A Period of time of Adjustment

Oops! That large hissing audio is the gaming balloon that experienced been increasing over the many years, little by little getting rid of air. But, it has not been a tide that decreased all ships however, as some emerging and growing gaming jurisdictions showed sturdy growth in 2008.

Total, the commercial and racetrack on line casino sectors (excluding Indian gaming), experienced a 3.five per cent decrease 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 drop, as they showed a achieve of practically $1 billion in 2008, thus bringing the Commercial sector market place decline to $one.8 billion, or 6.7 p.c. Nevada was the most significant loser in 2008, dropping virtually $1.3 billion, more than half of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most part, on line casino operators ended up caught fairly flat-footed by the extent of the 2008 income downturn, as it was not till the 3rd and fourth quarters when it genuinely nosedived. Driving the crest of year in excess of yr market place progress throughout the place and the availability of ample credit rating and equity funds, new construction and enlargement proliferated in recent several years. Nowadays, faced with the realities of declining, or at very best stagnant demand from customers, several of these assignments are now regarded as in excess of-leveraged and/or over-sized. As a end result many gaming organizations are attempting to renegotiate their credit card debt – created more hard by decrease valuations – whilst also paring down operational fees. The latter has turn out to be a very problematic conundrum when dealing with the competitiveness, specifically in those jurisdictions that are now vying for marketplace shares with new rising casino initiatives in neighboring regions. A subject we discuss far more completely in the State by Condition examination part of this publication.

As a outcome of these circumstances the gaming sector landscape is now strewn with impending fatalities. Among the far more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows every single 7 days.

“How prolonged will these economic situations persist, and are we at the bottom but?” are questions no one particular seems to be answering but. What is very clear even so is that most gaming jurisdictions will have to find out how to deal with a scaled-down pie.

Observe:
This analysis contains only gaming revenues of licensed casinos and pari-mutuel outlets that offer you casino online games, and not Indian gaming functions, card rooms, or tiny non-on line casino sort slot spots. The complete report, including earnings tables is accessible on our web webpage.

Input/Output Design

A essential aspect that seems to have arisen from the ashes of this present pattern is that a lot of on line casino projects have been just too huge to assist on their own. The enter, in terms of investment pounds, was not proportional to the output, in conditions of web income after financial debt services, when compared to beforehand accomplished outcomes. More and/or larger is not often greater. Viewing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of more comprehensive facilities in numerous other jurisdictions. The flaw in this method nonetheless is that the expenses related with widening marketplace penetration and occasioned-use, are significantly greater than those incurred to appeal to the foundation marketplace.

As daytripper marketplaces become more aggressive, on line casino venues will have to count a lot more and far more on their in-residence lodge patrons, and dimension their homes (and anticipations) appropriately. While Steve Wynn commenced a key development in producing up-industry mega-places, there basically was not adequate desire on the Strip to warrant the a lot of other comparable initiatives that followed that aimed at the identical niche.

The trick is to strike a satisfied medium in undertaking configurations which of program demand considerably less of a ‘seat-of-pants’ technique, and a single that is a lot more examined. A shameless plug for advancement consultants like ourselves.

Other Gaming Actions

Though there are no published detailed data of American Indian gaming revenues, anecdotal evidence appears to suggest that this section has been as hard hit as the Professional sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, representing a drop of about seven per cent, or almost $114 million, far more than doubling the 3.five per cent drop from the yr ahead of. This industry is seemingly even now reeling from the ripple-result of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming reviews that contributions dependent on a gaming profits formula from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in comparison to the prior yr decreasing .8 p.c in the initial quarter, seven.5 p.c in the second quarter, nine.five percent in the third quarter, and sixteen.one p.c in the fourth quarter.

Some SEC reporting Indian gaming homes report related decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that while calendar yr 2008 confirmed an virtually two p.c growth price in gaming revenues, there was an 8.7 % decline in the 3rd quarter and an nearly 10 per cent decline in the fourth quarter of 2008, when compared with 2007. Gaming income trends at nearby Niagara Falls, Ontario had been down 1.5% in 2008 in comparison with 2007.

It truly is been a combined-bag for point out lotteries across the country. The North American Association of Point out & Provincial Lotteries reports that U.S. lotteries created a complete of $60.6 billion in income in fiscal 2008, up about three percent from the preceding 12 months yet some jurisdictions described decreases, most notably California, which confirmed an 8 % drop. Inasmuch as some of these states are on a variety of fiscal calendar year ends, it would seem that the knowledge does not replicate the effect of third and/or fourth quarter final results.

According to data supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling seven % to $13.7 billion in 2008, versus $14.seven billion in 2007.

Prepared & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have spawned a lot of the growth in once-a-year casino/racino revenues above the years, and their affect is apt to continue into the near future.

Florida
Miami Dade voters accredited a ballot concern that allows each and every of a few pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Canine Track and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has nevertheless to introduced its plans. There are quite a few other proposals becoming regarded as that would more increase on line casino development through the condition.

Illinois
The point out last but not least obtained about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,two hundred+ recreation on line casino located in Des Plaines just east of O’Hare. The new facility is not most likely to open up until finally 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.

Kansas
The state’s expanded lottery software that allows for the growth of 4 casino gaming zones and slots at present horse and dog tracks appears mired, as only one facility is presently below development, even though 3 other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is found so close to the point out line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table game titles, alongside with a next period because of to open in 2011 with 875 slots and twenty desk games. The condition has extended the software approach for the other a few zones till April, 2009.

