A Time period of Adjustment

Oops! That giant hissing audio is the gaming balloon that experienced been expanding in excess of the a long time, slowly getting rid of air. But, it has not been a tide that lowered all ships however, as some rising and growing gaming jurisdictions confirmed powerful progress in 2008.

All round, the industrial and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.5 p.c decline 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 showed a obtain of virtually $one billion in 2008, thus bringing the Industrial sector industry drop to $one.eight billion, or six.seven percent. Nevada was the most significant loser in 2008, dropping nearly $one.3 billion, far more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most component, on line casino operators were caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not right up until the 3rd and fourth quarters when it genuinely nosedived. Driving the crest of 12 months in excess of calendar year industry development across the nation and the availability of ample credit score and fairness resources, new building and enlargement proliferated in current several years. Nowadays, confronted with the realities of declining, or at greatest stagnant desire, a lot of of these projects are now regarded as in excess of-leveraged and/or over-sized. As a consequence several gaming firms are trying to renegotiate their personal debt – made much more tough by decrease valuations – while also paring down operational charges. The latter has turn out to be a extremely problematic conundrum when working with the opposition, specially in those jurisdictions that are now vying for industry shares with new emerging on line casino projects in neighboring locations. A matter we go over more fully in the State by State investigation area of this publication.

As a end result of these situations the gaming market landscape is now strewn with impending fatalities. Between the far more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the record grows each and every 7 days.

“How long will these financial circumstances persist, and are we at the bottom however?” are queries no 1 appears to be answering however. What is clear nonetheless is that most gaming jurisdictions will have to find out how to deal with a smaller pie.

Be aware:
This analysis involves only gaming revenues of certified casinos and pari-mutuel stores that offer you casino games, and not Indian gaming functions, card rooms, or modest non-on line casino kind slot places. The entire report, including revenue tables is available on our web website page.

Enter/Output Model

A crucial aspect that looks to have arisen from the ashes of this existing craze is that several casino assignments ended up just way too massive to assistance by themselves. The enter, in terms of investment dollars, was not proportional to the output, in phrases of web earnings following credit card debt services, when compared to previously reached final results. More and/or larger is not usually better. Observing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of much more thorough amenities in numerous other jurisdictions. The flaw in this technique nonetheless is that the expenses related with widening industry penetration and occasioned-use, are drastically increased than these incurred to appeal to the foundation market.

As daytripper marketplaces grow to be more competitive, casino venues will have to depend much more and a lot more on their in-residence hotel patrons, and dimension their properties (and expectations) appropriately. While Steve Wynn began a main development in generating up-marketplace mega-locations, there basically was not sufficient demand from customers on the Strip to warrant the numerous other related tasks that followed that aimed at the exact same niche.

The trick is to strike a happy medium in task configurations which of program call for significantly less of a ‘seat-of-pants’ strategy, and one that is far more examined. A shameless plug for development consultants like ourselves.

Other Gaming Activities

Though there are no printed in depth knowledge of American Indian gaming revenues, anecdotal proof appears to advise that this phase has been as difficult strike as the Business sector. The two Connecticut Indian gaming installations report slot earnings of $one.six billion in 2008, representing a drop of about seven p.c, or nearly $114 million, a lot more than doubling the 3.five per cent drop from the 12 months ahead of. This market is seemingly nonetheless reeling from the ripple-result of a on line casino expansion in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming stories that contributions based mostly on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the preceding calendar year reducing .8 per cent in the 1st quarter, 7.five percent in the 2nd quarter, nine.five % in the third quarter, and 16.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming qualities report equivalent decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reports that even though calendar calendar year 2008 confirmed an almost two p.c growth price in gaming revenues, there was an 8.7 percent drop in the 3rd quarter and an almost ten per cent decrease in the fourth quarter of 2008, compared with 2007. Gaming income tendencies at close by Niagara Falls, Ontario ended up down one.5% in 2008 when compared with 2007.

It really is been a combined-bag for condition lotteries across the country. The North American Association of State & Provincial Lotteries reports that U.S. lotteries created a complete of $60.6 billion in income in fiscal 2008, up about 3 p.c from the previous calendar year however some jurisdictions reported decreases, most notably California, which showed an eight percent drop. Inasmuch as some of these states are on various fiscal yr ends, it would seem to be that the data does not replicate the impact of third and/or fourth quarter final results.

In accordance to info presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping seven p.c to $thirteen.seven billion in 2008, as opposed to $14.7 billion in 2007.

Planned & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned significantly of the expansion in yearly casino/racino revenues above the years, and their impact is apt to proceed into the in close proximity to long term.

Florida
Miami Dade voters approved a ballot issue that permits every single of three pari-mutuels to have a on line casino facility of up to two,000 slot equipment. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has yet to introduced its ideas. There are quite a few other proposals getting considered that would further increase casino growth all through the point out.

Illinois
The state ultimately received around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a one,200+ game casino positioned 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 discussion about permitting an enhance in per place 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 growth of 4 casino gaming zones and slots at current horse and canine tracks appears mired, as only one facility is presently beneath design, while three other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is found so shut to the condition line that its parking whole lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk game titles, along with a 2nd section because of to open in 2011 with 875 slots and 20 table games. The state has extended the software process for the other three zones till April, 2009.

Kentucky
There is nevertheless a good deal of ‘jockeying’ likely on, but the prospect of as several as 8 slot parlors and racinos seems to be back again on the entrance-burner, but most likely not solved throughout the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most recent currently being the 390 area M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Challenging Rock and new lodges consist of two parts of the Metropolis Centre task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino growth initiatives in Baton Rouge and Lake Charles, while delayed, are noted to still be on-monitor for opening this yr and/or early 2010.

