A Interval of Adjustment
Oops! That huge hissing sound is the gaming balloon that had been expanding above the years, little by little losing air. But, it has not been a tide that decreased all ships nevertheless, as some rising and growing gaming jurisdictions confirmed strong growth in 2008.
All round, the professional and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.5 % decline in gaming revenues for 2008, producing a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a acquire of virtually $one billion in 2008, thus bringing the Professional sector marketplace decline to $1.eight billion, or 6.7 p.c. Nevada was the most significant loser in 2008, dropping almost $1.3 billion, much more than 50 percent of which stemmed from the Las Vegas Strip section.
For the most component, casino operators ended up caught relatively flat-footed by the extent of the 2008 earnings downturn, as it was not till the third and fourth quarters when it genuinely nosedived. Driving the crest of calendar year over 12 months marketplace development across the country and the availability of enough credit history and equity funds, new building and growth proliferated in modern a long time. These days, faced with the realities of declining, or at very best stagnant demand from customers, a lot of of these assignments are now regarded over-leveraged and/or more than-sized. As a consequence numerous gaming companies are trying to renegotiate their financial debt – created far more tough by reduce valuations – although also paring down operational fees. The latter has become a quite problematic conundrum when working with the competitiveness, specially in people jurisdictions that are now vying for industry shares with new rising on line casino tasks in neighboring places. A subject we go over far more fully in the State by State analysis section of this publication.
As a consequence of these problems the gaming sector landscape is now strewn with impending fatalities. Amongst the more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the record grows each week.
“How extended will these economic problems persist, and are we at the base yet?” are questions no one appears to be answering however. What is very clear nonetheless is that most gaming jurisdictions will have to understand how to deal with a smaller sized pie.
This investigation consists of only gaming revenues of accredited casinos and pari-mutuel shops that offer you casino video games, and not Indian gaming operations, card rooms, or modest non-casino sort slot spots. The whole report, which includes revenue tables is offered on our net page.
A key element that looks to have arisen from the ashes of this recent trend is that many on line casino projects have been just way too huge to assist by themselves. The input, in conditions of investment dollars, was not proportional to the output, in phrases of web income following personal debt provider, compared to previously attained benefits. A lot more and/or bigger is not often greater. Seeing the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of far more extensive features in many other jurisdictions. The flaw in this method however is that the charges associated with widening market place penetration and occasioned-use, are significantly increased than these incurred to draw in the foundation industry.
As daytripper marketplaces become a lot more competitive, on line casino venues will have to rely more and far more on their in-property lodge patrons, and size their houses (and expectations) appropriately. Even though Steve Wynn began a main pattern in generating up-marketplace mega-places, there merely was not enough desire on the Strip to warrant the a lot of other similar tasks that adopted that aimed at the very same market.
The trick is to strike a happy medium in task configurations which of course require less of a ‘seat-of-pants’ method, and 1 that is far more researched. A shameless plug for development consultants like ourselves.
Other Gaming Pursuits
Though there are no published in depth information of American Indian gaming revenues, anecdotal evidence appears to advise that this section has been as challenging strike as the Commercial sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, representing a fall of about 7 per cent, or nearly $114 million, much more than doubling the 3.5 per cent drop from the year just before. This marketplace is evidently still reeling from the ripple-impact of a on line 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 on a gaming earnings formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in contrast to the preceding calendar year reducing .eight p.c in the very first quarter, seven.5 p.c in the next quarter, nine.5 percent in the 3rd quarter, and 16.one % in the fourth quarter.
Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that whilst calendar year 2008 confirmed an nearly 2 p.c expansion fee in gaming revenues, there was an 8.seven percent decrease in the third quarter and an practically ten percent decline in the fourth quarter of 2008, when compared with 2007. Gaming profits developments at close by Niagara Falls, Ontario have been down 1.5% in 2008 compared with 2007.
It is been a mixed-bag for condition lotteries across the country. The North American Association of Point out & Provincial Lotteries studies that U.S. lotteries generated a total of $sixty.six billion in sales in fiscal 2008, up about 3 % from the prior year however some jurisdictions noted decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on numerous fiscal 12 months finishes, it would seem to be that the information does not reflect the impact of third and/or fourth quarter final results.
In accordance to information supplied by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling seven p.c to $13.7 billion in 2008, as opposed to $14.seven billion in 2007.
Planned & Proposed New Expansions
As beforehand observed, it has been new gaming jurisdictions that have spawned a lot of the progress in yearly casino/racino revenues over the many years, and their effect is apt to proceed into the in close proximity to potential.
Miami Dade voters accepted a ballot problem that allows each and every of three pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Puppy Keep track of and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has nevertheless to declared its strategies. There are numerous other proposals being considered that would even more grow casino development through the state.
The point out finally acquired close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,two hundred+ sport on line 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 enabling an boost in per area gaming positions and slots at racetracks, despite the fact that neither initiative appears 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 existing horse and canine tracks appears mired, as only a single facility is presently below development, although 3 other proposals have been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so close to the state 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 table game titles, along with a next stage thanks to open up in 2011 with 875 slots and twenty desk games. The state has extended the software method for the other three zones till April, 2009.
There is even now a great deal of ‘jockeying’ likely on, but the prospect of as many as 8 slot parlors and racinos appears to be again on the entrance-burner, but probably not settled throughout the recent legislative session.
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most latest becoming the 390 area M Resort in Henderson. There are expansions underway at equally Caesars Palace and Difficult Rock and new resorts consist of two components of the City Center undertaking, and the Fountainebleau.
Pinnacle Entertainment’s new casino growth initiatives in Baton Rouge and Lake Charles, whilst delayed, are noted to nonetheless be on-monitor for opening this year and/or early 2010.
