A Interval of Adjustment

Oops! That big hissing seem is the gaming balloon that experienced been expanding in excess of the many years, little by little dropping air. But, it has not been a tide that lowered all ships however, as some rising and growing gaming jurisdictions confirmed strong development in 2008.

All round, the commercial and racetrack casino sectors (excluding Indian gaming), knowledgeable a three.5 per cent decrease in gaming revenues for 2008, making a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a achieve of virtually $1 billion in 2008, thereby bringing the Professional sector market decline to $1.eight billion, or 6.seven p.c. Nevada was the biggest loser in 2008, dropping practically $one.three billion, much more than 50 % of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, on line casino operators ended up caught relatively flat-footed by the extent of the 2008 earnings downturn, as it was not until the third and fourth quarters when it genuinely nosedived. Riding the crest of calendar year more than year market place progress throughout the country and the availability of sufficient credit history and equity cash, new design and expansion proliferated in modern years. These days, faced with the realities of declining, or at greatest stagnant need, several of these assignments are now considered in excess of-leveraged and/or above-sized. As a outcome several gaming companies are attempting to renegotiate their personal debt – manufactured much more challenging by reduce valuations – even though also paring down operational fees. The latter has become a really problematic conundrum when working with the competition, specially in these jurisdictions that are now vying for market place shares with new emerging casino projects in neighboring regions. A matter we examine much more completely in the Point out by Point out investigation section of this publication.

As a outcome of these circumstances the gaming business landscape is now strewn with impending fatalities. Among the a lot more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the listing grows each and every 7 days.

“How extended will these economic conditions persist, and are we at the base however?” are inquiries no 1 appears to be answering but. What is distinct even so is that most gaming jurisdictions will have to understand how to offer with a scaled-down pie.

Observe:
This evaluation consists of only gaming revenues of licensed casinos and pari-mutuel retailers that offer casino games, and not Indian gaming functions, card rooms, or tiny non-on line casino type slot areas. The complete article, which includes income tables is available on our web website page.

Input/Output Product

A essential factor that appears to have arisen from the ashes of this present craze is that many casino projects have been just as well big to assist on their own. The enter, in phrases of expense pounds, was not proportional to the output, in phrases of web earnings soon after personal debt provider, in comparison to previously reached benefits. More and/or even bigger is not constantly greater. Seeing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the advancement of a lot more complete features in many other jurisdictions. The flaw in this method nonetheless is that the expenses related with widening market penetration and occasioned-use, are significantly greater than people incurred to entice the base market.

As daytripper marketplaces become much more competitive, on line casino venues will have to depend a lot more and more on their in-property hotel patrons, and measurement their houses (and expectations) accordingly. Whilst Steve Wynn started a key craze in generating up-market place mega-destinations, there just was not sufficient demand from customers on the Strip to warrant the many other related projects that followed that aimed at the same area of interest.

The trick is to strike a satisfied medium in venture configurations which of course require much less of a ‘seat-of-pants’ technique, and one particular that is far more analyzed. A shameless plug for development consultants like ourselves.

Other Gaming Routines

Despite the fact that there are no revealed detailed knowledge of American Indian gaming revenues, anecdotal proof seems to advise that this segment has been as difficult hit as the Professional sector. The two Connecticut Indian gaming installations report slot earnings of $1.six billion in 2008, symbolizing a fall of about seven per cent, or nearly $114 million, more than doubling the 3.five percent fall from the calendar year prior to. This market place is apparently nonetheless reeling from the ripple-result of a casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming reports that contributions dependent on a gaming profits formula from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 when compared to the preceding 12 months decreasing .eight % in the very first quarter, seven.five p.c in the second quarter, nine.five p.c in the third quarter, and 16.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, reports that whilst calendar year 2008 showed an virtually 2 % progress charge in gaming revenues, there was an 8.seven % drop in the 3rd quarter and an practically ten % decline in the fourth quarter of 2008, in contrast with 2007. Gaming revenue trends at nearby Niagara Falls, Ontario had been down one.five% in 2008 in contrast with 2007.

It is been a blended-bag for point out lotteries across the nation. The North American Affiliation of Condition & Provincial Lotteries stories that U.S. lotteries generated a total of $60.six billion in product sales in fiscal 2008, up about three per cent from the earlier 12 months however some jurisdictions noted decreases, most notably California, which showed an 8 % drop. Inasmuch as some of these states are on numerous fiscal yr finishes, it would appear that the info does not reflect the influence of third and/or fourth quarter outcomes.

According to data provided by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 percent to $13.seven billion in 2008, as opposed to $14.seven billion in 2007.

Planned & Proposed New Expansions

As formerly mentioned, it has been new gaming jurisdictions that have spawned a lot of the expansion in annual on line casino/racino revenues more than the years, and their impact is apt to keep on into the near long term.

Florida
Miami Dade voters approved a ballot situation that permits each of 3 pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Puppy Track and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has nevertheless to declared its strategies. There are many other proposals being regarded as that would even more expand on line casino growth through the point out.

Illinois
The point out last but not least got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ sport on line casino located in Des Plaines just east of O’Hare. The new facility is not probably to open up until finally 2010. There has also been some dialogue about making it possible for an enhance in per location gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that enables for the growth of 4 casino gaming zones and slots at existing horse and dog tracks seems mired, as only 1 facility is presently under development, while 3 other proposals were rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is found so close to the condition line that its parking whole lot is in Kansas. The Boot Hill On line casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk online games, together with a 2nd phase due to open up in 2011 with 875 slots and 20 desk video games. The condition has extended the application procedure for the other three zones till April, 2009.