Maine
There is a bill beneath thing to consider that could far more than double Penn National’s slot machines to three,000, as properly as a proposal that would take away the restriction that slots be positioned inside five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to enable slots, may be considering transferring to a more hospitable city.

Maryland
A referendum was accredited in November, 2008 that permits for the improvement of five casinos with a total of 15,000 slots, and now the bidding war is afoot even though it is not as powerful as the point out had anticipated.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has run into numerous funding problems and whilst the hotel portion is open up, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled back again considerably, is nevertheless on monitor to open up this 12 months.

New England
Massachusetts, a sleeping-giant in conditions of industry possible, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but can not seem to be to muster the political help. A current examine accomplished by Dartmouth University estimates that Massachusetts resident put in far more than $920 million previous 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an option to produce casinos, even so the matter is very likely to be revisited, specially if Massachusetts decides to go ahead. There are also attempts in Maine to rethink its options.

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 proceed augmenting purses with an extra tax. The governor however, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by permitting the tracks to have slot devices specially at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would finally be developed, the successful bidder indicated an incapability to make the needed $370 million payment, citing the existing lending local climate, and throwing the task again into the lap of the governor. Although the industry demand from customers in the area could be regarded as fairly strong, the prospect of further competitors from close by Belmont could have an effect on Aqueduct’s underlining economic feasibility, specifically thinking about that marginally significantly less than 30% of the net earn is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort complex are currently being reconsidered perhaps owing to each the possible opening of at minimum a single or probably two racino operations in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Ohio
But another gaming proposal is being put forth in Ohio, after previous year’s version was turned down by the voters. This strategy phone calls for 1 casino every single in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision needed of $250 million, as well as an original licensing price of $50 million, and a 33 % tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot facilities still wallow in a political mire, but are anticipated to start design this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and include 300 video games, 140 rooms and a extensive selection of features.

Texas
Legislators are proposing a voter referendum that would amend the condition structure to allow on line casino gambling in selected places, as effectively as enable gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. State government has proffered the idea of permitting the vacation resort to offer you casino game titles, but this energy is in too early a phase to have any traction 1 way or yet another.

Indian Gaming
A modern Supreme Court ruling that restricts the using of lands into have faith in on behalf of federally regarded American Indian tribes has further stymied some new Class III gaming initiatives throughout the nation. Moreover, there were eleven Indian on line casino assignments rejected by the DOI final calendar year simply because of its new rule that casinos have to be close to ample to a reservation that tribal associates can perform at them. It has been proposed that the new Obama administration may well be more sympathetic to the development of Indian gaming tasks, but this situation has yet to be addressed.

Meanwhile, there are other Course III initiatives in the numerous stages of improvement. The Seneca on line casino undertaking in Buffalo, NY, whilst operating a small momentary facility, has delayed an previously beneath building long term facility until the market place rebounds. They have also expressed an curiosity in building a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could affect their programs for bigger projects. There are new Indian gaming projects set to open up in Michigan and Oklahoma this 12 months, and other individuals are in the planning phase. Texas may enable the reopening of Indian gaming amenities and enable other venue and there are strategies afoot by the Navajos in Arizona to build added casinos. California is poised to open two to 3 new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming earnings in Atlantic Metropolis has declined 7.six %, from $four.9 billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining itself in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast have been positioned in Atlantic Metropolis, the place it appeared as if it may really even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually nonetheless its market share was becoming encroached upon, 1st by the growth of a massive Course III gaming procedure in Connecticut, and then one more slots operations in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening close to Atlantic City’s foreseeable future prospects. It truly is reliance on working day-trippers lulled it into a untrue feeling of security, and it now finds itself having to redefine its mission assertion to “destination resort.”

The only issue with this strategy nevertheless is that it is ill-geared up to pull it off. For all intents and needs, Atlantic Metropolis is underneath-roomed and/or above-gamed. There is merely not sufficient day-tripper industry to go close to, and their efficient buying and selling region is tightening, as the peripheral populations northward now/will have more all set entry to a widened offer in New York (Yonkers, and quickly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

winbet than the ocean access, the city’s only genuine competitive advantages are its resort potential and the availability of table online games, though the latter is probably to eventuate in Pennsylvania, and probably Delaware. In order to adequately contend as a vacation spot resort the metropolis wants to build further visitor rooms and not always gaming potential. By comparison, the Las Vegas Strip houses – true gaming places, in that they do not have significantly of a day-excursion market, except for the ‘locals’ – have an common of .87 gaming positions per visitor area although Atlantic City’s typical is two.74 positions for every guest place.

It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, each of which added new rooms in 2008, have been the least impacted by the latest downturn. The Borgata experienced a gaming income fall of 1.six percent, while Harrah’s Marina documented a 4.9 % increase compared to 2007. Furthermore, the most difficult strike venues, namely 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, which includes the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been more delayed, and shedding valuation.

With a steady increase in gaming revenues through 2006, the town appeared primary for additional advancement, which precipitated organizing for 4 new resort projects, every of which have now been indefinitely delayed. Revel Amusement Group’s $2.5 billion undertaking remains an iron skeleton, Pinnacle Entertainment has introduced it might seek out to promote its razed Sands website, MGM Mirage has shelved its casino programs, and Penn Nationwide appears to have stopped its pursuit of the Bader Subject airport website.