A Period of Adjustment
Oops! That huge hissing seem is the gaming balloon that had been expanding over the several years, little by little getting rid of air. But, it has not been a tide that reduced all ships however, as some emerging and growing gaming jurisdictions confirmed strong expansion in 2008.
All round, the business and racetrack casino sectors (excluding Indian gaming), skilled a 3.5 percent decrease in gaming revenues for 2008, generating a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a gain of practically $1 billion in 2008, thus bringing the Commercial sector industry decrease to $one.8 billion, or six.seven per cent. Nevada was the most significant loser in 2008, dropping almost $1.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip segment.
For the most element, casino operators ended up caught comparatively flat-footed by the extent of the 2008 profits downturn, as it was not right up until the 3rd and fourth quarters when it really nosedived. Driving the crest of 12 months in excess of year marketplace progress across the region and the availability of ample credit history and equity resources, new development and enlargement proliferated in current a long time. Right now, confronted with the realities of declining, or at best stagnant need, numerous of these projects are now considered in excess of-leveraged and/or over-sized. As a result several gaming organizations are attempting to renegotiate their credit card debt – created more hard by reduce valuations – even though also paring down operational fees. The latter has turn out to be a extremely problematic conundrum when working with the competitors, specially in individuals jurisdictions that are now vying for market shares with new emerging on line casino tasks in neighboring areas. A subject matter we talk about much more entirely in the State by Point out evaluation segment of this publication.
As a consequence of these problems the gaming industry landscape is now strewn with impending fatalities. Among the more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the record grows every single 7 days.
“How extended will these economic circumstances persist, and are we at the bottom yet?” are queries no one seems to be answering yet. What is obvious nevertheless is that most gaming jurisdictions will have to learn how to offer with a smaller pie.
This analysis includes only gaming revenues of certified casinos and pari-mutuel shops that offer you casino games, and not Indian gaming functions, card rooms, or modest non-casino type slot places. The entire write-up, including income tables is obtainable on our internet web page.
A key factor that seems to have arisen from the ashes of this recent craze is that several casino initiatives ended up just too large to assist them selves. The input, in phrases of investment pounds, was not proportional to the output, in conditions of net income right after credit card debt provider, compared to earlier accomplished results. A lot more and/or bigger is not always better. Looking at the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of a lot more extensive facilities in several other jurisdictions. The flaw in this approach nevertheless is that the fees linked with widening industry penetration and occasioned-use, are substantially increased than individuals incurred to draw in the base marketplace.
As daytripper markets turn into far more competitive, casino venues will have to count much more and a lot more on their in-residence hotel patrons, and measurement their properties (and expectations) accordingly. Even though Steve Wynn began a major craze in producing up-market mega-locations, there basically was not ample need on the Strip to warrant the several other comparable initiatives that followed that aimed at the same specialized niche.
The trick is to strike a happy medium in venture configurations which of program need considerably less of a ‘seat-of-pants’ method, and a single that is much more researched. A shameless plug for development consultants like ourselves.
Other Gaming Pursuits
Despite the fact that there are no printed in depth info of American Indian gaming revenues, anecdotal proof seems to recommend that this section has been as challenging hit as the Commercial sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, symbolizing a drop of about 7 %, or virtually $114 million, more than doubling the three.5 per cent drop from the year ahead of. This industry is apparently nevertheless reeling from the ripple-influence of a casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Office of Gaming stories that contributions based on a gaming income method from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 compared to the preceding yr decreasing .eight p.c in the initial quarter, seven.five % in the 2nd quarter, 9.5 p.c in the 3rd quarter, and sixteen.1 p.c in the fourth quarter.
Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, studies that whilst calendar yr 2008 confirmed an almost two % progress charge in gaming revenues, there was an 8.7 per cent decline in the third quarter and an almost 10 per cent drop in the fourth quarter of 2008, when compared with 2007. Gaming income developments at close by Niagara Falls, Ontario ended up down 1.five% in 2008 when compared with 2007.
