A Interval of Adjustment
Oops! That large hissing sound is the gaming balloon that experienced been increasing in excess of the several years, slowly and gradually shedding air. But, it has not been a tide that lowered all ships nevertheless, as some emerging and expanding gaming jurisdictions showed robust progress in 2008.
Overall, the industrial and racetrack casino sectors (excluding Indian gaming), skilled a 3.five per cent drop in gaming revenues for 2008, producing a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a acquire of almost $one billion in 2008, thereby bringing the Industrial sector marketplace decline to $one.eight billion, or six.7 per cent. Nevada was the largest loser in 2008, dropping nearly $1.three billion, much more than 50 percent of which stemmed from the Las Vegas Strip section.
For the most element, on line casino operators ended up caught comparatively flat-footed by the extent of the 2008 income downturn, as it was not right up until the 3rd and fourth quarters when it really nosedived. Driving the crest of 12 months in excess of 12 months marketplace growth throughout the place and the availability of ample credit score and equity resources, new building and expansion proliferated in modern years. Nowadays, faced with the realities of declining, or at greatest stagnant need, several of these assignments are now regarded in excess of-leveraged and/or above-sized. As a outcome numerous gaming organizations are attempting to renegotiate their credit card debt – manufactured far more hard by lower valuations – whilst also paring down operational expenses. The latter has turn out to be a really problematic conundrum when working with the competitors, specially in people jurisdictions that are now vying for market shares with new rising casino projects in neighboring places. A matter we discuss more entirely in the State by Condition analysis section of this publication.
As a outcome of these circumstances the gaming sector landscape is now strewn with impending fatalities. Among the a lot more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the checklist grows each and every week.
“How prolonged will these economic conditions persist, and are we at the base nevertheless?” are inquiries no one seems to be answering however. What is very clear nevertheless is that most gaming jurisdictions will have to learn how to offer with a scaled-down pie.
This investigation contains only gaming revenues of accredited casinos and pari-mutuel stores that provide casino games, and not Indian gaming operations, card rooms, or little non-casino variety slot locations. The total post, which includes income tables is offered on our internet webpage.
A key element that seems to have arisen from the ashes of this existing pattern is that numerous casino tasks have been just also large to help them selves. The input, in phrases of expenditure pounds, was not proportional to the output, in phrases of internet income right after personal debt support, in comparison to earlier achieved results. Much more and/or greater is not constantly far better. Observing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the advancement of more comprehensive features in numerous other jurisdictions. The flaw in this method nonetheless is that the charges related with widening marketplace penetration and occasioned-use, are significantly larger than individuals incurred to entice the base market place.
As daytripper marketplaces grow to be far more aggressive, on line casino venues will have to rely far more and more on their in-home hotel patrons, and measurement their homes (and anticipations) appropriately. Although Steve Wynn began a significant pattern in producing up-industry mega-places, there merely was not sufficient demand from customers on the Strip to warrant the numerous other equivalent assignments that followed that aimed at the same specialized niche.
The trick is to strike a satisfied medium in venture configurations which of training course demand much less of a ‘seat-of-pants’ strategy, and 1 that is a lot more researched. A shameless plug for growth consultants like ourselves.
Other Gaming Routines
Although there are no released detailed data of American Indian gaming revenues, anecdotal evidence appears to propose that this segment has been as difficult hit as the Industrial sector. The two Connecticut Indian gaming installations report slot profits of $1.six billion in 2008, symbolizing a fall of about 7 percent, or virtually $114 million, much more than doubling the three.5 percent fall from the year before. This market place is apparently still reeling from the ripple-result of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Office of Gaming reviews that contributions dependent on a gaming revenue method from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in comparison to the preceding 12 months reducing .eight % in the initial quarter, seven.5 percent in the 2nd quarter, 9.five percent in the third quarter, and sixteen.1 p.c 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, reviews that even though calendar calendar year 2008 confirmed an nearly two % progress charge in gaming revenues, there was an 8.seven percent decline in the 3rd quarter and an practically 10 p.c decline in the fourth quarter of 2008, compared with 2007. Gaming income tendencies at close by Niagara Falls, Ontario ended up down 1.5% in 2008 in contrast with 2007.
