A Interval of Adjustment
Oops! That huge hissing audio is the gaming balloon that had been increasing above the several years, gradually shedding air. But, it has not been a tide that reduced all ships nevertheless, as some emerging and expanding gaming jurisdictions showed powerful development in 2008.
Total, the commercial and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a three.5 percent drop in gaming revenues for 2008, generating a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of nearly $1 billion in 2008, therefore bringing the Industrial sector industry decline to $1.eight billion, or six.seven %. Nevada was the largest loser in 2008, dropping nearly $1.three billion, a lot more than 50 % of which stemmed from the Las Vegas Strip segment.
For the most element, on line casino operators were caught relatively flat-footed by the extent of the 2008 income downturn, as it was not till the 3rd and fourth quarters when it genuinely nosedived. Using the crest of year in excess of 12 months market growth across the country and the availability of sufficient credit and equity resources, new building and growth proliferated in recent many years. Today, faced with the realities of declining, or at best stagnant demand, a lot of of these projects are now deemed in excess of-leveraged and/or above-sized. As a result numerous gaming organizations are trying to renegotiate their personal debt – made much more tough by lower valuations – although also paring down operational costs. The latter has turn out to be a very problematic conundrum when dealing with the opposition, specifically in those jurisdictions that are now vying for marketplace shares with new emerging on line casino initiatives in neighboring locations. A topic we talk about a lot more completely in the Condition by Condition evaluation area of this publication.
As a outcome of these problems the gaming industry landscape is now strewn with impending fatalities. Between the a lot more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the list grows each and every week.
“How prolonged will these economic conditions persist, and are we at the base however?” are inquiries no a single seems to be answering yet. What is very clear however is that most gaming jurisdictions will have to learn how to offer with a more compact pie.
This evaluation includes only gaming revenues of accredited casinos and pari-mutuel retailers that supply on line casino games, and not Indian gaming functions, card rooms, or little non-casino type slot areas. The entire write-up, like revenue tables is offered on our world wide web webpage.
A crucial aspect that looks to have arisen from the ashes of this present pattern is that numerous on line casino initiatives have been just way too huge to assist by themselves. The enter, in phrases of investment dollars, was not proportional to the output, in conditions of web profit after credit card debt support, compared to formerly attained outcomes. Much more and/or bigger is not always better. Viewing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the advancement of far more thorough features in several other jurisdictions. The flaw in this technique nevertheless is that the fees connected with widening market place penetration and occasioned-use, are substantially greater than people incurred to attract the foundation market.
As daytripper marketplaces become a lot more competitive, casino venues will have to count more and more on their in-property hotel patrons, and measurement their properties (and expectations) accordingly. Whilst Steve Wynn commenced a major development in generating up-industry mega-locations, there simply was not sufficient demand from customers on the Strip to warrant the numerous other similar tasks that followed that aimed at the same specialized niche.
The trick is to strike a satisfied medium in project configurations which of system call for considerably less of a ‘seat-of-pants’ strategy, and one that is much more analyzed. A shameless plug for development consultants like ourselves.
Other Gaming Pursuits
Though there are no released thorough knowledge of American Indian gaming revenues, anecdotal proof seems to propose that this segment has been as tough strike as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $one.six billion in 2008, symbolizing a drop of about seven per cent, or almost $114 million, a lot more than doubling the three.five p.c drop from the yr before. www.wooricasinoda.com is seemingly nonetheless 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 Division of Gaming reviews that contributions primarily based on a gaming earnings method from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the previous yr reducing .eight percent in the initial quarter, seven.five per cent in the 2nd quarter, 9.five p.c in the third quarter, and 16.one per cent in the fourth quarter.
Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, stories that whilst calendar yr 2008 showed an practically 2 p.c progress rate in gaming revenues, there was an eight.7 p.c decrease in the 3rd quarter and an virtually ten percent decrease in the fourth quarter of 2008, compared with 2007. Gaming revenue traits at nearby Niagara Falls, Ontario had been down one.five% in 2008 compared with 2007.