Kentucky
There is nevertheless a lot of ‘jockeying’ likely on, but the prospect of as a lot of as eight slot parlors and racinos seems to be back again on the entrance-burner, but very likely not settled throughout the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most current currently being the 390 space M Resort in Henderson. There are expansions underway at equally Caesars Palace and Tough Rock and new lodges contain two components of the Town Centre undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino improvement tasks in Baton Rouge and Lake Charles, although delayed, are noted to still be on-monitor for opening this calendar year and/or early 2010.

Maine
There is a bill below consideration that could far more than double Penn National’s slot machines to 3,000, as nicely as a proposal that would take away the restriction that slots be located within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional inhabitants to allow slots, may possibly be thinking about relocating to a much more hospitable city.

Maryland
A referendum was approved in November, 2008 that enables for the improvement of five casinos with a complete of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as extreme as the state had predicted.

Mississippi
Grand Soleil Casino Resort in Natchez had been slated to open in 2008, but has run into different financing issues and whilst the resort part is open, the riverboat is documented to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled again somewhat, is even now on observe to open up this year.

New England
Massachusetts, a sleeping-large in phrases of marketplace prospective, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can’t seem to muster the political assist. A current review finished by Dartmouth College estimates that Massachusetts resident expended more than $920 million previous 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an option to develop casinos, even so the subject is likely to be revisited, especially if Massachusetts decides to go ahead. There are also tries 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 not too long ago agreeing to carry on augmenting purses with an extra tax. The governor nevertheless, has appointed a new panel to study the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would ultimately be produced, the successful bidder indicated an incapability to make the necessary $370 million fee, citing the existing lending local weather, and throwing the undertaking back again into the lap of the governor. Even though the marketplace desire in the spot could be regarded as quite powerful, the prospect of additional competition from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, particularly taking into consideration that slightly much 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 the two the possible opening of at minimum a single or maybe two racino operations in the NY metro region, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.

Ohio
But yet another gaming proposal is being place forth in Ohio, right after last year’s model was turned down by the voters. This program phone calls for one on line casino each in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expenditure needed of $250 million, as properly as an preliminary licensing price of $fifty million, and a 33 per cent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is due to open 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 nonetheless wallow in a political mire, but are anticipated to commence building this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and contain 300 games, one hundred forty rooms and a vast selection of features.

Texas
Legislators are proposing a voter referendum that would amend the condition constitution to permit on line casino gambling in specified areas, as well as let gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. State govt has proffered the idea of allowing the resort to provide casino online games, but this energy is in way too early a phase to have any traction 1 way or another.

Indian Gaming
A recent Supreme Court ruling that restricts the taking of lands into have confidence in on behalf of federally recognized American Indian tribes has even more stymied some new Course III gaming initiatives across the country. In addition, there have been eleven Indian casino projects turned down by the DOI previous year due to the fact of its new rule that casinos have to be near sufficient to a reservation that tribal associates can operate at them. It has been suggested that the new Obama administration may possibly be much more sympathetic to the improvement of Indian gaming assignments, but this problem has but to be dealt with.

Meanwhile, there are other Course III tasks in the different phases of improvement. The Seneca casino task in Buffalo, NY, although operating a little temporary facility, has delayed an presently below building permanent facility right up until the market place rebounds. They have also expressed an desire in establishing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could influence their plans for bigger tasks. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this 12 months, and other folks are in the arranging stage. Texas may let the reopening of Indian gaming facilities and enable other venue and there are ideas afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming income in Atlantic City has declined 7.6 %, from $4.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining by itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast had been found in Atlantic Town, exactly where it seemed as if it may in fact even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Little by little however its market share was becoming encroached on, 1st by the improvement of a large Class III gaming procedure in Connecticut, and then another slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.

Now, with buy casino backlinks 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 prospective customers. It’s reliance on working day-trippers lulled it into a bogus sense of security, and it now finds itself obtaining to redefine its mission statement to “destination resort.”

The only dilemma with this technique even so is that it is ill-outfitted to pull it off. For all intents and reasons, Atlantic Metropolis is below-roomed and/or in excess of-gamed. There is merely not sufficient working day-tripper market place to go all around, and their powerful buying and selling area is tightening, as the peripheral populations northward now/will have more completely ready access to a widened supply in New York (Yonkers, and before long at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only real aggressive rewards are its resort ability and the availability of desk game titles, even though the latter is very likely to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently compete as a vacation spot resort the metropolis requirements to produce added guest rooms and not always gaming capability. By comparison, the Las Vegas Strip houses – real gaming destinations, in that they do not have considerably of a working day-excursion marketplace, apart from for the ‘locals’ – have an average of .87 gaming positions per guest area whilst Atlantic City’s regular is two.seventy four positions for each visitor area.

It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, ended up the least impacted by the newest downturn. The Borgata seasoned a gaming revenue drop of 1.6 per cent, even though Harrah’s Marina described a four.9 p.c boost in contrast to 2007. In addition, the hardest strike 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, including the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and dropping valuation.

With a steady increase in gaming revenues by way of 2006, the town seemed key for even more growth, which precipitated planning for 4 new vacation resort projects, each of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion undertaking remains an iron skeleton, Pinnacle Amusement has introduced it may seek out to market its razed Sands web site, MGM Mirage has shelved its casino ideas, and Penn Countrywide appears to have stopped its pursuit of the Bader Discipline airport site.