It’s been a combined-bag for state lotteries throughout the region. The North American Affiliation of Point out & Provincial Lotteries reviews that U.S. lotteries generated a whole of $60.6 billion in income in fiscal 2008, up about three per cent from the preceding 12 months nevertheless some jurisdictions reported decreases, most notably California, which confirmed an eight percent fall. Inasmuch as some of these states are on a variety of fiscal year ends, it would appear that the data does not replicate the impact of third and/or fourth quarter outcomes.
According to knowledge offered by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping 7 p.c to $13.seven billion in 2008, compared to $14.7 billion in 2007.
Planned & Proposed New Expansions
As beforehand noted, it has been new gaming jurisdictions that have spawned a lot of the growth in once-a-year casino/racino revenues more than the a long time, and their effect is apt to keep on into the near long term.
Miami Dade voters accredited a ballot situation that enables each of a few pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Dog Monitor and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, although the Calder set up in Miami Gardens has but to introduced its strategies. There are many other proposals getting regarded that would even more grow on line casino growth through the state.
The condition lastly acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ sport on line casino located in Des Plaines just east of O’Hare. The new facility is not probably to open up until finally 2010. There has also been www.teamsasa.com about enabling an enhance in for each area gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.
The state’s expanded lottery plan that makes it possible for for the development of four on line casino gaming zones and slots at existing horse and dog tracks seems mired, as only a single facility is presently under building, while a few other proposals ended up rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is situated so close to the point out line that its parking lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table game titles, alongside with a 2nd phase thanks to open in 2011 with 875 slots and 20 table games. The condition has extended the application procedure for the other a few zones until finally April, 2009.
There is nonetheless a whole lot of ‘jockeying’ going on, but the prospect of as a lot of as 8 slot parlors and racinos appears to be again on the entrance-burner, but likely not fixed throughout the current legislative session.
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest currently being the 390 place M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new resorts contain two elements of the Metropolis Middle task, and the Fountainebleau.
Pinnacle Entertainment’s new on line casino growth tasks in Baton Rouge and Lake Charles, although delayed, are described to nevertheless be on-observe for opening this calendar year and/or early 2010.
There is a bill below thought that could far more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would take away the restriction that slots be located within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby citizens to allow slots, could be taking into consideration moving to a a lot more hospitable city.
A referendum was approved in November, 2008 that enables for the advancement of five casinos with a total of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as powerful as the point out had anticipated.
Grand Soleil Casino Resort in Natchez had been slated to open in 2008, but has operate into a variety of funding issues and even though the hotel portion is open up, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back considerably, is nevertheless on observe to open up this yr.
Massachusetts, a sleeping-huge in conditions of market prospective, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can’t appear to muster the political assist. A latest study concluded by Dartmouth University estimates that Massachusetts resident invested much more than $920 million previous 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to produce casinos, nevertheless the subject is probably to be revisited, especially if Massachusetts decides to go ahead. There are also attempts in Maine to reconsider its possibilities.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by just lately agreeing to carry on augmenting purses with an further tax. The governor nevertheless, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by allowing the tracks to have slot machines particularly at the Meadowlands. (See The Nor’easter Squeeze section)
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would finally be created, the profitable bidder indicated an incapability to make the essential $370 million charge, citing the present lending weather, and throwing the project back again into the lap of the governor. Although the market place demand from customers in the region could be considered fairly sturdy, the prospect of added competitors from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, specially taking into consideration that a bit less than 30% of the web acquire is retained by the operator.
Ideas to relocate Monticello Raceway into a vacation resort complex are being reconsidered probably owing to equally the possible opening of at the very least 1 or probably two racino operations in the NY metro area, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.
But yet another gaming proposal is becoming set forth in Ohio, following very last year’s variation was turned down by the voters. This strategy phone calls for one casino every single in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment required of $250 million, as effectively as an original licensing payment of $fifty million, and a 33 per cent tax on gaming income.
