A Period of Adjustment

Oops! That big hissing sound is the gaming balloon that experienced been expanding more than the a long time, little by little getting rid of air. But, it has not been a tide that lowered all ships nonetheless, as some emerging and increasing gaming jurisdictions showed powerful growth in 2008.

General, the business and racetrack casino sectors (excluding Indian gaming), experienced a three.five % decrease in gaming revenues for 2008, producing a whole 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 nearly $one billion in 2008, therefore bringing the Industrial sector industry decrease to $one.8 billion, or 6.seven per cent. Nevada was the biggest loser in 2008, dropping practically $one.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most component, casino operators have been caught relatively 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. Using the crest of yr over calendar year industry growth throughout the place and the availability of ample credit score and fairness cash, new design and growth proliferated in latest a long time. These days, faced with the realities of declining, or at best stagnant need, a lot of of these projects are now regarded as more than-leveraged and/or over-sized. As a result a lot of gaming organizations are attempting to renegotiate their debt – produced much more hard by reduced valuations – even though also paring down operational expenses. The latter has grow to be a really problematic conundrum when working with the opposition, specially in individuals jurisdictions that are now vying for industry shares with new rising casino projects in neighboring areas. A matter we go over a lot more totally in the State by State evaluation segment of this publication.

As a consequence of these conditions the gaming market landscape is now strewn with impending fatalities. Amongst the much more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the checklist grows every week.

“How long will these economic conditions persist, and are we at the bottom but?” are concerns no one particular appears to be answering however. What is toriters.com is that most gaming jurisdictions will have to find out how to offer with a smaller sized pie.

This investigation involves only gaming revenues of accredited casinos and pari-mutuel retailers that offer you casino games, and not Indian gaming operations, card rooms, or tiny non-on line casino sort slot places. The total article, which includes income tables is available on our world wide web website page.

Input/Output Product

A essential facet that appears to have arisen from the ashes of this recent development is that many casino tasks have been just way too huge to help by themselves. The enter, in phrases of expense dollars, was not proportional to the output, in terms of net revenue following financial debt service, compared to previously achieved results. More and/or greater is not often far better. Observing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the development of a lot more comprehensive facilities in many other jurisdictions. The flaw in this strategy even so is that the charges linked with widening market place penetration and occasioned-use, are considerably greater than individuals incurred to appeal to the foundation market place.

As daytripper markets grow to be a lot more aggressive, casino venues will have to count much more and far more on their in-house hotel patrons, and dimensions their qualities (and expectations) appropriately. Even though Steve Wynn started a significant craze in making up-marketplace mega-places, there basically was not adequate need on the Strip to warrant the a lot of other equivalent initiatives that followed that aimed at the exact same specialized niche.

The trick is to strike a satisfied medium in undertaking configurations which of program require considerably less of a ‘seat-of-pants’ approach, and one particular that is much more examined. A shameless plug for advancement consultants like ourselves.

Other Gaming Actions

Although there are no printed in depth information of American Indian gaming revenues, anecdotal proof seems to propose that this phase has been as difficult hit as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, symbolizing a fall of about seven %, or almost $114 million, a lot more than doubling the 3.five p.c drop from the year before. This market is seemingly nevertheless reeling from the ripple-influence of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Division of Gaming reviews that contributions primarily based on a gaming revenue system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 when compared to the earlier 12 months reducing .8 percent in the first quarter, seven.5 p.c in the second quarter, 9.5 per cent in the third quarter, and 16.one % in the fourth quarter.

Some SEC reporting Indian gaming houses report equivalent decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, reviews that while calendar yr 2008 confirmed an virtually 2 percent growth rate in gaming revenues, there was an 8.seven per cent drop in the 3rd quarter and an practically 10 % decline in the fourth quarter of 2008, compared with 2007. Gaming profits traits at close by Niagara Falls, Ontario were down 1.five% in 2008 when compared with 2007.

It’s been a mixed-bag for state lotteries throughout the region. The North American Association of Condition & Provincial Lotteries stories that U.S. lotteries generated a overall of $60.6 billion in income in fiscal 2008, up about three per cent from the preceding year however some jurisdictions documented decreases, most notably California, which showed an eight % drop. Inasmuch as some of these states are on various fiscal yr finishes, it would look that the data does not replicate the affect of third and/or fourth quarter outcomes.

According to info presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 % to $thirteen.seven billion in 2008, vs . $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As beforehand noted, it has been new gaming jurisdictions that have spawned considerably of the development in yearly casino/racino revenues in excess of the many years, and their impact is apt to carry on into the in close proximity to long term.

Miami Dade voters accepted a ballot problem that enables every of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Puppy Observe and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to announced its strategies. There are quite a few other proposals getting deemed that would even more increase casino development all through the point out.

The point out ultimately got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,200+ match casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open up right up until 2010. There has also been some discussion about allowing an boost in per location gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.

The state’s expanded lottery plan that enables for the improvement of four casino gaming zones and slots at current horse and dog tracks seems mired, as only 1 facility is presently beneath development, whilst a few other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is positioned so shut to the point out line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table games, together with a 2nd section due to open in 2011 with 875 slots and 20 table online games. The state has extended the software approach for the other 3 zones until April, 2009.

There is nevertheless a great deal of ‘jockeying’ heading on, but the prospect of as many as 8 slot parlors and racinos seems to be back on the entrance-burner, but very likely not resolved throughout the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most recent becoming the 390 room M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new resorts consist of two elements of the City Middle venture, and the Fountainebleau.

