intents and functions, Atlantic City is beneath-roomed and/or in excess of-gamed. There is basically not enough working day-tripper market place to go all around, and their powerful trading location is tightening, as the peripheral populations northward now/will have a lot more prepared entry to a widened offer 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 competitive rewards are its lodge ability and the availability of desk video games, although the latter is probably to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently compete as a spot vacation resort the town wants to create added visitor rooms and not automatically gaming potential. By comparison, the Las Vegas Strip qualities – true gaming locations, in that they do not have a lot of a day-journey industry, other than for the ‘locals’ – have an average of .87 gaming positions for every visitor space while Atlantic City’s average is 2.74 positions for every visitor room.
It is not a coincidence that Atlantic City’s two largest accommodations, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, ended up the the very least impacted by the latest downturn. The Borgata experienced a gaming income fall of 1.six percent, while Harrah’s Marina described a four.nine p.c increase when compared to 2007. Additionally, the hardest strike venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest amount 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 shedding valuation.
With a regular increase in gaming revenues by way of 2006, the metropolis seemed primary for additional development, which precipitated arranging for four new resort initiatives, each of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion task continues to be an iron skeleton, Pinnacle Amusement has declared it may find to promote its razed Sands website, MGM Mirage has shelved its on line casino strategies, and Penn Nationwide seems to have stopped its pursuit of the Bader Area airport website.