A Period of Adjustment
Oops! That large hissing audio is the gaming balloon that had been increasing above the many years, slowly and gradually losing air. But, it has not been a tide that reduced all ships nevertheless, as some rising and growing gaming jurisdictions confirmed powerful development in 2008.
Total, the professional and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.five per cent drop in gaming revenues for 2008, creating a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a gain of practically $one billion in 2008, thus bringing the Commercial sector market decrease to $one.8 billion, or 6.seven per cent. Nevada was the most significant loser in 2008, dropping nearly $one.3 billion, much more than 50 percent of which stemmed from the Las Vegas Strip phase.
For the most component, on line casino operators have been caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not right up until the third and fourth quarters when it really nosedived. Riding the crest of yr above yr industry expansion throughout the place and the availability of ample credit history and equity cash, new construction and growth proliferated in modern a long time. Right now, faced with the realities of declining, or at best stagnant demand from customers, several of these initiatives are now regarded more than-leveraged and/or above-sized. As a result several gaming companies are attempting to renegotiate their debt – manufactured a lot more tough by reduce valuations – whilst also paring down operational charges. The latter has turn into a really problematic conundrum when working with the competitors, especially in these jurisdictions that are now vying for marketplace shares with new emerging casino tasks in neighboring places. A subject matter we discuss far more totally in the Point out by State examination area of this publication.
As a consequence of these situations the gaming sector landscape is now strewn with impending fatalities. Among the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the list grows each 7 days.
“How lengthy will these economic situations persist, and are we at the base however?” are inquiries no one particular seems to be answering nevertheless. What is obvious however is that most gaming jurisdictions will have to find out how to offer with a smaller pie.
This examination involves only gaming revenues of certified casinos and pari-mutuel outlets that offer on line casino online games, and not Indian gaming operations, card rooms, or small non-on line casino sort slot areas. The entire post, including earnings tables is accessible on our internet page.
A crucial element that would seem to have arisen from the ashes of this recent trend is that a lot of on line casino projects were just way too large to support by themselves. The enter, in conditions of expense dollars, was not proportional to the output, in terms of net profit right after personal debt services, in comparison to previously achieved final results. A lot more and/or bigger is not always better. Seeing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the advancement of a lot more extensive amenities in several other jurisdictions. The flaw in this method nevertheless is that the expenses connected with widening market penetration and occasioned-use, are considerably larger than individuals incurred to appeal to the foundation marketplace.
As daytripper marketplaces become more aggressive, casino venues will have to depend more and more on their in-home resort patrons, and dimension their houses (and expectations) appropriately. Whilst Steve Wynn started out a major development in generating up-market mega-locations, there basically was not adequate demand from customers on the Strip to warrant the several other similar assignments that followed that aimed at the exact same market.
The trick is to strike a satisfied medium in venture configurations which of course need much less of a ‘seat-of-pants’ approach, and a single that is far more studied. A shameless plug for improvement consultants like ourselves.
Other Gaming Activities
Though there are no revealed in depth knowledge of American Indian gaming revenues, anecdotal proof appears to advise that this phase has been as difficult strike as the Business sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, representing a drop of about 7 percent, or virtually $114 million, far more than doubling the three.5 per cent fall from the year just before. This marketplace is seemingly still reeling from the ripple-impact of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Division of Gaming studies that contributions primarily based on a gaming revenue formula from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the preceding yr decreasing .8 per cent in the first quarter, seven.5 p.c in the 2nd quarter, nine.five per cent in the 3rd quarter, and 16.1 per cent in the fourth quarter.
pgslot reporting Indian gaming qualities report comparable decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, reviews that whilst calendar 12 months 2008 confirmed an practically 2 % expansion rate in gaming revenues, there was an eight.seven % drop in the third quarter and an virtually ten p.c decrease in the fourth quarter of 2008, when compared with 2007. Gaming earnings tendencies at nearby Niagara Falls, Ontario were down one.5% in 2008 when compared with 2007.
It truly is been a mixed-bag for state lotteries across the nation. The North American Association of Condition & Provincial Lotteries stories that U.S. lotteries created a overall of $sixty.6 billion in product sales in fiscal 2008, up about 3 p.c from the prior yr yet some jurisdictions reported decreases, most notably California, which confirmed an eight % drop. Inasmuch as some of these states are on numerous fiscal year ends, it would seem that the knowledge does not replicate the influence of 3rd and/or fourth quarter outcomes.
According to data presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling 7 % to $13.seven billion in 2008, as opposed to $fourteen.seven billion in 2007.
Planned & Proposed New Expansions
As formerly noted, it has been new gaming jurisdictions that have spawned significantly of the progress in annual on line casino/racino revenues in excess of the several years, and their affect is apt to carry on into the in close proximity to long term.
Miami Dade voters authorized a ballot concern that allows every single of three pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Puppy Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to announced its plans. There are many other proposals getting regarded as that would additional expand casino improvement throughout the point out.
The condition lastly got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,two hundred+ sport casino positioned in Des Plaines just east of O’Hare. The new facility is not likely to open right up until 2010. There has also been some dialogue about permitting an improve in per spot gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.
The state’s expanded lottery software that permits for the improvement of four on line casino gaming zones and slots at current horse and puppy tracks seems mired, as only 1 facility is presently underneath building, although a few other proposals have 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 situated so close to the condition line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table online games, alongside with a next period due to open up in 2011 with 875 slots and twenty desk game titles. The condition has extended the software process for the other a few zones till April, 2009.
There is nevertheless a good deal of ‘jockeying’ likely on, but the prospect of as a lot of as eight slot parlors and racinos appears to be back again on the front-burner, but likely not fixed during the current legislative session.
