A Period of Adjustment

Oops! That huge hissing seem is the gaming balloon that had been increasing in excess of the a long time, slowly dropping air. But, it has not been a tide that reduced all ships nevertheless, as some rising and expanding gaming jurisdictions showed robust growth in 2008.

Total, the business and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a 3.5 p.c drop in gaming revenues for 2008, generating a complete of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a gain of virtually $1 billion in 2008, thereby bringing the Commercial sector marketplace decrease to $one.eight billion, or 6.7 %. Nevada was the largest loser in 2008, dropping nearly $one.three billion, far more than half of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most element, casino operators had been caught comparatively flat-footed by the extent of the 2008 income downturn, as it was not till the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of yr above year market progress across the place and the availability of enough credit history and equity resources, new construction and enlargement proliferated in current several years. Right now, confronted with the realities of declining, or at greatest stagnant desire, many of these projects are now regarded in excess of-leveraged and/or over-sized. As a consequence several gaming businesses are attempting to renegotiate their credit card debt – manufactured far more tough by decrease valuations – whilst also paring down operational fees. The latter has grow to be a quite problematic conundrum when working with the competitors, especially in those jurisdictions that are now vying for market place shares with new emerging on line casino initiatives in neighboring regions. A topic we go over far more fully in the Point out by Condition evaluation area of this publication.

As a outcome of these circumstances the gaming market landscape is now strewn with impending fatalities. Between the far more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows every single week.

“How prolonged will these economic problems persist, and are we at the base nevertheless?” are questions no a single appears to be answering nevertheless. What is distinct however is that most gaming jurisdictions will have to find out how to offer with a more compact pie.

Note:
This evaluation includes only gaming revenues of licensed casinos and pari-mutuel shops that offer on line casino game titles, and not Indian gaming operations, card rooms, or tiny non-casino kind slot areas. The entire report, including income tables is offered on our internet webpage.

Enter/Output Model

A crucial aspect that appears to have arisen from the ashes of this existing craze is that several on line casino initiatives were just too big to help themselves. The input, in terms of investment bucks, was not proportional to the output, in conditions of net profit soon after credit card debt support, when compared to earlier reached outcomes. More and/or even bigger is not constantly much better. Observing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the improvement of far more complete amenities in many other jurisdictions. The flaw in this strategy nevertheless is that the expenses associated with widening marketplace penetration and occasioned-use, are drastically higher than individuals incurred to draw in the foundation market place.

As daytripper markets turn out to be a lot more competitive, casino venues will have to rely more and a lot more on their in-house resort patrons, and dimension their properties (and anticipations) accordingly. Whilst Steve Wynn started a significant trend in producing up-marketplace mega-places, there just was not adequate need on the Strip to warrant the a lot of other similar assignments that adopted that aimed at the identical niche.

The trick is to strike a content medium in undertaking configurations which of course need significantly less of a ‘seat-of-pants’ technique, and 1 that is a lot more examined. A shameless plug for advancement consultants like ourselves.

Other Gaming Pursuits

Though there are no revealed comprehensive data of American Indian gaming revenues, anecdotal proof seems to suggest that this section has been as challenging hit as the Business sector. The two Connecticut Indian gaming installations report slot income of $one.six billion in 2008, symbolizing a drop of about seven per cent, or virtually $114 million, a lot more than doubling the 3.5 per cent drop from the yr before. This marketplace is apparently still reeling from the ripple-influence of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming reports that contributions dependent on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the earlier calendar year lowering .8 % in the very first quarter, 7.5 p.c in the 2nd quarter, nine.5 p.c in the 3rd quarter, and sixteen.one percent 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 even though calendar year 2008 confirmed an practically 2 % progress fee in gaming revenues, there was an 8.7 percent drop in the third quarter and an almost 10 p.c decline in the fourth quarter of 2008, compared with 2007. Gaming income developments at nearby Niagara Falls, Ontario ended up down one.five% in 2008 compared with 2007.

It is been a mixed-bag for state lotteries throughout the nation. The North American Affiliation of State & Provincial Lotteries studies that U.S. lotteries generated a complete of $60.six billion in revenue in fiscal 2008, up about 3 p.c from the earlier calendar year however some jurisdictions reported decreases, most notably California, which showed an eight per cent fall. Inasmuch as some of these states are on a variety of fiscal calendar year ends, it would seem that the data does not reflect the affect of 3rd and/or fourth quarter final results.

According to info offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 per cent to $13.seven billion in 2008, versus $14.seven billion in 2007.

Planned & Proposed New Expansions

As formerly noted, it has been new gaming jurisdictions that have spawned a lot of the growth in yearly casino/racino revenues more than the many years, and their influence is apt to keep on into the in close proximity to long term.

Florida
Miami Dade voters approved a ballot concern that makes it possible for each and every of three pari-mutuels to have a casino facility of up to 2,000 slot devices. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has nevertheless to declared its ideas. There are many other proposals getting regarded as that would even more broaden on line casino advancement during the state.

Illinois
The condition finally obtained around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,two hundred+ game on line casino positioned in Des Plaines just east of O’Hare. The new facility is not most likely to open until finally 2010. There has also been some discussion about allowing an enhance in for each spot gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery plan that permits for the development of 4 on line casino gaming zones and slots at current horse and puppy tracks seems mired, as only 1 facility is presently beneath design, even though 3 other proposals have been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is located so close to the state line that its parking good deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk game titles, alongside with a 2nd phase owing to open up in 2011 with 875 slots and 20 desk games. The point out has extended the application procedure for the other three zones till April, 2009.