It’s been a blended-bag for point out lotteries across the nation. The North American Association of Condition & Provincial Lotteries studies that U.S. lotteries produced a whole of $60.six billion in sales in fiscal 2008, up about 3 per cent from the preceding 12 months however some jurisdictions reported decreases, most notably California, which confirmed an 8 percent fall. Inasmuch as some of these states are on various fiscal yr finishes, it would appear that the data does not replicate the impact of third and/or fourth quarter results.
According to info supplied by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 % to $13.seven billion in 2008, as opposed to $fourteen.7 billion in 2007.
Planned & Proposed New Expansions
As previously observed, it has been new gaming jurisdictions that have spawned a lot of the expansion in once-a-year casino/racino revenues in excess of the years, and their impact is apt to carry on into the close to long term.
Miami Dade voters accepted a ballot issue that allows each of three pari-mutuels to have a casino facility of up to two,000 slot devices. The Flagler Puppy Keep track of and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has nevertheless to declared its programs. There are several other proposals getting considered that would more broaden casino advancement through the point out.
The point out finally got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ sport casino positioned in Des Plaines just east of O’Hare. The new facility is not most likely to open right up until 2010. There has also been some dialogue about making it possible for an improve in per place gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.
The state’s expanded lottery system that makes it possible for for the development of four on line casino gaming zones and slots at current horse and pet tracks seems mired, as only a single facility is presently beneath building, although a few other proposals were rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is situated so near to the condition 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 ten desk video games, together with a next period because of to open in 2011 with 875 slots and twenty desk online games. The point out has extended the software procedure for the other a few zones until finally April, 2009.
There is nonetheless a whole lot of ‘jockeying’ likely on, but the prospect of as many as eight slot parlors and racinos seems to be again on the front-burner, but likely not fixed throughout the current legislative session.
There are about 14,000 rooms scheduled to arrive 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 Difficult Rock and new hotels consist of two parts of the Town Centre undertaking, and the Fountainebleau.
Pinnacle Entertainment’s new on line casino advancement initiatives in Baton Rouge and Lake Charles, even though delayed, are noted to nevertheless be on-monitor for opening this 12 months and/or early 2010.
There is a monthly bill under thought that could more than double Penn National’s slot machines to 3,000, as effectively as a proposal that would remove the restriction that slots be situated inside of five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing local people to allow slots, could be contemplating transferring to a a lot more hospitable city.
A referendum was accredited in November, 2008 that enables for the improvement of 5 casinos with a complete of 15,000 slots, and now the bidding war is afoot although it is not as powerful as the point out experienced anticipated.
Grand Soleil On line casino Vacation resort in Natchez had been slated to open up in 2008, but has operate into a variety of financing problems and although the resort part is open up, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back again somewhat, is still on observe to open this 12 months.
Massachusetts, a sleeping-giant in terms of market possible, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to appear to muster the political assist. A current research concluded by Dartmouth University estimates that Massachusetts resident spent much more than $920 million previous 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to produce casinos, nevertheless the subject matter is likely to be revisited, especially if Massachusetts decides to go ahead. There are also tries in Maine to rethink its options.
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 additional tax. The governor even so, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by making it possible for the tracks to have slot devices specifically at the Meadowlands. (See The Nor’easter Squeeze segment)
Just when it appeared as if Aqueduct’s four,500 VLT facility would ultimately be created, the profitable bidder indicated an lack of ability to make the needed $370 million payment, citing the recent lending climate, and throwing the undertaking again into the lap of the governor. Though the market demand from customers in the location could be regarded as fairly strong, the prospect of added opposition from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, specially considering that marginally considerably less than thirty% of the net win is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort intricate are currently being reconsidered possibly owing to each the possible opening of at least one or perhaps two racino operations in the NY metro region, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.
