A Interval of Adjustment

Oops! That big hissing audio is the gaming balloon that had been growing more than the many years, slowly and gradually dropping air. But, it has not been a tide that reduced all ships however, as some rising and expanding gaming jurisdictions confirmed sturdy progress in 2008.

All round, the business and racetrack casino sectors (excluding Indian gaming), knowledgeable a three.five p.c decrease in gaming revenues for 2008, making a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a obtain of virtually $one billion in 2008, thus bringing the Industrial sector marketplace decrease to $1.8 billion, or 6.7 per cent. Nevada was the biggest loser in 2008, dropping almost $one.3 billion, much more than fifty percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, casino operators had been caught fairly flat-footed by the extent of the 2008 earnings downturn, as it was not until finally the 3rd and fourth quarters when it genuinely nosedived. Using the crest of calendar year over year industry growth throughout the country and the availability of enough credit history and fairness resources, new development and enlargement proliferated in current several years. Today, confronted with the realities of declining, or at greatest stagnant demand, several of these assignments are now considered above-leveraged and/or in excess of-sized. As a outcome a lot of gaming companies are trying to renegotiate their personal debt – made a lot more difficult by reduce valuations – while also paring down operational costs. The latter has turn out to be a quite problematic conundrum when working with the opposition, especially in these jurisdictions that are now vying for marketplace shares with new rising casino tasks in neighboring places. A matter we go over much more totally in the State by Condition examination section of this publication.

As a outcome of these problems the gaming business landscape is now strewn with impending fatalities. Between the much more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows each 7 days.

“How long will these financial situations persist, and are we at the base however?” are queries no one particular appears to be answering but. What is clear nonetheless is that most gaming jurisdictions will have to learn how to deal with a smaller sized pie.

Note:
This analysis contains only gaming revenues of accredited casinos and pari-mutuel stores that offer on line casino games, and not Indian gaming functions, card rooms, or little non-on line casino type slot locations. The complete post, such as income tables is accessible on our internet web page.

Input/Output Model

A essential aspect that would seem to have arisen from the ashes of this present pattern is that a lot of casino projects ended up just also big to support on their own. The enter, in terms of investment pounds, was not proportional to the output, in conditions of web revenue right after debt provider, when compared to previously accomplished results. More and/or larger is not always far better. Seeing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the growth of much more comprehensive amenities in a lot of other jurisdictions. The flaw in this technique even so is that the charges connected with widening market place penetration and occasioned-use, are substantially higher than these incurred to attract the foundation market.

As daytripper markets grow to be more competitive, casino venues will have to depend much more and much more on their in-home hotel patrons, and dimension their homes (and anticipations) accordingly. Whilst Steve Wynn began a key craze in making up-market mega-locations, there simply was not adequate desire on the Strip to warrant the numerous other comparable projects that followed that aimed at the same niche.

The trick is to strike a content medium in project configurations which of system call for less of a ‘seat-of-pants’ approach, and a single that is a lot more analyzed. A shameless plug for growth consultants like ourselves.

Other Gaming Routines

Even though there are no published thorough info of American Indian gaming revenues, anecdotal evidence appears to advise that this phase has been as hard hit as the Industrial sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, symbolizing a drop of about seven p.c, or virtually $114 million, far more than doubling the three.5 percent drop from the 12 months just before. This market place is apparently still reeling from the ripple-result of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming studies that contributions dependent on a gaming income method from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the preceding calendar year decreasing .eight % in the first quarter, seven.5 per cent in the second quarter, nine.5 per cent in the 3rd quarter, and sixteen.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming properties report comparable decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, reports that although calendar 12 months 2008 showed an nearly two per cent growth price in gaming revenues, there was an 8.seven percent drop in the third quarter and an nearly ten per cent decrease in the fourth quarter of 2008, in contrast with 2007. Gaming earnings traits at close by Niagara Falls, Ontario were down one.5% in 2008 when compared with 2007.

It really is been a blended-bag for point out lotteries throughout the place. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries created a overall of $60.six billion in revenue in fiscal 2008, up about three percent from the previous yr nevertheless some jurisdictions reported decreases, most notably California, which showed an 8 per cent drop. Inasmuch as some of these states are on numerous fiscal 12 months ends, it would look that the information does not reflect the effect of 3rd and/or fourth quarter final results.

In accordance to info provided by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping 7 p.c to $thirteen.7 billion in 2008, versus $14.7 billion in 2007.

Planned & Proposed New Expansions

As formerly observed, it has been new gaming jurisdictions that have spawned significantly of the progress in yearly casino/racino revenues in excess of the years, and their affect is apt to keep on into the close to potential.

Florida
Miami Dade voters authorized a ballot situation that makes it possible for every single of a few pari-mutuels to have a on line 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, even though the Calder set up in Miami Gardens has yet to declared its ideas. There are several other proposals being regarded as that would additional broaden casino growth all through the point out.

Illinois
The state last but not least acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,two hundred+ sport on line casino located in Des Plaines just east of O’Hare. The new facility is not very likely to open up until 2010. There has also been some dialogue about making it possible for an improve in per area gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that makes it possible for for the improvement of 4 on line casino gaming zones and slots at present horse and pet tracks seems mired, as only one facility is presently under development, although three other proposals have been 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 situated so near to the point out line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk video games, along with a next period thanks to open in 2011 with 875 slots and twenty table video games. The point out has prolonged the software approach for the other 3 zones until finally April, 2009.

