A Period of Adjustment
Oops! That giant hissing sound is the gaming balloon that experienced been growing above the a long time, little by little losing air. But, it has not been a tide that decreased all ships even so, as some rising and expanding gaming jurisdictions showed powerful growth in 2008.
General, the professional and racetrack casino sectors (excluding Indian gaming), skilled a 3.five p.c decrease in gaming revenues for 2008, making a total of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a obtain of nearly $one billion in 2008, therefore bringing the Commercial sector market decrease to $one.8 billion, or 6.seven per cent. Nevada was the greatest loser in 2008, dropping almost $one.3 billion, much more than 50 % of which stemmed from the Las Vegas Strip section.
For the most part, casino operators ended up caught fairly flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the third and fourth quarters when it actually nosedived. Using the crest of year more than yr market place progress across the place and the availability of ample credit rating and equity cash, new building and enlargement proliferated in recent many years. Nowadays, faced with the realities of declining, or at very best stagnant need, many of these tasks are now deemed over-leveraged and/or above-sized. As a consequence a lot of gaming firms are trying to renegotiate their debt – manufactured a lot more tough by lower valuations – while also paring down operational expenses. The latter has become a extremely problematic conundrum when dealing with the competition, especially in people jurisdictions that are now vying for market shares with new rising casino tasks in neighboring places. A matter we go over far more totally in the Point out by Point out analysis segment of this publication.
As a result of these problems the gaming sector landscape is now strewn with impending fatalities. Among the more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the record grows every single week.
“How long will these financial conditions persist, and are we at the base but?” are queries no one particular appears to be answering however. What is obvious nevertheless is that most gaming jurisdictions will have to discover how to deal with a smaller sized pie.
This analysis involves only gaming revenues of licensed casinos and pari-mutuel retailers that provide casino online games, and not Indian gaming functions, card rooms, or modest non-casino sort slot spots. The complete write-up, including earnings tables is available on our web webpage.
A key element that appears to have arisen from the ashes of this present pattern is that numerous on line casino projects ended up just too large to assist on their own. The input, in terms of investment bucks, was not proportional to the output, in terms of internet income soon after credit card debt services, in contrast to beforehand achieved results. A lot more and/or larger is not constantly better. Viewing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the growth of a lot more complete features in several other jurisdictions. The flaw in this approach nevertheless is that the expenses linked with widening marketplace penetration and occasioned-use, are significantly higher than people incurred to draw in the base market.
As daytripper markets grow to be more aggressive, casino venues will have to rely much more and a lot more on their in-property hotel patrons, and measurement their qualities (and anticipations) appropriately. While Steve Wynn started out a major craze in creating up-industry mega-places, there merely was not sufficient desire on the Strip to warrant the numerous other related projects that followed that aimed at the same market.
The trick is to strike a pleased medium in task configurations which of system call for significantly less of a ‘seat-of-pants’ strategy, and 1 that is a lot more analyzed. A shameless plug for development consultants like ourselves.
Other Gaming Activities
Although there are no revealed detailed data of American Indian gaming revenues, anecdotal proof appears to advise that this segment has been as hard strike as the Business sector. The two Connecticut Indian gaming installations report slot profits of $one.6 billion in 2008, representing a fall of about seven %, or practically $114 million, much more than doubling the 3.5 percent drop from the calendar year prior to. This market is evidently even now reeling from the ripple-impact of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Department of Gaming reviews that contributions primarily based on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the earlier calendar year decreasing .8 per cent in the very first quarter, seven.five per cent in the 2nd quarter, 9.five per cent in the 3rd quarter, and sixteen.1 percent in the fourth quarter.
Some SEC reporting Indian gaming properties report equivalent decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reports that while calendar 12 months 2008 showed an nearly two per cent expansion rate in gaming revenues, there was an 8.seven per cent decrease in the third quarter and an almost ten percent decline in the fourth quarter of 2008, compared with 2007. Gaming income traits at close by Niagara Falls, Ontario ended up down 1.five% in 2008 compared with 2007.
It’s been a blended-bag for condition lotteries throughout the place. The North American Association of Point out & Provincial Lotteries reviews that U.S. lotteries generated a overall of $60.six billion in product sales in fiscal 2008, up about 3 percent from the previous calendar year however some jurisdictions described decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on a variety of fiscal year ends, it would seem that the knowledge does not mirror the influence of 3rd and/or fourth quarter results.
In accordance to information offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 percent to $thirteen.seven billion in 2008, vs . $14.7 billion in 2007.
Prepared & Proposed New Expansions
As beforehand noted, it has been new gaming jurisdictions that have spawned a lot of the progress in yearly on line casino/racino revenues over the several years, and their impact is apt to keep on into the in close proximity to future.
Miami Dade voters approved a ballot issue that enables each and every of a few pari-mutuels to have a casino facility of up to 2,000 slot equipment. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, whilst the Calder set up in Miami Gardens has nevertheless to announced its ideas. There are numerous other proposals being regarded as that would more grow on line casino growth through the condition.
The state lastly got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,200+ game on line casino situated in Des Plaines just east of O’Hare. The new facility is not likely to open up till 2010. There has also been some discussion about enabling an boost in for every location gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.
The state’s expanded lottery software that makes it possible for for the advancement of four casino gaming zones and slots at existing horse and pet tracks seems mired, as only 1 facility is presently underneath design, whilst a few other proposals were rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is positioned so shut to the point out line that its parking lot is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk games, along with a second section because of to open up in 2011 with 875 slots and twenty table games. The state has extended the application approach for the other a few zones until finally April, 2009.
There is nevertheless a lot of ‘jockeying’ likely on, but the prospect of as numerous as 8 slot parlors and racinos appears to be again on the entrance-burner, but likely not settled in the course of the present legislative session.
