A Time period of Adjustment
Oops! That huge hissing seem is the gaming balloon that had been developing above the many years, little by little shedding air. But, it has not been a tide that reduced all ships even so, as some rising and expanding gaming jurisdictions confirmed sturdy expansion in 2008.
General, the commercial and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.5 percent decrease in gaming revenues for 2008, creating a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a acquire of nearly $one billion in 2008, thus bringing the Commercial sector market place drop to $1.8 billion, or six.seven %. Nevada was the biggest loser in 2008, dropping almost $1.three billion, far more than 50 % of which stemmed from the Las Vegas Strip phase.
Hunkering Down
For the most portion, on line casino operators have been caught comparatively flat-footed by the extent of the 2008 earnings downturn, as it was not right up until the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of calendar year in excess of year marketplace progress across the country and the availability of sufficient credit and fairness resources, new design and expansion proliferated in modern several years. Right now, confronted with the realities of declining, or at best stagnant desire, many of these tasks are now considered above-leveraged and/or over-sized. As a result a lot of gaming companies are attempting to renegotiate their financial debt – produced a lot more hard by reduce valuations – although also paring down operational charges. The latter has become a extremely problematic conundrum when working with the competition, especially in individuals jurisdictions that are now vying for market shares with new emerging on line casino assignments in neighboring locations. A topic we talk about far more entirely in the Condition by Condition evaluation area of this publication.
As a consequence of these situations the gaming industry landscape is now strewn with impending fatalities. Among the far more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the checklist grows each week.
“How extended will these financial problems persist, and are we at the bottom nevertheless?” are inquiries no one seems to be answering nevertheless. What is distinct even so is that most gaming jurisdictions will have to understand how to offer with a scaled-down pie.
Be aware:
This examination includes only gaming revenues of licensed casinos and pari-mutuel outlets that supply casino online games, and not Indian gaming operations, card rooms, or modest non-on line casino kind slot locations. The complete post, which includes earnings tables is available on our internet page.
Enter/Output Design
A essential factor that would seem to have arisen from the ashes of this recent development is that several casino tasks have been just also huge to assist themselves. The enter, in conditions of expense pounds, was not proportional to the output, in conditions of net profit following debt support, when compared to previously achieved results. Far more and/or greater is not usually better. Observing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the advancement of more thorough facilities in several other jurisdictions. The flaw in this strategy however is that the expenses related with widening industry penetration and occasioned-use, are drastically increased than people incurred to attract the foundation industry.
As daytripper marketplaces turn out to be more aggressive, casino venues will have to depend much more and far more on their in-property lodge patrons, and size their properties (and anticipations) appropriately. Although Steve Wynn started a significant trend in producing up-market place mega-places, there basically was not sufficient need on the Strip to warrant the a lot of other comparable initiatives that adopted that aimed at the exact same market.
The trick is to strike a happy medium in task configurations which of training course call for significantly less of a ‘seat-of-pants’ method, and one that is a lot more examined. A shameless plug for growth consultants like ourselves.
Other Gaming Pursuits
Although there are no published thorough info of American Indian gaming revenues, anecdotal proof seems to propose that this phase has been as difficult strike as the Commercial sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, representing a drop of about seven %, or nearly $114 million, far more than doubling the 3.5 % fall from the calendar year prior to. This market is seemingly nevertheless reeling from the ripple-impact of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Office of Gaming reviews that contributions based on a gaming revenue formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in comparison to the preceding 12 months reducing .eight percent in the initial quarter, seven.five p.c in the 2nd quarter, 9.five p.c in the third quarter, and sixteen.1 p.c in the fourth quarter.
Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reports that while calendar year 2008 showed an almost 2 per cent growth fee in gaming revenues, there was an eight.7 percent drop in the 3rd quarter and an virtually 10 % drop in the fourth quarter of 2008, compared with 2007. Gaming profits tendencies at close by Niagara Falls, Ontario were down one.five% in 2008 when compared with 2007.
It truly is been a blended-bag for point out lotteries across the place. The North American Association of State & Provincial Lotteries studies that U.S. lotteries created a complete of $60.6 billion in sales in fiscal 2008, up about three per cent from the previous year but some jurisdictions described decreases, most notably California, which showed an eight percent fall. Inasmuch as some of these states are on a variety of fiscal calendar year ends, it would seem to be that the info does not reflect the influence of third and/or fourth quarter results.
According to info provided by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping 7 p.c to $13.7 billion in 2008, versus $fourteen.seven billion in 2007.
Prepared & Proposed New Expansions
As earlier observed, it has been new gaming jurisdictions that have spawned significantly of the growth in once-a-year on line casino/racino revenues in excess of the several years, and their influence is apt to proceed into the near potential.
Florida
Miami Dade voters accredited a ballot situation that allows every of three 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, whilst the Calder set up in Miami Gardens has yet to announced its ideas. There are quite a few other proposals becoming deemed that would even more increase casino growth during the state.
Illinois
The condition finally acquired all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,200+ recreation casino situated in Des Plaines just east of O’Hare. The new facility is not very likely to open up right up until 2010. There has also been fishtonga.com about making it possible for an enhance in for every spot 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 software that makes it possible for for the improvement of four casino gaming zones and slots at present horse and pet tracks appears mired, as only one particular facility is presently below construction, whilst three other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is located so near to the state line that its parking good deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 table online games, along with a next stage because of to open in 2011 with 875 slots and twenty table video games. The state has prolonged the software approach for the other 3 zones until finally April, 2009.
Kentucky
There is nonetheless a great deal of ‘jockeying’ likely on, but the prospect of as numerous as 8 slot parlors and racinos appears to be again on the entrance-burner, but very likely not solved in the course of the current legislative session.
Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most current currently being the 390 area M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Hard Rock and new lodges contain two elements of the Town Center project, and the Fountainebleau.
Louisiana
Pinnacle Entertainment’s new casino improvement tasks in Baton Rouge and Lake Charles, whilst delayed, are described to even now be on-monitor for opening this year and/or early 2010.
Maine
There is a bill beneath thing to consider that could a lot more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would get rid of the restriction that slots be positioned in five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to let slots, may be considering relocating to a more hospitable city.
Maryland
A referendum was approved in November, 2008 that makes it possible for for the improvement of five casinos with a total of fifteen,000 slots, and now the bidding war is afoot even though it is not as powerful as the point out had predicted.
Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has operate into various financing issues and whilst the lodge part is open, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back somewhat, is nonetheless on monitor to open this year.
New England
Massachusetts, a sleeping-huge in phrases of industry prospective, is nevertheless maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but are not able to seem to be to muster the political support. A modern study accomplished by Dartmouth College estimates that Massachusetts resident spent a lot more than $920 million last calendar year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to build casinos, however the matter is very likely to be revisited, specifically 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 carry on augmenting purses with an further tax. The governor nonetheless, has appointed a new panel to study the state’s sagging racing system which ironically, can only be preserved by permitting the tracks to have slot devices specially at the Meadowlands. (See The Nor’easter Squeeze part)
New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would lastly be designed, the successful bidder indicated an inability to make the necessary $370 million charge, citing the recent lending weather, and throwing the undertaking back again into the lap of the governor. Though the market place demand in the location could be deemed really robust, the prospect of extra opposition from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, especially contemplating that a bit much less than 30% of the net win is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort complicated are getting reconsidered probably owing to equally the possible opening of at minimum one or probably two racino operations in the NY metro location, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.
Ohio
Nevertheless another gaming proposal is getting set forth in Ohio, right after final year’s model was turned down by the voters. This strategy phone calls for one particular casino every in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expense required of $250 million, as nicely as an original licensing payment of $50 million, and a 33 p.c tax on gaming income.
Pennsylvania
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 nevertheless wallow in a political mire, but are expected to begin construction this yr.
South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and consist of 300 games, a hundred and forty rooms and a wide assortment of facilities.
Texas
Legislators are proposing a voter referendum that would amend the condition constitution to allow casino gambling in selected areas, as properly as permit gambling on American Indian lands in Texas and at existing racetracks.
West Virginia
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. Condition govt has proffered the notion of making it possible for the resort to offer on line casino games, but this work is in also early a phase to have any traction one particular way or an additional.
Indian Gaming
A current Supreme Court ruling that restricts the having of lands into have confidence in on behalf of federally identified American Indian tribes has further stymied some new Course III gaming initiatives throughout the nation. Furthermore, there ended up eleven Indian casino assignments rejected by the DOI final yr simply 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 advised that the new Obama administration may possibly be much more sympathetic to the development of Indian gaming tasks, but this issue has yet to be addressed.
Meanwhile, there are other Course III projects in the different phases of improvement. The Seneca casino venture in Buffalo, NY, whilst operating a little short-term facility, has delayed an previously below construction permanent facility until finally the industry rebounds. They have also expressed an interest in developing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is getting challenged, and could affect their plans for greater projects. There are new Indian gaming tasks set to open in Michigan and Oklahoma this calendar year, and others are in the preparing phase. Texas may let the reopening of Indian gaming services and permit other location and there are plans afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to 3 new Course III casinos in 2009/ten.
The Nor’easter Squeeze
Complete gaming income in Atlantic City has declined seven.6 percent, from $four.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is finding itself in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been located in Atlantic Town, where it looked as if it may really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Little by little however its marketplace share was becoming encroached on, very first by the advancement of a huge Class III gaming procedure in Connecticut, and then another slots functions in Rhode Island, and then 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 eventually two functions in Philadelphia, the noose is tightening about Atlantic City’s potential potential clients. It really is reliance on day-trippers lulled it into a false perception of safety, and it now finds alone getting to redefine its mission statement to “vacation spot resort.”
The only issue with this approach nevertheless is that it is unwell-geared up to pull it off. For all intents and needs, Atlantic City is below-roomed and/or in excess of-gamed. There is basically not sufficient day-tripper market place to go close to, and their efficient buying and selling location is tightening, as the peripheral populations northward now/will have a lot more prepared obtain to a widened supply 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 access, the city’s only true competitive rewards are its resort capacity and the availability of table games, though the latter is very likely to eventuate in Pennsylvania, and potentially Delaware. In order to sufficiently compete as a vacation spot vacation resort the metropolis requirements to build further visitor rooms and not essentially gaming capability. By comparison, the Las Vegas Strip houses – correct gaming destinations, in that they do not have a lot of a working day-excursion market, besides for the ‘locals’ – have an average of .87 gaming positions for every visitor area whilst Atlantic City’s typical is two.seventy four positions per guest room.
It is not a coincidence that Atlantic City’s two premier hotels, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, had been the the very least impacted by the latest downturn. The Borgata experienced a gaming earnings fall of 1.6 %, even though Harrah’s Marina reported a four.9 per cent enhance when compared to 2007. Moreover, the hardest strike venues, particularly 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 properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.
With a continual increase in gaming revenues through 2006, the city appeared primary for even more growth, which precipitated preparing for 4 new vacation resort assignments, each of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion project remains an iron skeleton, Pinnacle Entertainment has announced it may seek to promote its razed Sands internet site, MGM Mirage has shelved its on line casino strategies, and Penn Nationwide seems to have stopped its pursuit of the Bader Area airport web site.