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most modern being the 390 room M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Tough Rock and new resorts include two factors of the Metropolis Heart venture, and the Fountainebleau.
Pinnacle Entertainment’s new casino growth assignments in Baton Rouge and Lake Charles, whilst delayed, are documented to even now be on-track for opening this calendar year and/or early 2010.
There is a invoice beneath consideration that could much more than double Penn National’s slot devices to 3,000, as properly as a proposal that would take away the restriction that slots be situated inside of five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to enable slots, may possibly be considering moving to a a lot more hospitable town.
A referendum was accredited in November, 2008 that enables for the advancement of 5 casinos with a complete of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the point out experienced predicted.
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open up in 2008, but has run into a variety of funding troubles and whilst the hotel part is open up, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled again somewhat, is even now on monitor to open this 12 months.
Massachusetts, a sleeping-giant in phrases of market place potential, is nevertheless maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but can’t look to muster the political assist. A latest review accomplished by Dartmouth College estimates that Massachusetts resident expended far more than $920 million very last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an option to build casinos, even so the topic is likely to be revisited, particularly if Massachusetts decides to go ahead. There are also tries in Maine to rethink its choices.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by not too long ago agreeing to continue augmenting purses with an additional tax. The governor even so, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by making it possible for the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze area)
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would last but not least be created, the profitable bidder indicated an incapability to make the required $370 million price, citing the existing lending weather, and throwing the venture back into the lap of the governor. Though the market demand in the spot could be deemed quite robust, the prospect of additional competition from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, specially considering that marginally less than 30% of the net acquire is retained by the operator.
Ideas to relocate Monticello Raceway into a vacation resort intricate are becoming reconsidered perhaps owing to both the probable opening of at the very least one or possibly two racino operations in the NY metro area, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.
However an additional gaming proposal is currently being put forth in Ohio, soon after previous year’s edition was turned down by the voters. This program phone calls for a single on line casino each in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment decision needed of $250 million, as nicely as an first licensing charge of $50 million, and a 33 per cent tax on gaming income.
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is envisioned to be operational in August, ’09 even though Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are predicted to start off development this 12 months.
The Lodge at Deadwood is slated to open in the Slide of 2009, and incorporate three hundred online games, one hundred forty rooms and a extensive assortment of features.
Legislators are proposing a voter referendum that would amend the condition structure to let on line casino gambling in selected locations, as effectively as permit gambling on American Indian lands in Texas and at present racetracks.
The Greenbriar, the state’s venerable vacation resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. Condition authorities has proffered the notion of permitting the vacation resort to offer casino online games, but this effort is in too early a phase to have any traction a single way or yet another.
A recent Supreme Courtroom ruling that restricts the taking of lands into have confidence in on behalf of federally identified American Indian tribes has more stymied some new Course III gaming tasks across the country. Furthermore, there ended up eleven Indian casino projects turned down by the DOI final 12 months simply because of its new rule that casinos should be in close proximity to ample to a reservation that tribal members can function at them. It has been advised that the new Obama administration might be far more sympathetic to the advancement of Indian gaming projects, but this problem has yet to be dealt with.
Meanwhile, there are other Course III assignments in the different levels of growth. The Seneca casino task in Buffalo, NY, although operating a small short term facility, has delayed an previously underneath building long lasting facility until finally the market rebounds. They have also expressed an fascination in building a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could influence their ideas for greater tasks. There are new Indian gaming initiatives set to open in Michigan and Oklahoma this yr, and other individuals are in the preparing stage. Texas may let the reopening of Indian gaming facilities and enable other venue and there are strategies afoot by the Navajos in Arizona to construct further casinos. California is poised to open up two to three new Class III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming revenue in Atlantic Metropolis has declined seven.six p.c, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is locating alone in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been located in Atlantic Metropolis, exactly where it seemed as if it might really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Slowly and gradually nonetheless its industry share was currently being encroached on, first by the growth of a massive Course III gaming procedure 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 not too long ago Pennsylvania.
Now, with the prepared opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening around Atlantic City’s future potential clients. It really is reliance on day-trippers lulled it into a bogus feeling of protection, and it now finds alone possessing to redefine its mission statement to “spot vacation resort.”
The only problem with this method nonetheless is that it is unwell-geared up to pull it off. For all intents and reasons, Atlantic Metropolis is below-roomed and/or above-gamed. There is simply not enough working day-tripper marketplace to go around, and their powerful trading spot is tightening, as the peripheral populations northward now/will have a lot more completely ready accessibility to a widened offer in New York (Yonkers, and before long at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only genuine competitive rewards are its hotel ability and the availability of table online games, despite the fact that the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In get to sufficiently compete as a spot vacation resort the town demands to build added visitor rooms and not always gaming capability. By comparison, the Las Vegas Strip homes – accurate gaming locations, in that they do not have considerably of a day-journey industry, other than for the ‘locals’ – have an regular of .87 gaming positions for each visitor room whilst Atlantic City’s typical is 2.seventy four positions for every guest space.
It is not a coincidence that Atlantic City’s two biggest accommodations, the Borgata and Harrah’s Marina, equally of which extra new rooms in 2008, have been the least impacted by the newest downturn. The Borgata seasoned a gaming income drop of 1.6 percent, while Harrah’s Marina reported a 4.9 per cent boost when compared to 2007. In addition, the hardest strike 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 homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and getting rid of valuation.
With a constant rise in gaming revenues via 2006, the town seemed prime for even more improvement, which precipitated organizing for 4 new resort assignments, each of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion undertaking remains an iron skeleton, Pinnacle Amusement has introduced it may find to market its razed Sands website, MGM Mirage has shelved its casino programs, and Penn Countrywide seems to have stopped its pursuit of the Bader Field airport website.