Kentucky
There is nonetheless a whole lot of ‘jockeying’ heading on, but the prospect of as many as eight slot parlors and racinos seems to be back on the front-burner, but probably not settled throughout the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most modern becoming the 390 room M Resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new hotels incorporate two elements of the Town Heart undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino growth assignments in Baton Rouge and Lake Charles, even though delayed, are described to nonetheless be on-monitor for opening this yr and/or early 2010.

Maine
There is a invoice beneath thing to consider that could a lot more than double Penn National’s slot devices to 3,000, as well as a proposal that would get rid of the restriction that slots be situated in 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing local residents to allow slots, could be considering relocating to a far more hospitable town.

Maryland
A referendum was authorized in November, 2008 that permits for the improvement of five casinos with a complete of 15,000 slots, and now the bidding war is afoot although it is not as intense as the state experienced anticipated.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has run into a variety of financing issues and while the resort part is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back again somewhat, is even now on observe to open this calendar year.

New England
Massachusetts, a sleeping-big in terms of marketplace potential, is still maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to seem to be to muster the political assistance. A recent study finished by Dartmouth College estimates that Massachusetts resident expended far more than $920 million last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to create casinos, nonetheless the topic is probably to be revisited, especially if Massachusetts decides to go forward. There are also makes an attempt in Maine to reconsider its alternatives.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by lately 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 allowing the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it looked as if Aqueduct’s four,500 VLT facility would ultimately be created, the profitable bidder indicated an inability to make the necessary $370 million charge, citing the recent lending weather, and throwing the task back into the lap of the governor. Although the marketplace desire in the region could be deemed really sturdy, the prospect of further opposition from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, particularly thinking about that a bit less than 30% of the net acquire is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort intricate are currently being reconsidered probably owing to both the probable opening of at minimum a single or maybe two racino operations in the NY metro area, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.

Ohio
Nevertheless another gaming proposal is becoming set forth in Ohio, right after very last year’s model was turned down by the voters. This program calls for a single casino each in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense required of $250 million, as well as an original licensing charge of $fifty million, and a 33 p.c tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot amenities even now wallow in a political mire, but are expected to start off building this year.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and incorporate three hundred video games, 140 rooms and a vast selection of amenities.

Texas
Legislators are proposing a voter referendum that would amend the point out structure to allow casino gambling in selected regions, as effectively as let 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 Accommodations, who have reportedly tendered an offer you. Condition federal government has proffered the idea of making it possible for the vacation resort to supply casino online games, but this hard work is in too early a phase to have any traction one way or yet another.

Indian Gaming
A modern Supreme Court ruling that restricts the taking of lands into believe in on behalf of federally regarded American Indian tribes has further stymied some new Class III gaming assignments across the region. In addition, there ended up eleven Indian on line casino tasks turned down by the DOI previous 12 months simply because of its new rule that casinos need to be around sufficient to a reservation that tribal users can work at them. It has been advised that the new Obama administration may possibly be far more sympathetic to the development of Indian gaming tasks, but this issue has but to be tackled.

Meanwhile, there are other Class III tasks in the different levels of improvement. The Seneca on line casino undertaking in Buffalo, NY, even though running a small temporary facility, has delayed an previously below construction permanent facility right up until the market place rebounds. They have also expressed an fascination in building a casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could influence their plans for bigger assignments. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this 12 months, and other folks are in the organizing stage. Texas could let the reopening of Indian gaming services and allow other venue and there are plans afoot by the Navajos in Arizona to build added casinos. California is poised to open two to a few new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming profits in Atlantic Town has declined seven.6 percent, from $four.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the metropolis is discovering by itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were situated in Atlantic Metropolis, where it looked as if it might really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly and gradually however its market place share was currently being encroached on, 1st by the improvement of a large Class III gaming procedure in Connecticut, and then one more slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening about Atlantic City’s future prospective customers. It really is reliance on day-trippers lulled it into a fake perception of security, and it now finds itself possessing to redefine its mission statement to “destination vacation resort.”

The only problem with this strategy however is that it is sick-outfitted to pull it off. For all intents and functions, Atlantic City is below-roomed and/or over-gamed. There is just not adequate working day-tripper industry to go all around, and their powerful buying and selling area is tightening, as the peripheral populations northward now/will have much more all set access to a widened provide in New York (Yonkers, and quickly at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only genuine competitive rewards are its lodge ability and the availability of table video games, although the latter is very likely to eventuate in Pennsylvania, and possibly Delaware. In purchase to adequately contend as a location resort the city needs to develop added guest rooms and not always gaming ability. By comparison, the Las Vegas Strip homes – accurate gaming locations, in that they do not have considerably of a day-excursion market place, apart from for the ‘locals’ – have an typical of .87 gaming positions per visitor area while Atlantic City’s typical is two.74 positions per guest space.

It is not a coincidence that Atlantic City’s two premier hotels, the Borgata and Harrah’s Marina, each of which added new rooms in 2008, had been the minimum impacted by the most current downturn. https://www.ut9winth.com experienced a gaming earnings fall of 1.6 p.c, even though Harrah’s Marina reported a 4.nine percent increase compared to 2007. Furthermore, the most difficult hit venues, namely 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, like the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and shedding valuation.

With a regular increase in gaming revenues via 2006, the city appeared prime for additional growth, which precipitated organizing for 4 new resort projects, each and every of which have now been indefinitely delayed. Revel Leisure Group’s $two.5 billion venture stays an iron skeleton, Pinnacle Enjoyment has introduced it may possibly seek out to offer its razed Sands web site, MGM Mirage has shelved its on line casino programs, and Penn National seems to have stopped its pursuit of the Bader Subject airport website.