A Time period of Adjustment
Oops! That big hissing sound is the gaming balloon that experienced been developing above the a long time, slowly losing air. But, it has not been a tide that reduced all ships however, as some rising and increasing gaming jurisdictions confirmed sturdy expansion in 2008.
Overall, the professional and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a 3.5 p.c decline in gaming revenues for 2008, generating a whole 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, thus bringing the Professional sector marketplace decrease to $1.8 billion, or six.7 percent. Nevada was the greatest loser in 2008, dropping nearly $one.3 billion, more than fifty percent of which stemmed from the Las Vegas Strip segment.
For the most component, casino operators were caught comparatively flat-footed by the extent of the 2008 profits downturn, as it was not until finally the 3rd and fourth quarters when it truly nosedived. Driving the crest of 12 months more than yr market expansion across the place and the availability of enough credit history and equity money, new development and expansion proliferated in latest years. Today, faced with the realities of declining, or at very best stagnant demand from customers, a lot of of these projects are now regarded as more than-leveraged and/or over-sized. As a outcome many gaming firms are trying to renegotiate their financial debt – created a lot more challenging by reduce valuations – whilst also paring down operational charges. The latter has grow to be a very problematic conundrum when dealing with the opposition, particularly in those jurisdictions that are now vying for market place shares with new rising on line casino projects in neighboring regions. A subject matter we discuss a lot more totally in the Condition by State analysis area of this publication.
As a result of these situations the gaming sector landscape is now strewn with impending fatalities. Amid the more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows every single week.
“How lengthy will these economic circumstances persist, and are we at the bottom but?” are queries no 1 seems to be answering but. What is very clear nonetheless is that most gaming jurisdictions will have to understand how to deal with a smaller pie.
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This analysis involves only gaming revenues of licensed casinos and pari-mutuel shops that supply casino video games, and not Indian gaming functions, card rooms, or tiny non-on line casino type slot spots. The complete post, which includes revenue tables is offered on our net page.
A essential element that appears to have arisen from the ashes of this current pattern is that many casino initiatives ended up just too massive to assistance on their own. The input, in phrases of investment decision bucks, was not proportional to the output, in conditions of web earnings right after personal debt support, when compared to earlier attained final results. Much more and/or even bigger is not always far better. Looking at the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of a lot more complete features in a lot of other jurisdictions. The flaw in this strategy however is that the charges related with widening market penetration and occasioned-use, are considerably larger than those incurred to appeal to the base market place.
As daytripper marketplaces turn into a lot more competitive, casino venues will have to depend a lot more and more on their in-property resort patrons, and size their qualities (and expectations) accordingly. Whilst Steve Wynn began a key development in making up-marketplace mega-destinations, there simply was not adequate demand on the Strip to warrant the several other related projects that followed that aimed at the exact same niche.
The trick is to strike a satisfied medium in task configurations which of program demand considerably less of a ‘seat-of-pants’ method, and a single that is much more analyzed. A shameless plug for development consultants like ourselves.
Other Gaming Activities
Even though there are no released thorough info of American Indian gaming revenues, anecdotal proof seems to propose that this segment has been as tough hit as the Business sector. The two Connecticut Indian gaming installations report slot earnings of $1.6 billion in 2008, symbolizing a fall of about 7 per cent, or almost $114 million, much more than doubling the three.five p.c fall from the year just before. This industry is apparently still reeling from the ripple-influence of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Division of Gaming studies that contributions dependent on a gaming income system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 when compared to the earlier yr lowering .8 % in the 1st quarter, 7.5 % in the second quarter, nine.5 p.c in the third quarter, and 16.one per cent in the fourth quarter.
Some SEC reporting Indian gaming qualities report comparable decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, stories that even though calendar year 2008 showed an practically 2 percent growth fee in gaming revenues, there was an 8.seven per cent decrease in the third quarter and an almost 10 per cent decrease in the fourth quarter of 2008, in comparison with 2007. Gaming income trends at close by Niagara Falls, Ontario were down one.5% in 2008 when compared with 2007.
It really is been a combined-bag for condition lotteries throughout the region. The North American Affiliation of State & Provincial Lotteries reports that U.S. lotteries created a complete of $sixty.6 billion in sales in fiscal 2008, up about three percent from the preceding year however some jurisdictions noted decreases, most notably California, which showed an eight percent drop. Inasmuch as some of these states are on numerous fiscal calendar year finishes, it would seem to be that the info does not mirror the influence of third and/or fourth quarter final results.
In accordance to info offered by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping seven p.c to $thirteen.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 much of the progress in yearly on line casino/racino revenues more than the a long time, and their influence is apt to proceed into the around long term.
Miami Dade voters accepted a ballot situation that makes it possible for each of 3 pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Pet Observe and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has nevertheless to introduced its plans. There are numerous other proposals getting considered that would additional broaden on line casino advancement throughout the condition.
The condition finally received around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,two hundred+ game casino located in Des Plaines just east of O’Hare. The new facility is not probably to open until 2010. There has also been some dialogue about permitting an improve in for every location gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.
The state’s expanded lottery system that allows for the growth of 4 casino gaming zones and slots at present horse and dog tracks seems mired, as only 1 facility is presently beneath building, whilst three other proposals have been 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 positioned so near to the state 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 ten table online games, together with a next phase owing to open in 2011 with 875 slots and twenty desk online games. The point out has extended the software method for the other 3 zones till April, 2009.
There is nevertheless a good deal of ‘jockeying’ going on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be again on the entrance-burner, but probably not solved in the course of the present legislative session.
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most recent getting the 390 area M Resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new accommodations contain two factors of the City Centre undertaking, and the Fountainebleau.