There are about 14,000 rooms scheduled to come on line in 2009, with the most modern becoming the 390 room M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new lodges consist of two components of the Town Heart task, and the Fountainebleau.
Pinnacle Entertainment’s new casino growth tasks in Baton Rouge and Lake Charles, whilst delayed, are documented to still be on-track for opening this yr and/or early 2010.
There is a monthly bill underneath thought that could a lot more than double Penn National’s slot devices to 3,000, as properly as a proposal that would remove the restriction that slots be found within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing nearby citizens to enable slots, may be taking into consideration relocating to a more hospitable city.
A referendum was accredited in November, 2008 that makes it possible for for the development of 5 casinos with a total of fifteen,000 slots, and now the bidding war is afoot although it is not as extreme as the point out experienced expected.
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into numerous funding concerns and while the hotel portion is open, the riverboat is reported to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back relatively, is still on monitor to open this 12 months.
Massachusetts, a sleeping-huge in phrases of market place prospective, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can not seem to muster the political support. A recent examine concluded by Dartmouth University estimates that Massachusetts resident expended far more than $920 million very last year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an option to create casinos, however the matter is likely to be revisited, especially if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its alternatives.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by lately agreeing to keep on augmenting purses with an further tax. The governor even so, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze section)
Just when it seemed as if Aqueduct’s four,five hundred VLT facility would ultimately be produced, the successful bidder indicated an inability to make the needed $370 million fee, citing the recent lending climate, and throwing the project back again into the lap of the governor. Though the industry need in the location could be deemed fairly powerful, the prospect of extra opposition from nearby Belmont could have an influence on Aqueduct’s underlining financial feasibility, particularly thinking about that slightly much less than 30% of the internet earn is retained by the operator.
Strategies to relocate Monticello Raceway into a vacation resort complex are being reconsidered probably owing to the two the probable opening of at the very least one particular or probably two racino functions in the NY metro location, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.
But an additional gaming proposal is being put forth in Ohio, after final year’s model was turned down by the voters. This prepare calls for 1 casino every single in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment essential of $250 million, as nicely as an original licensing payment of $fifty million, and a 33 % tax on gaming revenue.
The Sands in Bethlehem is owing to open 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 services still wallow in a political mire, but are anticipated to start development this calendar year.
The Lodge at Deadwood is slated to open up in the Fall of 2009, and include three hundred online games, a hundred and forty rooms and a wide selection of features.
Legislators are proposing a voter referendum that would amend the point out structure to enable on line casino gambling in specified regions, as effectively as allow gambling on American Indian lands in Texas and at current racetracks.
The Greenbriar, the state’s venerable vacation resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. Condition federal government has proffered the notion of enabling the vacation resort to supply casino video games, but this hard work is in also early a phase to have any traction one particular way or another.
A recent Supreme Court ruling that restricts the using of lands into have faith in on behalf of federally regarded American Indian tribes has additional stymied some new Course III gaming initiatives across the nation. Additionally, there ended up eleven Indian casino projects rejected by the DOI previous year because of its new rule that casinos have to be close to enough to a reservation that tribal associates can work at them. It has been recommended that the new Obama administration may well be a lot more sympathetic to the development of Indian gaming tasks, but this problem has yet to be addressed.
In the meantime, there are other Course III projects in the different phases of growth. The Seneca casino project in Buffalo, NY, while functioning a modest temporary facility, has delayed an currently beneath building permanent facility right up until the market rebounds. They have also expressed an interest in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could impact their strategies for bigger initiatives. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this 12 months, and others are in the organizing stage. Texas could let the reopening of Indian gaming services and allow other location and there are ideas afoot by the Navajos in Arizona to assemble extra casinos. California is poised to open two to 3 new Course III casinos in 2009/10.
Complete gaming revenue in Atlantic Town has declined 7.6 p.c, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is finding alone in an intensive comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up found in Atlantic Metropolis, the place it seemed as if it might really even eclipse the Las Vegas Strip’s yearly gaming revenues.
Slowly nonetheless its market place share was getting encroached on, very first by the development of a huge Class III gaming operation in Connecticut, and then yet 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 on line casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening close to Atlantic City’s long term prospective customers. It is reliance on working day-trippers lulled it into a bogus feeling of stability, and it now finds by itself having to redefine its mission assertion to “spot resort.”
The only difficulty with this approach however is that it is unwell-outfitted to pull it off. For all intents and needs, Atlantic Metropolis is underneath-roomed and/or over-gamed. There is basically not sufficient working day-tripper industry to go close to, and their powerful trading spot is tightening, as the peripheral populations northward now/will have more ready entry 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 real competitive benefits are its hotel capability and the availability of table games, despite the fact that the latter is very likely to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately compete as a destination vacation resort the city wants to build extra visitor rooms and not necessarily gaming capacity. By comparison, the Las Vegas Strip properties – real gaming destinations, in that they do not have much of a day-vacation market place, except for the ‘locals’ – have an average of .87 gaming positions for each guest area although Atlantic City’s average is two.74 positions for every visitor place.
It is not a coincidence that Atlantic City’s two greatest resorts, the Borgata and Harrah’s Marina, equally of which added new rooms in 2008, have been the minimum impacted by the most current downturn. The Borgata skilled a gaming earnings fall of 1.6 p.c, while Harrah’s Marina documented a 4.nine percent boost in contrast to 2007. In addition, the toughest hit 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, which includes the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.
With a continual rise in gaming revenues through 2006, the city seemed key for further advancement, which precipitated organizing for 4 new resort projects, every single of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion undertaking stays an iron skeleton, Pinnacle Amusement has declared it may well seek to sell its razed Sands internet site, MGM Mirage has shelved its on line casino programs, and Penn Countrywide seems to have stopped its pursuit of the Bader Area airport website.