Kentucky
There is nevertheless a great deal of ‘jockeying’ heading on, but the prospect of as numerous as 8 slot parlors and racinos appears to be back again on the front-burner, but very likely not settled for the duration of the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most modern getting the 390 space M Resort in Henderson. There are expansions underway at equally Caesars Palace and Tough Rock and new hotels include two elements of the Metropolis Heart undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino improvement projects in Baton Rouge and Lake Charles, while delayed, are reported to nevertheless be on-observe for opening this yr and/or early 2010.

Maine
There is a monthly bill underneath consideration that could far more than double Penn National’s slot equipment to 3,000, as nicely as a proposal that would get rid of the restriction that slots be positioned inside five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby people to permit slots, may possibly be taking into consideration relocating to a much more hospitable city.

Maryland
A referendum was accepted in November, 2008 that enables for the advancement of five casinos with a complete of 15,000 slots, and now the bidding war is afoot although it is not as extreme as the point out experienced predicted.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has operate into numerous financing issues and while the resort portion is open up, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back again fairly, is even now on monitor to open up this yr.

คาสิโน , a sleeping-giant in conditions of market potential, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t appear to muster the political assist. A modern research finished by Dartmouth University estimates that Massachusetts resident put in more than $920 million previous year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an alternative to produce casinos, even so the subject is probably to be revisited, particularly if Massachusetts decides to go forward. There are also makes an attempt in Maine to reconsider its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by lately agreeing to proceed augmenting purses with an extra tax. The governor nonetheless, has appointed a new panel to examine the state’s sagging racing software which ironically, can only be preserved by permitting the tracks to have slot machines especially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it seemed as if Aqueduct’s four,five hundred VLT facility would ultimately be produced, the winning bidder indicated an lack of ability to make the required $370 million payment, citing the current lending local climate, and throwing the undertaking back into the lap of the governor. Although the market demand in the spot could be considered fairly strong, the prospect of added opposition from close by Belmont could have an affect on Aqueduct’s underlining financial feasibility, especially taking into consideration that somewhat less than 30% of the internet win is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort complex are being reconsidered probably owing to equally the probable opening of at minimum one particular or probably two racino functions in the NY metro area, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.

Ohio
However one more gaming proposal is currently being place forth in Ohio, after previous year’s variation was turned down by the voters. This program phone calls for one on line casino every single in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expenditure necessary of $250 million, as well as an first licensing price of $fifty million, and a 33 % tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot amenities nonetheless wallow in a political mire, but are predicted to start building this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and include three hundred online games, 140 rooms and a broad assortment of features.

Texas
Legislators are proposing a voter referendum that would amend the state structure to permit on line casino gambling in selected regions, as effectively as enable gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an supply. Condition government has proffered the notion of making it possible for the vacation resort to provide casino games, but this hard work is in too early a stage to have any traction 1 way or one more.

Indian Gaming
A modern Supreme Courtroom ruling that restricts the using of lands into have confidence in on behalf of federally regarded American Indian tribes has further stymied some new Course III gaming tasks throughout the place. In addition, there had been eleven Indian on line casino projects rejected by the DOI last yr because of its new rule that casinos must be in close proximity to adequate to a reservation that tribal users can work at them. It has been proposed that the new Obama administration might be a lot more sympathetic to the growth of Indian gaming initiatives, but this problem has yet to be resolved.

Meanwhile, there are other Class III initiatives in the various stages of improvement. The Seneca casino project in Buffalo, NY, while functioning a little short-term facility, has delayed an currently below development long term facility until finally the marketplace rebounds. They have also expressed an curiosity in developing a casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could impact their programs for larger initiatives. There are new Indian gaming initiatives set to open up in Michigan and Oklahoma this 12 months, and other folks are in the preparing stage. Texas might enable the reopening of Indian gaming facilities and allow other location and there are programs afoot by the Navajos in Arizona to build additional casinos. California is poised to open up two to a few new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming income in Atlantic Metropolis has declined 7.six per cent, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the town is finding alone in an extreme comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast were situated in Atlantic Town, where it seemed as if it may well really even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly however its market place share was getting encroached upon, first by the growth of a huge Class III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening around Atlantic City’s potential potential clients. It’s reliance on working day-trippers lulled it into a false feeling of stability, and it now finds alone possessing to redefine its mission assertion to “location vacation resort.”

The only difficulty with this technique nevertheless is that it is ill-equipped to pull it off. For all intents and functions, Atlantic City is under-roomed and/or in excess of-gamed. There is simply not adequate day-tripper industry to go around, and their effective investing region is tightening, as the peripheral populations northward now/will have more ready entry to a widened provide 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 entry, the city’s only actual aggressive positive aspects are its hotel capacity and the availability of desk video games, despite the fact that the latter is likely to eventuate in Pennsylvania, and possibly Delaware. In order to sufficiently contend as a vacation spot vacation resort the city demands to create added guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip houses – true gaming places, in that they do not have considerably of a day-excursion market place, besides for the ‘locals’ – have an common of .87 gaming positions for every visitor area even though Atlantic City’s regular is 2.seventy four positions per visitor space.

It is not a coincidence that Atlantic City’s two premier hotels, the Borgata and Harrah’s Marina, both of which included new rooms in 2008, had been the the very least impacted by the most recent downturn. The Borgata skilled a gaming income drop of one.6 percent, whilst Harrah’s Marina described a 4.nine per cent improve in comparison to 2007. In addition, the most difficult hit 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 houses and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.

With a regular rise in gaming revenues via 2006, the town seemed primary for additional advancement, which precipitated preparing for four new vacation resort projects, each and every of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion task stays an iron skeleton, Pinnacle Amusement has announced it may possibly seek to promote its razed Sands website, MGM Mirage has shelved its on line casino programs, and Penn National seems to have stopped its pursuit of the Bader Area airport internet site.