Pinnacle Entertainment’s new casino development assignments in Baton Rouge and Lake Charles, while delayed, are described to still be on-track for opening this year and/or early 2010.

There is a monthly bill below consideration that could much more than double Penn National’s slot equipment to three,000, as properly as a proposal that would remove the restriction that slots be situated within 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing nearby residents to allow slots, may possibly be considering moving to a more hospitable city.

A referendum was accredited in November, 2008 that allows for the development of five casinos with a overall of 15,000 slots, and now the bidding war is afoot though it is not as intensive as the point out had predicted.

Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open up in 2008, but has run into numerous funding concerns and whilst the resort portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, whilst scaled back again somewhat, is nevertheless on monitor to open this yr.

New England
Massachusetts, a sleeping-giant in terms of market possible, is nonetheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot appear to muster the political support. A modern review concluded by Dartmouth College estimates that Massachusetts resident expended a lot more than $920 million previous yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an alternative to produce casinos, nevertheless the subject is most likely to be revisited, specifically if Massachusetts decides to go ahead. There are also attempts in Maine to reconsider its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by just lately agreeing to keep on augmenting purses with an additional tax. The governor nonetheless, has appointed a new panel to examine the state’s sagging racing plan which ironically, can only be preserved by making it possible for the tracks to have slot devices specially at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would ultimately be produced, the profitable bidder indicated an inability to make the essential $370 million price, citing the present lending climate, and throwing the venture back into the lap of the governor. Although the industry need in the location could be regarded fairly sturdy, the prospect of added competition from close by Belmont could have an affect on Aqueduct’s underlining economic feasibility, especially thinking about that marginally significantly less than 30% of the internet win is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort intricate are being reconsidered probably owing to each the probable opening of at the very least one or perhaps two racino operations in the NY metro location, and the resurfacing of initiatives to advancement a Course III Indian gaming facility in the Catskills.

Yet one more gaming proposal is becoming put forth in Ohio, soon after very last year’s variation was turned down by the voters. This plan phone calls for one particular casino each in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment decision necessary of $250 million, as well as an original licensing payment of $fifty million, and a 33 p.c tax on gaming income.

The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers project in Pittsburgh is envisioned to be operational in August, ’09 although Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are expected to begin construction this year.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and contain 300 video games, one hundred forty rooms and a extensive assortment of features.

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

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer you. State authorities has proffered the notion of allowing the vacation resort to offer you casino games, but this energy is in way too early a stage to have any traction one particular way or yet another.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the taking of lands into have faith in on behalf of federally recognized American Indian tribes has even more stymied some new Course III gaming tasks throughout the region. Additionally, there had been eleven Indian casino projects rejected by the DOI last yr due to the fact of its new rule that casinos need to be around ample to a reservation that tribal members can perform at them. It has been suggested that the new Obama administration may possibly be far more sympathetic to the advancement of Indian gaming tasks, but this situation has however to be dealt with.

In the meantime, there are other Course III projects in the numerous levels of development. The Seneca casino project in Buffalo, NY, although functioning a little temporary facility, has delayed an presently under construction permanent facility until the marketplace rebounds. They have also expressed an fascination in creating a casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could effect their strategies for greater projects. There are new Indian gaming projects set to open up in Michigan and Oklahoma this yr, and others are in the organizing phase. Texas might let the reopening of Indian gaming services and permit other location and there are programs afoot by the Navajos in Arizona to assemble further casinos. California is poised to open two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming earnings in Atlantic Town has declined seven.6 p.c, from $four.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is discovering itself in an intensive comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast ended up positioned in Atlantic Metropolis, in which it looked as if it may really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Little by little however its market share was being encroached on, initial by the advancement of a massive Class III gaming operation in Connecticut, and then another slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned opening of slot functions 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 future potential clients. It truly is reliance on working day-trippers lulled it into a fake feeling of protection, and it now finds itself getting to redefine its mission statement to “location resort.”

The only problem with this technique however is that it is ill-equipped to pull it off. For all intents and functions, Atlantic City is underneath-roomed and/or in excess of-gamed. There is basically not sufficient day-tripper industry to go about, and their powerful trading location is tightening, as the peripheral populations northward now/will have more all set accessibility 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.

Other than the ocean access, the city’s only genuine competitive benefits are its hotel ability and the availability of desk online games, despite the fact that the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In purchase to sufficiently compete as a destination resort the town wants to build extra visitor rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip properties – accurate gaming locations, in that they do not have significantly of a day-vacation market place, other than for the ‘locals’ – have an regular of .87 gaming positions per guest room although Atlantic City’s typical is two.seventy four positions for every guest place.

It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, each of which added new rooms in 2008, had been the minimum impacted by the most recent downturn. The Borgata seasoned a gaming income fall of 1.6 p.c, even though Harrah’s Marina documented a 4.nine p.c enhance in comparison to 2007. Additionally, the hardest 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, such as the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.

With a steady increase in gaming revenues through 2006, the city seemed key for additional growth, which precipitated organizing for 4 new resort projects, every single of which have now been indefinitely delayed. Revel Leisure Group’s $two.five billion venture remains an iron skeleton, Pinnacle Leisure has introduced it might seek to sell its razed Sands site, MGM Mirage has shelved its casino ideas, and Penn Countrywide seems to have stopped its pursuit of the Bader Area airport site.