But yet another gaming proposal is becoming put forth in Ohio, soon after very last year’s edition was turned down by the voters. This prepare calls for 1 casino each in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure necessary of $250 million, as effectively as an preliminary licensing payment of $50 million, and a 33 % tax on gaming earnings.
The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is envisioned to be operational in August, ’09 while Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are expected to commence development this calendar year.
The Lodge at Deadwood is slated to open up in the Tumble of 2009, and contain 300 game titles, a hundred and forty rooms and a wide assortment of amenities.
Legislators are proposing a voter referendum that would amend the state constitution to allow casino gambling in designated areas, as nicely as permit gambling on American Indian lands in Texas and at current racetracks.
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer you. Condition federal government has proffered the idea of making it possible for the vacation resort to offer casino games, but this energy is in too early a phase to have any traction a single way or one more.
A latest Supreme Courtroom ruling that restricts the having of lands into trust on behalf of federally acknowledged American Indian tribes has more stymied some new Class III gaming initiatives throughout the place. In addition, there ended up eleven Indian casino tasks turned down by the DOI very last yr due to the fact of its new rule that casinos must be close to adequate to a reservation that tribal associates can work at them. It has been suggested that the new Obama administration may possibly be a lot more sympathetic to the advancement of Indian gaming projects, but this problem has yet to be addressed.
Meanwhile, there are other Course III assignments in the a variety of phases of growth. The Seneca casino venture in Buffalo, NY, whilst working a tiny short-term facility, has delayed an already beneath development everlasting facility right up until the market rebounds. They have also expressed an curiosity in creating a casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could influence their ideas for greater assignments. There are new Indian gaming assignments set to open up in Michigan and Oklahoma this year, and other people are in the arranging phase. Texas may enable the reopening of Indian gaming services and enable other location and there are strategies afoot by the Navajos in Arizona to build extra casinos. California is poised to open up two to three new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Complete gaming income in Atlantic City has declined 7.6 %, from $4.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining alone in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were found in Atlantic Town, the place it looked as if it may truly even eclipse the Las Vegas Strip’s yearly gaming revenues.
Slowly however its market share was getting encroached on, very first by the advancement of a huge Course III gaming procedure in Connecticut, and then another slots operations 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 prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening all around Atlantic City’s potential potential customers. It’s reliance on day-trippers lulled it into a fake perception of security, and it now finds alone getting to redefine its mission assertion to “spot vacation resort.”
The only issue with this method even so is that it is sick-equipped to pull it off. For all intents and purposes, Atlantic Town is beneath-roomed and/or over-gamed. There is merely not sufficient working day-tripper industry to go about, and their powerful investing region is tightening, as the peripheral populations northward now/will have a lot more prepared accessibility to a widened offer in New York (Yonkers, and soon at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean accessibility, the city’s only genuine competitive benefits are its lodge potential and the availability of desk games, though the latter is very likely to eventuate in Pennsylvania, and probably Delaware. In purchase to sufficiently compete as a location vacation resort the city demands to build additional guest rooms and not necessarily gaming capability. By comparison, the Las Vegas Strip houses – true gaming locations, in that they do not have a lot of a working day-vacation industry, besides for the ‘locals’ – have an average of .87 gaming positions for each guest area although Atlantic City’s regular is two.seventy four positions for each guest area.
It is not a coincidence that Atlantic City’s two premier hotels, the Borgata and Harrah’s Marina, equally of which added new rooms in 2008, had been the least impacted by the most current downturn. The Borgata knowledgeable a gaming profits drop of one.six per cent, even though Harrah’s Marina reported a four.nine percent enhance compared to 2007. In addition, the most difficult strike venues, particularly 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 properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.
With a regular rise in gaming revenues by means of 2006, the metropolis seemed primary for additional development, which precipitated planning for four new resort projects, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $2.5 billion task stays an iron skeleton, Pinnacle Amusement has announced it might seek to offer its razed Sands web site, MGM Mirage has shelved its on line casino programs, and Penn National appears to have stopped its pursuit of the Bader Subject airport website.