There is a monthly bill below consideration that could a lot more than double Penn National’s slot devices to three,000, as nicely as a proposal that would take away the restriction that slots be situated inside of five miles of the observe. mega888 Scarborough Downs, which has been unsuccessful in convincing neighborhood residents to allow slots, may possibly be thinking about shifting to a far more hospitable city.
A referendum was accredited in November, 2008 that permits for the development of five casinos with a complete of fifteen,000 slots, and now the bidding war is afoot although it is not as intensive as the state experienced anticipated.
Grand Soleil On line casino Vacation resort in Natchez had been slated to open in 2008, but has run into a variety of funding concerns and even though the resort portion 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 even now on monitor to open up this calendar year.
Massachusetts, a sleeping-big in conditions of market place possible, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can not seem to be to muster the political assistance. A latest examine finished by Dartmouth College estimates that Massachusetts resident put in far more than $920 million final calendar year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an selection to develop casinos, however the matter is probably to be revisited, specially if Massachusetts decides to go ahead. There are also attempts in Maine to rethink its options.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by lately agreeing to carry on augmenting purses with an additional tax. The governor however, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by permitting the tracks to have slot equipment especially at the Meadowlands. (See The Nor’easter Squeeze area)
Just when it looked as if Aqueduct’s 4,five hundred VLT facility would ultimately be designed, the successful bidder indicated an incapability to make the essential $370 million fee, citing the current lending local climate, and throwing the undertaking again into the lap of the governor. Although the market place demand from customers in the spot could be deemed fairly robust, the prospect of extra opposition from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, particularly thinking about that a bit significantly less than thirty% of the web earn is retained by the operator.
Programs to relocate Monticello Raceway into a resort complicated are becoming reconsidered maybe owing to the two the probable opening of at minimum one particular or maybe two racino functions in the NY metro spot, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.
However yet another gaming proposal is currently being set forth in Ohio, after last year’s version was turned down by the voters. This plan phone calls for one casino every in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expense needed of $250 million, as well as an original licensing payment of $fifty million, and a 33 per cent tax on gaming earnings.
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is expected to be operational in August, ’09 although Philadelphia’s two slot services still wallow in a political mire, but are expected to start development this calendar year.
The Lodge at Deadwood is slated to open up in the Slide of 2009, and include 300 video games, one hundred forty rooms and a vast variety of facilities.
Legislators are proposing a voter referendum that would amend the condition structure to allow casino gambling in designated areas, as well as let gambling on American Indian lands in Texas and at existing racetracks.
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. State authorities has proffered the notion of allowing the vacation resort to offer you casino games, but this hard work is in too early a phase to have any traction one way or yet another.
A recent Supreme Court ruling that restricts the taking of lands into trust on behalf of federally recognized American Indian tribes has even more stymied some new Class III gaming tasks throughout the nation. In addition, there were eleven Indian casino initiatives turned down by the DOI previous yr since of its new rule that casinos should be in close proximity to sufficient to a reservation that tribal customers can perform at them. It has been advised that the new Obama administration may be more sympathetic to the growth of Indian gaming projects, but this situation has yet to be dealt with.
In the meantime, there are other Course III tasks in the various phases of improvement. The Seneca on line casino venture in Buffalo, NY, although working a modest short term facility, has delayed an presently under development everlasting facility until finally the market rebounds. They have also expressed an desire in developing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could affect their plans for larger initiatives. There are new Indian gaming projects set to open up in Michigan and Oklahoma this 12 months, and others are in the arranging phase. Texas might allow the reopening of Indian gaming amenities and enable other venue and there are programs afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to three new Course III casinos in 2009/10.
The Nor’easter Squeeze
Whole gaming income in Atlantic Town has declined seven.six per cent, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is obtaining alone in an intensive comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up positioned in Atlantic Metropolis, exactly where it looked as if it may possibly actually even eclipse the Las Vegas Strip’s yearly gaming revenues.
Little by little however its industry share was becoming encroached upon, initial by the improvement of a massive Course III gaming operation 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 prepared opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening all around Atlantic City’s potential potential customers. It’s reliance on working day-trippers lulled it into a fake perception of protection, and it now finds alone getting to redefine its mission statement to “vacation spot vacation resort.”
The only difficulty with this method even so is that it is sick-equipped to pull it off. For all intents and purposes, Atlantic City is beneath-roomed and/or over-gamed. There is basically not ample day-tripper industry to go about, and their powerful buying and selling location is tightening, as the peripheral populations northward now/will have far more ready access to a widened supply in New York (Yonkers, and shortly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean access, the city’s only real competitive advantages are its lodge capacity and the availability of table video games, though the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In purchase to adequately contend as a spot vacation resort the town requirements to produce additional visitor rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip homes – real gaming destinations, in that they do not have considerably of a working day-excursion industry, other than for the ‘locals’ – have an common of .87 gaming positions for every guest area while Atlantic City’s common is two.74 positions for every guest space.
It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, have been the the very least impacted by the newest downturn. The Borgata experienced a gaming profits fall of 1.6 percent, while Harrah’s Marina described a 4.nine per cent increase in contrast to 2007. Moreover, the hardest hit venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest number 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 shedding valuation.
With a constant rise in gaming revenues by way of 2006, the metropolis seemed prime for more growth, which precipitated preparing for four new resort projects, each and every of which have now been indefinitely delayed. Revel Leisure Group’s $two.five billion venture continues to be an iron skeleton, Pinnacle Enjoyment has introduced it may possibly seek to market its razed Sands internet site, MGM Mirage has shelved its casino plans, and Penn Countrywide appears to have stopped its pursuit of the Bader Field airport website.