Pinnacle Entertainment’s new on line casino development projects in Baton Rouge and Lake Charles, even though delayed, are described to nevertheless be on-keep track of for opening this calendar year and/or early 2010.
There is a invoice beneath consideration that could far more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would get rid of the restriction that slots be located in 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing neighborhood residents to permit slots, could be taking into consideration relocating to a far more hospitable town.
A referendum was accepted in November, 2008 that permits for the advancement of five casinos with a complete of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the point out had predicted.
Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has run into various financing problems and while the resort part is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled back again relatively, is still on keep track of to open up this year.
Massachusetts, a sleeping-big in phrases of market place prospective, is even now maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but are not able to look to muster the political assist. A modern review concluded by Dartmouth University estimates that Massachusetts resident put in much more than $920 million final calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an alternative to produce casinos, nevertheless the topic is likely to be revisited, specifically 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 recently agreeing to continue augmenting purses with an added tax. The governor even so, has appointed a new panel to examine the state’s sagging racing system which ironically, can only be preserved by permitting the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze part)
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would lastly be created, the profitable bidder indicated an incapability to make the needed $370 million charge, citing the present lending local climate, and throwing the task back into the lap of the governor. Though the marketplace demand from customers in the spot could be regarded quite robust, the prospect of added competitiveness from close by Belmont could have an effect on Aqueduct’s underlining economic feasibility, specially considering that a bit significantly less than 30% of the internet win is retained by the operator.
Ideas to relocate Monticello Raceway into a vacation resort sophisticated are being reconsidered perhaps owing to equally the probable opening of at least one particular or probably two racino functions in the NY metro spot, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.
But yet another gaming proposal is currently being put forth in Ohio, following very last year’s model was turned down by the voters. This prepare phone calls for a single casino every in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense needed of $250 million, as well as an original licensing charge of $50 million, and a 33 p.c tax on gaming income.
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is predicted to be operational in August, ’09 even though Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are expected to start construction this year.
The Lodge at Deadwood is slated to open in the Fall of 2009, and include three hundred online games, a hundred and forty rooms and a vast range of features.
Legislators are proposing a voter referendum that would amend the state constitution to enable casino gambling in selected areas, as effectively as permit gambling on American Indian lands in Texas and at existing racetracks.
The Greenbriar, the state’s venerable vacation resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Condition govt has proffered the notion of permitting the resort to supply on line casino video games, but this energy is in also early a stage to have any traction one way or an additional.
A latest Supreme Courtroom ruling that restricts the having of lands into believe in on behalf of federally recognized American Indian tribes has additional stymied some new Class III gaming projects throughout the place. Additionally, there were eleven Indian on line casino initiatives rejected by the DOI final yr since of its new rule that casinos should be around ample to a reservation that tribal users can work at them. It has been proposed that the new Obama administration may possibly be a lot more sympathetic to the development of Indian gaming projects, but this problem has but to be dealt with.
Meanwhile, there are other Course III initiatives in the different levels of advancement. The Seneca casino project in Buffalo, NY, even though running a modest momentary facility, has delayed an presently beneath construction everlasting facility until the industry rebounds. They have also expressed an interest in building a casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could impact their programs for more substantial initiatives. There are new Indian gaming projects established to open in Michigan and Oklahoma this 12 months, and other individuals are in the planning phase. Texas could enable the reopening of Indian gaming services and enable other location and there are ideas afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to three new Course III casinos in 2009/10.
The Nor’easter Squeeze
Complete gaming revenue in Atlantic Town has declined seven.six percent, from $4.9 billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the metropolis is discovering alone in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been positioned in Atlantic City, the place it looked as if it may well really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Little by little nonetheless its market share was becoming encroached upon, very first by the advancement of a massive Class III gaming operation in Connecticut, and then another slots functions in Rhode Island, and then online 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 casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening close to Atlantic City’s potential potential customers. It is reliance on working day-trippers lulled it into a untrue perception of security, and it now finds itself possessing to redefine its mission assertion to “location resort.”
The only dilemma with this technique even so is that it is sick-outfitted to pull it off. For all intents and functions, Atlantic Metropolis is underneath-roomed and/or more than-gamed. There is basically not sufficient day-tripper industry to go close to, and their effective trading spot is tightening, as the peripheral populations northward now/will have more ready 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 entry, the city’s only actual competitive benefits are its lodge capacity and the availability of table games, even though the latter is very likely to eventuate in Pennsylvania, and probably Delaware. In purchase to sufficiently compete as a location resort the town needs to build added visitor rooms and not essentially gaming ability. By comparison, the Las Vegas Strip properties – correct gaming places, in that they do not have significantly of a day-journey market place, except for the ‘locals’ – have an common of .87 gaming positions for every guest room although Atlantic City’s average is two.seventy four positions for every guest place.
It is not a coincidence that Atlantic City’s two greatest accommodations, the Borgata and Harrah’s Marina, each of which extra new rooms in 2008, ended up the the very least impacted by the newest downturn. The Borgata skilled a gaming profits drop of 1.6 %, whilst Harrah’s Marina reported a four.nine per cent improve compared to 2007. Furthermore, the toughest hit venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity of rooms. In the meantime some of the venues are teetering on viability, which includes the the Trump homes and Resorts with the hoped for sale of the Tropicana has been further delayed, and losing valuation.
With a steady rise in gaming revenues through 2006, the metropolis appeared prime for more development, which precipitated planning for four new vacation resort assignments, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.five billion venture stays an iron skeleton, Pinnacle Entertainment has announced it may possibly seek out to offer its razed Sands site, MGM Mirage has shelved its casino ideas, and Penn National seems to have stopped its pursuit of the Bader Field airport internet site.