A Interval of Adjustment

Oops! That huge hissing audio is the gaming balloon that had been expanding above the several years, slowly getting rid of air. But, it has not been a tide that decreased all ships even so, as some rising and increasing gaming jurisdictions confirmed robust progress in 2008.

All round, the professional and racetrack on line casino sectors (excluding Indian gaming), skilled a three.5 percent decline in gaming revenues for 2008, creating 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 obtain of virtually $one billion in 2008, therefore bringing the Commercial sector market place decline to $1.eight billion, or six.7 %. Nevada was the largest loser in 2008, dropping virtually $1.three billion, more than 50 % of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most portion, casino operators have been caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not until finally the third and fourth quarters when it truly nosedived. Using the crest of year in excess of yr industry growth throughout the country and the availability of sufficient credit and equity money, new construction and expansion proliferated in recent many years. Today, faced with the realities of declining, or at very best stagnant demand, a lot of of these projects are now considered above-leveraged and/or over-sized. As a consequence a lot of gaming companies are attempting to renegotiate their credit card debt – created more difficult by lower valuations – whilst also paring down operational expenses. The latter has grow to be a quite problematic conundrum when working with the opposition, specially in those jurisdictions that are now vying for market shares with new emerging on line casino initiatives in neighboring areas. A subject we go over more totally in the Condition by Point out investigation section of this publication.

As a outcome of these conditions the gaming sector landscape is now strewn with impending fatalities. Among the far more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the record grows each week.

“How long will these financial situations persist, and are we at the base nevertheless?” are questions no a single appears to be answering nevertheless. What is distinct however is that most gaming jurisdictions will have to understand how to offer with a scaled-down pie.

Observe:
This evaluation contains only gaming revenues of accredited casinos and pari-mutuel outlets that offer you casino game titles, and not Indian gaming operations, card rooms, or tiny non-casino sort slot spots. The total article, including income tables is offered on our world wide web website page.

Input/Output Design

A crucial facet that looks to have arisen from the ashes of this current development is that many casino projects ended up just also large to help them selves. The input, in phrases of expenditure dollars, was not proportional to the output, in conditions of web revenue soon after debt support, compared to previously achieved results. A lot more and/or larger is not usually better. Looking at the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of far more comprehensive facilities in many other jurisdictions. The flaw in this method nonetheless is that the fees associated with widening marketplace penetration and occasioned-use, are considerably higher than people incurred to draw in the base market place.

As daytripper markets turn out to be far more competitive, on line casino venues will have to depend more and much more on their in-house lodge patrons, and dimensions their houses (and expectations) accordingly. Whilst Steve Wynn commenced a key pattern in generating up-industry mega-places, there just was not sufficient desire on the Strip to warrant the many other comparable assignments that adopted that aimed at the very same area of interest.

The trick is to strike a content medium in project configurations which of training course call for considerably less of a ‘seat-of-pants’ technique, and one that is much more researched. A shameless plug for improvement consultants like ourselves.

Other Gaming Activities

Although there are no released in depth knowledge of American Indian gaming revenues, anecdotal proof seems to suggest that this section has been as tough strike as the Professional sector. The two Connecticut Indian gaming installations report slot income of $1.6 billion in 2008, symbolizing a drop of about 7 percent, or almost $114 million, a lot more than doubling the 3.five % drop from the 12 months prior to. This industry is evidently nonetheless reeling from the ripple-effect of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming stories that contributions dependent on a gaming profits formula from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the previous 12 months lowering .eight p.c in the 1st quarter, seven.five p.c in the 2nd quarter, 9.five p.c in the 3rd quarter, and 16.1 percent in the fourth quarter.

Some SEC reporting Indian gaming qualities report similar decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, studies that even though calendar year 2008 showed an almost 2 percent expansion charge in gaming revenues, there was an 8.seven per cent decline in the third quarter and an virtually ten per cent decline in the fourth quarter of 2008, compared with 2007. Gaming income developments at close by Niagara Falls, Ontario had been down 1.5% in 2008 compared with 2007.

It truly is been a blended-bag for state lotteries throughout the place. The North American Association of Condition & Provincial Lotteries studies that U.S. lotteries produced a total of $sixty.6 billion in product sales in fiscal 2008, up about 3 per cent from the previous yr yet some jurisdictions noted decreases, most notably California, which confirmed an eight percent fall. Inasmuch as some of these states are on a variety of fiscal calendar year finishes, it would appear that the information does not mirror the affect of 3rd and/or fourth quarter results.

In accordance to information offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 per cent to $13.seven billion in 2008, versus $fourteen.7 billion in 2007.

Prepared & Proposed New Expansions

As beforehand observed, it has been new gaming jurisdictions that have spawned a lot of the growth in yearly casino/racino revenues over the years, and their affect is apt to proceed into the near potential.

Florida
Miami Dade voters accredited a ballot issue that enables each and every of a few pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Puppy Keep track of and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has yet to introduced its programs. There are numerous other proposals currently being regarded that would further expand on line casino advancement during the condition.

Illinois
The condition ultimately acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,200+ game on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open until 2010. There has also been some dialogue about making it possible for an increase in for each spot gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery plan that enables for the improvement of four casino gaming zones and slots at current horse and pet tracks seems mired, as only one facility is presently beneath design, although 3 other proposals have been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is located so shut to the state line that its parking whole lot is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 desk video games, along with a next phase due to open in 2011 with 875 slots and twenty table video games. The condition has prolonged the application process for the other three zones right up until April, 2009.