Kentucky
There is nevertheless a whole lot of ‘jockeying’ likely on, but the prospect of as numerous as 8 slot parlors and racinos seems to be back on the front-burner, but very likely not settled for the duration of the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most latest becoming the 390 room M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Challenging Rock and new lodges contain two factors of the Town Heart venture, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino improvement 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 invoice below consideration that could much more than double Penn National’s slot equipment to three,000, as nicely as a proposal that would remove the restriction that slots be located in 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing neighborhood people to let slots, may be considering transferring to a much more hospitable city.

Maryland
A referendum was approved in November, 2008 that makes it possible for for the advancement of 5 casinos with a total of fifteen,000 slots, and now the bidding war is afoot even though it is not as intensive as the condition experienced expected.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open up in 2008, but has run into different funding concerns and even though the hotel portion is open, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled again fairly, is nonetheless on track to open this year.

New England
Massachusetts, a sleeping-large in conditions of market possible, is even now maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but cannot look to muster the political assistance. A current examine completed by Dartmouth College estimates that Massachusetts resident invested more than $920 million very last 12 months at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an alternative to build casinos, however the matter is most likely to be revisited, particularly if Massachusetts decides to go forward. There are also attempts in Maine to rethink its possibilities.

New Jersey
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 extra tax. The governor however, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by allowing the tracks to have slot machines especially at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would lastly be produced, the successful bidder indicated an incapacity to make the needed $370 million price, citing the existing lending weather, and throwing the project back into the lap of the governor. Despite the fact that the marketplace desire in the location could be deemed really strong, the prospect of further competitors from close by Belmont could have an effect on Aqueduct’s underlining economic feasibility, particularly contemplating that somewhat significantly less than thirty% of the net win is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort complex are currently being reconsidered possibly owing to both the possible opening of at minimum 1 or perhaps two racino operations in the NY metro area, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

Ohio
However one more gaming proposal is becoming put forth in Ohio, after final year’s version was turned down by the voters. This prepare calls for a single on line casino each and every in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expense required of $250 million, as well as an original licensing fee of $50 million, and a 33 % tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers task in Pittsburgh is expected to be operational in August, ’09 whilst Philadelphia’s two slot facilities even now wallow in a political mire, but are anticipated to start off construction this yr.

South Dakota
The Lodge at Deadwood is slated to open up in the Fall of 2009, and incorporate three hundred game titles, a hundred and forty rooms and a vast variety of facilities.

Texas
Legislators are proposing a voter referendum that would amend the point out structure to allow casino gambling in selected regions, as properly as let 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 Resorts, who have reportedly tendered an offer. Point out govt has proffered the idea of making it possible for the vacation resort to supply on line casino online games, but this work is in as well early a stage to have any traction one way or one more.

winning168.com Gaming
A recent Supreme Courtroom ruling that restricts the using of lands into trust on behalf of federally identified American Indian tribes has more stymied some new Course III gaming projects throughout the region. Moreover, there were eleven Indian casino tasks turned down by the DOI previous 12 months simply because of its new rule that casinos have to be around enough to a reservation that tribal members can work at them. It has been recommended that the new Obama administration may be more sympathetic to the development of Indian gaming tasks, but this concern has yet to be resolved.

In the meantime, there are other Class III initiatives in the numerous levels of advancement. The Seneca casino undertaking in Buffalo, NY, while operating a tiny momentary facility, has delayed an currently underneath development long lasting facility until the market place rebounds. They have also expressed an curiosity in developing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could influence their plans for greater projects. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this calendar year, and others are in the preparing stage. Texas may possibly enable the reopening of Indian gaming services and allow other location and there are ideas afoot by the Navajos in Arizona to assemble further casinos. California is poised to open two to three new Course III casinos in 2009/10.

The Nor’easter Squeeze

Whole gaming revenue in Atlantic Metropolis has declined seven.6 per cent, from $4.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is obtaining alone in an intense 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 might truly even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually nonetheless its industry share was getting encroached on, first by the improvement of a big Course III gaming operation in Connecticut, and then an additional slots operations in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently 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 operations in Philadelphia, the noose is tightening about Atlantic City’s potential prospects. It truly is reliance on working day-trippers lulled it into a false feeling of safety, and it now finds itself possessing to redefine its mission assertion to “destination resort.”

The only issue with this approach however is that it is sick-outfitted to pull it off. For all intents and purposes, Atlantic Town is under-roomed and/or above-gamed. There is basically not enough working day-tripper industry to go about, and their powerful buying and selling area is tightening, as the peripheral populations northward now/will have a lot more prepared accessibility to a widened source in New York (Yonkers, and soon 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 real competitive rewards are its hotel capacity and the availability of table games, though the latter is most likely to eventuate in Pennsylvania, and probably Delaware. In get to adequately contend as a vacation spot vacation resort the city needs to produce additional visitor rooms and not automatically gaming potential. By comparison, the Las Vegas Strip qualities – correct gaming locations, in that they do not have much of a working day-journey market, other than for the ‘locals’ – have an typical of .87 gaming positions for every visitor place whilst Atlantic City’s average is two.seventy four positions for each visitor space.

It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, have been the minimum impacted by the most current downturn. The Borgata experienced a gaming earnings fall of 1.6 per cent, although Harrah’s Marina reported a four.nine p.c improve in comparison to 2007. In addition, the hardest 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, including the the Trump homes and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.

With a regular rise in gaming revenues by means of 2006, the town appeared primary for further improvement, which precipitated preparing for four new resort initiatives, each of which have now been indefinitely delayed. Revel Amusement Group’s $2.five billion project continues to be an iron skeleton, Pinnacle Amusement has declared it may well seek to offer its razed Sands website, MGM Mirage has shelved its on line casino ideas, and Penn Countrywide appears to have stopped its pursuit of the Bader Field airport site.