The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is envisioned to be operational in August, ’09 although Philadelphia’s two slot amenities even now wallow in a political mire, but are predicted to begin development this yr.
The Lodge at Deadwood is slated to open in the Slide of 2009, and contain 300 video games, 140 rooms and a wide selection of facilities.
Legislators are proposing a voter referendum that would amend the condition structure to allow casino gambling in designated areas, as effectively as let gambling on American Indian lands in Texas and at current racetracks.
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer you. State authorities has proffered the notion of enabling the resort to provide casino video games, but this energy is in as well early a phase to have any traction one way or another.
A current Supreme Courtroom ruling that restricts the getting of lands into trust on behalf of federally identified American Indian tribes has additional stymied some new Class III gaming assignments throughout the country. Additionally, there had been eleven Indian on line casino tasks turned down by the DOI final 12 months since of its new rule that casinos must be around adequate to a reservation that tribal members can function at them. It has been recommended that the new Obama administration may possibly be far more sympathetic to the improvement of Indian gaming projects, but this problem has however to be resolved.
In the meantime, there are other Class III initiatives in the numerous phases of advancement. The Seneca on line casino task in Buffalo, NY, even though functioning a little short term facility, has delayed an previously underneath building long term facility until the market place rebounds. They have also expressed an desire in developing a casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could affect their strategies for greater initiatives. There are new Indian gaming initiatives set to open in Michigan and Oklahoma this year, and other people are in the arranging phase. Texas may allow the reopening of Indian gaming facilities and enable other location and there are programs afoot by the Navajos in Arizona to build further casinos. California is poised to open two to 3 new Course III casinos in 2009/ten.
The Nor’easter Squeeze
Overall gaming income in Atlantic City has declined seven.six p.c, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is discovering by itself in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast had been positioned in Atlantic Metropolis, the place it looked as if it may actually even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Gradually even so its industry share was being encroached on, 1st by the improvement of a massive Course III gaming operation in Connecticut, and then yet another slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately 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 functions in Philadelphia, the noose is tightening close to Atlantic City’s long term potential customers. It really is reliance on working day-trippers lulled it into a untrue sense of safety, and it now finds alone having to redefine its mission statement to “destination vacation resort.”
The only difficulty with this technique even so is that it is sick-outfitted to pull it off. For all intents and functions, Atlantic City is below-roomed and/or more than-gamed. There is simply not enough day-tripper marketplace to go all around, and their efficient buying and selling region is tightening, as the peripheral populations northward now/will have far more prepared access to a widened provide in New York (Yonkers, and quickly 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 competitive rewards are its resort ability and the availability of table games, although the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In purchase to adequately compete as a location resort the city wants to produce extra visitor rooms and not always gaming ability. By comparison, the Las Vegas Strip qualities – correct gaming locations, in that they do not have significantly of a working day-excursion market place, apart from for the ‘locals’ – have an common of .87 gaming positions for each guest room although Atlantic City’s typical is 2.seventy four positions per guest place.
It is not a coincidence that Atlantic City’s two largest resorts, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, had been the the very least impacted by the most current downturn. The Borgata knowledgeable a gaming profits fall of 1.6 per cent, even though Harrah’s Marina noted a four.nine per cent boost compared to 2007. Additionally, the hardest hit venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest amount of rooms. In the meantime some of the venues are teetering on viability, such as the the Trump homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.
With a steady increase in gaming revenues by way of 2006, the metropolis appeared primary for further growth, which precipitated arranging for four new resort tasks, each of which have now been indefinitely delayed. Revel Amusement Group’s $2.five billion undertaking remains an iron skeleton, Pinnacle Leisure has announced it might find to market its razed Sands website, MGM Mirage has shelved its casino plans, and Penn Nationwide seems to have stopped its pursuit of the Bader Subject airport website.