It is been a combined-bag for point out lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries generated a total of $60.6 billion in revenue in fiscal 2008, up about 3 % from the previous 12 months however some jurisdictions noted decreases, most notably California, which showed an 8 p.c drop. Inasmuch as some of these states are on different fiscal yr ends, it would seem to be that the knowledge does not mirror the impact of third and/or fourth quarter final results.
In accordance to info supplied by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 per cent to $13.seven billion in 2008, vs . $14.seven billion in 2007.
Planned & Proposed New Expansions
As previously famous, it has been new gaming jurisdictions that have spawned much of the expansion in once-a-year on line casino/racino revenues more than the several years, and their influence is apt to continue into the in close proximity to long term.
Miami Dade voters accepted a ballot issue that allows every of 3 pari-mutuels to have a on line casino facility of up to 2,000 slot equipment. The Flagler Puppy Observe and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has yet to announced its ideas. There are several other proposals currently being regarded that would even more increase casino growth throughout the state.
The point out last but not least got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ recreation casino found in Des Plaines just east of O’Hare. The new facility is not probably to open till 2010. There has also been some discussion about enabling an increase in for each location gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.
The state’s expanded lottery system that makes it possible for for the growth of 4 on line casino gaming zones and slots at present horse and puppy tracks appears mired, as only one facility is presently under development, although three other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is located so shut to the point out line that its parking whole 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 online games, alongside with a next phase thanks to open up in 2011 with 875 slots and 20 desk online games. The state has prolonged the software process for the other 3 zones right up until April, 2009.
There is nevertheless a good deal of ‘jockeying’ heading on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be back on the entrance-burner, but most likely not resolved throughout the existing legislative session.
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most modern currently being the 390 place M Resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new resorts contain two elements of the City Heart undertaking, and the Fountainebleau.
Pinnacle Entertainment’s new casino growth assignments in Baton Rouge and Lake Charles, while delayed, are reported to even now be on-monitor for opening this year and/or early 2010.
There is a invoice beneath thing to consider that could much more than double Penn National’s slot equipment to three,000, as nicely as a proposal that would take away the restriction that slots be situated inside of 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing regional inhabitants to enable slots, could be taking into consideration relocating to a much more hospitable city.
A referendum was authorized in November, 2008 that enables for the advancement of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot though it is not as intensive as the point out had predicted.
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has run into various financing concerns and even though the hotel part is open up, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back relatively, is nonetheless on track to open this calendar year.
Massachusetts, a sleeping-huge in terms of marketplace prospective, is nevertheless maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to be to muster the political help. A latest study finished by Dartmouth University estimates that Massachusetts resident put in much more than $920 million previous yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an selection to create casinos, even so the matter is probably to be revisited, especially if Massachusetts decides to go forward. There are also tries in Maine to reconsider its alternatives.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by not too long ago agreeing to proceed augmenting purses with an additional 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 specially at the Meadowlands. (See The Nor’easter Squeeze part)
Just when it seemed as if Aqueduct’s four,five hundred VLT facility would last but not least be designed, the successful bidder indicated an lack of ability to make the required $370 million charge, citing the recent lending climate, and throwing the project back into the lap of the governor. Though the marketplace desire in the location could be regarded as fairly strong, the prospect of added competitiveness from close by Belmont could have an impact on Aqueduct’s underlining economic feasibility, specifically contemplating that a bit less than thirty% of the internet win is retained by the operator.
Ideas to relocate Monticello Raceway into a resort intricate are being reconsidered possibly owing to each the possible opening of at the very least one particular or perhaps two racino functions in the NY metro spot, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.
However yet another gaming proposal is becoming put forth in Ohio, right after last year’s edition was turned down by the voters. This prepare phone calls for 1 casino every single in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment decision essential of $250 million, as effectively as an original licensing fee of $50 million, and a 33 % tax on gaming income.
