A Time period of Adjustment

Oops! That giant hissing audio is the gaming balloon that experienced been developing over the a long time, slowly and gradually getting rid of air. But, it has not been a tide that decreased all ships however, as some emerging and expanding gaming jurisdictions confirmed robust expansion in 2008.

Total, the professional and racetrack casino sectors (excluding Indian gaming), seasoned a three.five % drop 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 drop, as they showed a achieve of practically $one billion in 2008, thus bringing the Industrial sector market drop to $1.8 billion, or 6.seven percent. Nevada was the biggest loser in 2008, dropping nearly $one.three billion, far more than half of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most element, casino operators have been caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not until finally the third and fourth quarters when it genuinely nosedived. Riding the crest of yr over calendar year market place development throughout the nation and the availability of sufficient credit rating and fairness cash, new design and expansion proliferated in modern many years. Nowadays, faced with the realities of declining, or at best stagnant desire, several of these projects are now regarded above-leveraged and/or over-sized. As a result several gaming organizations are attempting to renegotiate their debt – manufactured a lot more difficult by lower valuations – although also paring down operational costs. The latter has turn out to be a really problematic conundrum when working with the competition, specially in individuals jurisdictions that are now vying for marketplace shares with new rising casino tasks in neighboring places. A subject we examine much more totally in the Point out by Point out analysis segment of this publication.

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

“How extended will these economic conditions persist, and are we at the bottom however?” are questions no a single seems to be answering but. What is very clear nonetheless is that most gaming jurisdictions will have to understand how to offer with a more compact pie.

Note:
This investigation includes only gaming revenues of licensed casinos and pari-mutuel stores that provide on line casino game titles, and not Indian gaming operations, card rooms, or little non-casino variety slot spots. The total article, which includes revenue tables is accessible on our internet website page.

Enter/Output Model

A key factor that seems to have arisen from the ashes of this present pattern is that a lot of on line casino initiatives have been just way too large to assist by themselves. The input, in phrases of expenditure dollars, was not proportional to the output, in phrases of web income following debt services, when compared to previously reached benefits. More and/or larger is not constantly better. Viewing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of a lot more complete features in several other jurisdictions. The flaw in this strategy nevertheless is that the expenses linked with widening market penetration and occasioned-use, are drastically greater than individuals incurred to attract the foundation marketplace.

As daytripper markets grow to be a lot more competitive, casino venues will have to rely more and more on their in-house resort patrons, and measurement their qualities (and expectations) accordingly. Although Steve Wynn started out a key trend in making up-marketplace mega-destinations, there merely was not ample desire on the Strip to warrant the several other related tasks that adopted that aimed at the identical area of interest.

The trick is to strike a satisfied medium in project configurations which of training course demand much less of a ‘seat-of-pants’ approach, and 1 that is a lot more researched. A shameless plug for development consultants like ourselves.

Other Gaming Routines

Despite the fact that there are no printed thorough knowledge of American Indian gaming revenues, anecdotal proof seems to propose that this section has been as difficult hit as the Industrial sector. The two Connecticut Indian gaming installations report slot earnings of $1.6 billion in 2008, representing a drop of about seven %, or practically $114 million, a lot more than doubling the three.5 p.c drop from the yr before. This marketplace is apparently nevertheless reeling from the ripple-impact of a casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section of Gaming reports that contributions based mostly on a gaming profits formula from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in contrast to the preceding calendar year decreasing .eight p.c in the very first quarter, seven.five p.c in the second quarter, nine.5 per cent in the third quarter, and sixteen.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, reviews that whilst calendar yr 2008 confirmed an almost two p.c development price in gaming revenues, there was an eight.seven p.c decrease in the third quarter and an almost ten per cent decrease in the fourth quarter of 2008, when compared with 2007. Gaming earnings tendencies at close by Niagara Falls, Ontario have been down 1.five% in 2008 compared with 2007.

It’s been a mixed-bag for point out lotteries across the region. The North American Association of Point out & Provincial Lotteries reports that U.S. lotteries created a overall of $sixty.six billion in sales in fiscal 2008, up about 3 p.c from the previous 12 months nevertheless some jurisdictions described decreases, most notably California, which showed an 8 per cent fall. Inasmuch as some of these states are on different fiscal calendar year finishes, it would look that the data does not reflect the effect of 3rd and/or fourth quarter results.

In accordance to info supplied by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 percent to $thirteen.seven billion in 2008, versus $14.seven billion in 2007.

Planned & Proposed New Expansions

As previously mentioned, it has been new gaming jurisdictions that have spawned much of the progress in once-a-year on line casino/racino revenues above the years, and their impact is apt to keep on into the close to long term.

Florida
Miami Dade voters accepted a ballot concern that permits each of 3 pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Canine Monitor and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, whilst the Calder set up in Miami Gardens has nevertheless to introduced its strategies. There are several other proposals currently being deemed that would more expand on line casino improvement through the state.

Illinois
The point out lastly received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,two hundred+ game 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 discussion about enabling an improve in for each area gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that allows for the development of 4 casino gaming zones and slots at current horse and puppy tracks appears mired, as only one facility is presently beneath development, whilst a few other proposals were 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 good deal is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten table game titles, along with a next phase thanks to open in 2011 with 875 slots and 20 table video games. The state has extended the software approach for the other three zones till April, 2009.

Kentucky
There is nonetheless a lot of ‘jockeying’ going on, but the prospect of as several as 8 slot parlors and racinos appears to be again on the entrance-burner, but very likely not resolved during the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most modern getting the 390 area M Resort in Henderson. There are expansions underway at the two Caesars Palace and Difficult Rock and new resorts incorporate two elements of the City Heart project, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino improvement assignments in Baton Rouge and Lake Charles, whilst delayed, are documented to even now be on-track for opening this yr and/or early 2010.