Kentucky
There is nonetheless a good deal of ‘jockeying’ likely on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be back on the front-burner, but most likely not solved during the present 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 both Caesars Palace and Hard Rock and new lodges consist of two components of the City Middle undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino advancement initiatives in Baton Rouge and Lake Charles, even though delayed, are documented to nevertheless be on-keep track of for opening this yr and/or early 2010.

Maine
There is a bill beneath thing to consider that could much more than double Penn National’s slot equipment to three,000, as nicely as a proposal that would eliminate the restriction that slots be found in 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing local residents to allow slots, might be considering moving to a more hospitable city.

Maryland
A referendum was accredited in November, 2008 that allows for the advancement of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot although it is not as intensive as the state experienced expected.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has operate into a variety of funding troubles and while the hotel portion is open, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back again considerably, is even now on observe to open this yr.

New England
Massachusetts, a sleeping-huge in phrases of market place prospective, is nevertheless maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but can’t seem to be to muster the political support. A current examine accomplished by Dartmouth University estimates that Massachusetts resident put in much more than $920 million very last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to develop casinos, however the topic is likely to be revisited, especially if Massachusetts decides to go forward. There are also attempts in Maine to rethink its alternatives.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by lately agreeing to carry on augmenting purses with an further tax. The governor however, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by making it possible for the tracks to have slot devices specially at the Meadowlands. (See CDBET918Kiss Squeeze section)

New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would finally be developed, the winning bidder indicated an lack of ability to make the needed $370 million price, citing the recent lending climate, and throwing the task back again into the lap of the governor. Though the industry desire in the area could be regarded as very powerful, the prospect of added competition from nearby Belmont could have an impact on Aqueduct’s underlining economic feasibility, especially thinking about that a bit less than thirty% of the internet get is retained by the operator.

Programs to relocate Monticello Raceway into a resort intricate are currently being reconsidered maybe owing to the two the probable opening of at the very least one particular or possibly two racino functions in the NY metro location, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.

Ohio
However another gaming proposal is getting put forth in Ohio, soon after previous year’s model was turned down by the voters. This prepare phone calls for a single on line casino every single in the state’s premier metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure required of $250 million, as nicely as an first licensing price of $fifty million, and a 33 per cent tax on gaming profits.

Pennsylvania
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 even though Philadelphia’s two slot services nonetheless wallow in a political mire, but are expected to begin construction this 12 months.

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

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to enable casino gambling in specified places, as well 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 Accommodations, who have reportedly tendered an offer you. State federal government has proffered the notion of making it possible for the resort to supply on line casino games, but this energy is in way too early a phase to have any traction one way or yet another.

Indian Gaming
A recent Supreme Courtroom ruling that restricts the taking of lands into have faith in on behalf of federally recognized American Indian tribes has even more stymied some new Class III gaming assignments across the nation. Moreover, there were eleven Indian on line casino initiatives rejected by the DOI last 12 months simply because of its new rule that casinos must be around adequate to a reservation that tribal users can operate at them. It has been proposed that the new Obama administration might be a lot more sympathetic to the advancement of Indian gaming tasks, but this issue has yet to be resolved.

In the meantime, there are other Course III tasks in the various stages of advancement. The Seneca casino undertaking in Buffalo, NY, while functioning a little temporary facility, has delayed an presently below building everlasting facility until the industry rebounds. They have also expressed an fascination in creating a casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could affect their ideas for greater initiatives. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this calendar year, and other individuals are in the planning phase. Texas might allow the reopening of Indian gaming amenities and let other location and there are ideas afoot by the Navajos in Arizona to build added casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming revenue in Atlantic Metropolis has declined seven.6 p.c, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is discovering 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 City, exactly where it looked as if it may possibly really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Gradually nevertheless its marketplace share was becoming encroached upon, first by the improvement of a huge Course III gaming procedure in Connecticut, and then yet another slots operations in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening all around Atlantic City’s foreseeable future prospects. It is reliance on day-trippers lulled it into a bogus perception of stability, and it now finds alone getting to redefine its mission statement to “vacation spot resort.”

The only dilemma with this method nevertheless is that it is ill-geared up to pull it off. For all intents and reasons, Atlantic City is underneath-roomed and/or above-gamed. There is simply not enough working day-tripper market to go about, and their powerful trading area is tightening, as the peripheral populations northward now/will have a lot more all set accessibility to a widened offer in New York (Yonkers, and soon 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 actual aggressive benefits are its hotel capacity and the availability of table game titles, although the latter is likely to eventuate in Pennsylvania, and possibly Delaware. In order to adequately contend as a destination vacation resort the town needs to create added visitor rooms and not automatically gaming capability. By comparison, the Las Vegas Strip qualities – correct gaming locations, in that they do not have significantly of a working day-journey market, besides for the ‘locals’ – have an average of .87 gaming positions for each guest area even though Atlantic City’s average is 2.seventy four positions per visitor area.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, had been the minimum impacted by the newest downturn. The Borgata experienced a gaming earnings fall of one.six p.c, while Harrah’s Marina documented a four.9 % boost compared to 2007. Additionally, the toughest strike venues, namely 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, including the the Trump homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and shedding valuation.

With a regular rise in gaming revenues via 2006, the metropolis appeared key for more advancement, which precipitated preparing for four new vacation resort tasks, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.five billion task remains an iron skeleton, Pinnacle Entertainment has announced it might find to offer its razed Sands website, MGM Mirage has shelved its casino strategies, and Penn Nationwide seems to have stopped its pursuit of the Bader Discipline airport site.