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is envisioned to be operational in August, ’09 although Philadelphia’s two slot services even now wallow in a political mire, but are expected to commence building this calendar year.
The Lodge at Deadwood is slated to open in the Drop of 2009, and incorporate 300 video games, one hundred forty rooms and a broad variety of amenities.
Legislators are proposing a voter referendum that would amend the state constitution to permit on line casino gambling in designated regions, as nicely as let gambling on American Indian lands in Texas and at present racetracks.
The Greenbriar, the state’s venerable resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. Condition govt has proffered the notion of permitting the vacation resort to supply on line casino video games, but this hard work is in too early a phase to have any traction one way or one more.
A current Supreme Court docket ruling that restricts the having of lands into trust on behalf of federally recognized American Indian tribes has additional stymied some new Course III gaming assignments across the country. Additionally, there were eleven Indian casino tasks rejected by the DOI previous yr due to the fact of its new rule that casinos should be in close proximity to adequate to a reservation that tribal customers can work at them. It has been suggested that the new Obama administration might be more sympathetic to the growth of Indian gaming projects, but this concern has however to be tackled.
In the meantime, there are other Course III projects in the various levels of improvement. The Seneca casino task in Buffalo, NY, while running a modest temporary facility, has delayed an previously below development long lasting facility until finally the market place rebounds. They have also expressed an interest in developing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could influence their programs for more substantial initiatives. There are new Indian gaming tasks established to open in Michigan and Oklahoma this calendar year, and others are in the planning phase. Texas might permit the reopening of Indian gaming amenities and let other location and there are strategies afoot by the Navajos in Arizona to construct added casinos. California is poised to open up two to a few new Course III casinos in 2009/10.
The Nor’easter Squeeze
Complete gaming income in Atlantic Metropolis has declined seven.6 %, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the city is discovering itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were located in Atlantic Metropolis, the place it seemed as if it may actually even eclipse the Las Vegas Strip’s annual gaming revenues.
Little by little however its industry share was currently being encroached on, first by the advancement of a massive Class III gaming operation 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 recently 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 functions in Philadelphia, the noose is tightening around Atlantic City’s potential prospective customers. It really is reliance on working day-trippers lulled it into a false sense of security, and it now finds by itself getting to redefine its mission statement to “destination resort.”
The only dilemma with this method however is that it is ill-equipped to pull it off. For all intents and reasons, Atlantic Town is beneath-roomed and/or above-gamed. There is basically not adequate working day-tripper industry to go around, and their successful investing area is tightening, as the peripheral populations northward now/will have a lot more ready accessibility to a widened source in New York (Yonkers, and before long 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 real competitive rewards are its hotel potential and the availability of desk video games, despite the fact that the latter is very likely to eventuate in Pennsylvania, and potentially Delaware. In order to sufficiently contend as a vacation spot resort the metropolis requirements to produce further visitor rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip houses – real gaming destinations, in that they do not have significantly of a day-excursion industry, except for the ‘locals’ – have an common of .87 gaming positions per visitor space although Atlantic City’s average is two.74 positions per visitor place.
It is not a coincidence that Atlantic City’s two biggest resorts, the Borgata and Harrah’s Marina, both of which additional new rooms in 2008, had been the minimum impacted by the newest downturn. The Borgata experienced a gaming revenue fall of 1.six percent, although Harrah’s Marina noted a 4.9 p.c boost in comparison to 2007. Additionally, the toughest hit venues, namely 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 homes and Resorts with the hoped for sale of the Tropicana has been more delayed, and losing valuation.
With a steady rise in gaming revenues via 2006, the city seemed key for further development, which precipitated planning for four new resort initiatives, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion undertaking stays an iron skeleton, Pinnacle Leisure has declared it may find to promote its razed Sands website, MGM Mirage has shelved its on line casino ideas, and Penn Countrywide seems to have stopped its pursuit of the Bader Area airport site.