Maine
There is a bill beneath thing to consider that could far more than double Penn National’s slot machines to three,000, as effectively as a proposal that would take away the restriction that slots be found within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local inhabitants to permit slots, could be considering shifting to a far more hospitable town.

Maryland
A referendum was accepted in November, 2008 that makes it possible for for the advancement of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the state experienced expected.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has run into a variety of funding concerns and while the hotel part is open, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back fairly, is nevertheless on monitor to open this yr.

New England
Massachusetts, a sleeping-huge in conditions of market prospective, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to look to muster the political help. A current study completed by Dartmouth College estimates that Massachusetts resident put in much more than $920 million very last calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to develop casinos, nevertheless the matter is most likely to be revisited, specifically if Massachusetts decides to go forward. There are also tries in Maine to rethink its options.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by recently agreeing to carry on augmenting purses with an further tax. The governor even so, has appointed a new panel to research the state’s sagging racing program which ironically, can only be preserved by permitting the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would finally be developed, the profitable bidder indicated an incapacity to make the required $370 million charge, citing the present lending local weather, and throwing the project again into the lap of the governor. Although the market place demand from customers in the region could be deemed fairly powerful, the prospect of further competitiveness from close by Belmont could have an impact on Aqueduct’s underlining economic feasibility, especially considering that slightly significantly less than thirty% of the internet win is retained by the operator.

Ideas to relocate Monticello Raceway into a resort sophisticated are becoming reconsidered perhaps owing to the two the possible opening of at least 1 or maybe two racino functions in the NY metro area, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

ufabet
Yet yet another gaming proposal is getting put forth in Ohio, soon after last year’s variation was turned down by the voters. This plan calls for one particular casino every single in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure required of $250 million, as effectively as an initial licensing charge of $fifty million, and a 33 per cent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers project in Pittsburgh is envisioned to be operational in August, ’09 whilst Philadelphia’s two slot services still wallow in a political mire, but are anticipated to start off development this calendar year.

South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and include 300 games, one hundred forty rooms and a broad variety of amenities.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to allow on line casino gambling in designated places, as properly as enable gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an provide. Condition authorities has proffered the notion of making it possible for the vacation resort to offer on line casino video games, but this energy is in also early a phase to have any traction one particular way or another.

Indian Gaming
A current Supreme Court ruling that restricts the using of lands into believe in on behalf of federally identified American Indian tribes has more stymied some new Class III gaming tasks throughout the nation. In addition, there had been eleven Indian casino assignments rejected by the DOI very last yr because of its new rule that casinos have to be close to sufficient to a reservation that tribal associates can work at them. It has been advised that the new Obama administration might be a lot more sympathetic to the growth of Indian gaming tasks, but this issue has however to be tackled.

Meanwhile, there are other Course III tasks in the a variety of levels of advancement. The Seneca on line casino venture in Buffalo, NY, even though operating a modest temporary facility, has delayed an presently below development everlasting facility until the market rebounds. They have also expressed an fascination in developing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could impact their ideas for more substantial assignments. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this year, and others are in the organizing phase. Texas may permit the reopening of Indian gaming amenities and enable other location and there are strategies afoot by the Navajos in Arizona to construct further casinos. California is poised to open up two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming income in Atlantic Metropolis has declined 7.6 percent, from $four.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the metropolis is discovering itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were found in Atlantic Metropolis, where it seemed as if it may possibly actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly even so its market share was getting encroached on, initial by the development of a big Course III gaming operation in Connecticut, and then one more slots operations in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.

Now, with the planned 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 foreseeable future potential clients. It is reliance on working day-trippers lulled it into a bogus perception of stability, and it now finds by itself possessing to redefine its mission statement to “location vacation resort.”

The only issue with this approach even so is that it is sick-equipped to pull it off. For all intents and reasons, Atlantic Town is underneath-roomed and/or in excess of-gamed. There is merely not sufficient working day-tripper market place to go around, and their efficient trading area is tightening, as the peripheral populations northward now/will have much more completely ready accessibility to a widened offer in New York (Yonkers, and quickly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only real aggressive positive aspects are its hotel capacity and the availability of table games, despite the fact that the latter is very likely to eventuate in Pennsylvania, and possibly Delaware. In get to sufficiently contend as a spot vacation resort the city wants to develop additional guest rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip properties – true gaming locations, in that they do not have considerably of a day-trip industry, apart from for the ‘locals’ – have an average of .87 gaming positions per guest space whilst Atlantic City’s average is two.74 positions for every guest area.

It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, equally of which added new rooms in 2008, had been the least impacted by the newest downturn. The Borgata experienced a gaming earnings fall of one.six %, although Harrah’s Marina documented a 4.9 per cent enhance in contrast to 2007. Additionally, the hardest strike venues, specifically 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, including the the Trump homes and Resorts with the hoped for sale of the Tropicana has been even more delayed, and shedding valuation.

With a constant increase in gaming revenues by way of 2006, the city seemed primary for further advancement, which precipitated organizing for four new vacation resort tasks, every of which have now been indefinitely delayed. Revel Amusement Group’s $2.5 billion venture stays an iron skeleton, Pinnacle Entertainment has declared it might look for to promote its razed Sands internet site, MGM Mirage has shelved its on line casino strategies, and Penn Nationwide appears to have stopped its pursuit of the Bader Area airport internet site.