A Interval of Adjustment
Oops! That large hissing sound is the gaming balloon that had been growing in excess of the years, slowly losing air. But, it has not been a tide that lowered all ships however, as some emerging and increasing gaming jurisdictions confirmed sturdy progress in 2008.
Overall, the professional and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.five per cent drop in gaming revenues for 2008, generating a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a obtain of virtually $1 billion in 2008, therefore bringing the Business sector market decrease to $one.8 billion, or 6.seven percent. Nevada was the largest loser in 2008, dropping almost $1.three billion, much more than half of which stemmed from the Las Vegas Strip segment.
For the most portion, casino operators had been caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not until finally the third and fourth quarters when it genuinely nosedived. Driving the crest of year in excess of yr market expansion across the region and the availability of sufficient credit history and equity cash, new construction and growth proliferated in current a long time. Right now, confronted with the realities of declining, or at ideal stagnant demand from customers, numerous of these projects are now regarded above-leveraged and/or more than-sized. As a outcome many gaming companies are trying to renegotiate their personal debt – produced far more tough by reduce valuations – while also paring down operational fees. The latter has turn out to be a really problematic conundrum when dealing with the competition, particularly in people jurisdictions that are now vying for marketplace shares with new emerging casino projects in neighboring locations. A subject we examine much more completely in the Condition by Point out investigation section of this publication.
As a result of these problems the gaming sector landscape is now strewn with impending fatalities. Amongst the far more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows every single week.
“How extended will these economic situations persist, and are we at the bottom nevertheless?” are concerns no one seems to be answering yet. What is clear nevertheless is that most gaming jurisdictions will have to find out how to deal with a more compact pie.
This investigation consists of only gaming revenues of accredited casinos and pari-mutuel outlets that supply casino video games, and not Indian gaming operations, card rooms, or modest non-on line casino sort slot areas. The complete write-up, like earnings tables is available on our web web page.
A key aspect that looks to have arisen from the ashes of this recent pattern is that several casino assignments were just also large to help them selves. The enter, in phrases of investment bucks, was not proportional to the output, in conditions of internet revenue soon after financial debt services, in comparison to beforehand reached final results. More and/or bigger is not often better. Viewing the increase in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of far more complete amenities in a lot of other jurisdictions. The flaw in this method nevertheless is that the expenses linked with widening marketplace penetration and occasioned-use, are drastically larger than individuals incurred to entice the base market place.
As daytripper marketplaces turn into much more aggressive, casino venues will have to count much more and a lot more on their in-residence resort patrons, and dimension their properties (and expectations) appropriately. Even though Steve Wynn began a main craze in creating up-industry mega-locations, there merely was not adequate desire on the Strip to warrant the many other similar projects that followed that aimed at the identical niche.
The trick is to strike a satisfied medium in undertaking configurations which of course need considerably less of a ‘seat-of-pants’ method, and one that is far more analyzed. A shameless plug for development consultants like ourselves.
Other Gaming Pursuits
Despite the fact that there are no revealed in depth information of American Indian gaming revenues, anecdotal evidence appears to propose that this segment has been as difficult hit as the Industrial sector. The two Connecticut Indian gaming installations report slot earnings of $one.six billion in 2008, symbolizing a drop of about seven percent, or nearly $114 million, far more than doubling the 3.five per cent fall from the calendar year ahead of. This market is evidently even now reeling from the ripple-impact of a on line casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Section of Gaming reports that contributions dependent on a gaming profits method from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the preceding yr reducing .8 p.c in the first quarter, 7.five per cent in the next quarter, 9.5 per cent in the 3rd quarter, and 16.one per cent in the fourth quarter.
Some SEC reporting Indian gaming properties report comparable decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, reviews that even though calendar calendar year 2008 showed an practically two percent progress charge in gaming revenues, there was an eight.7 per cent drop in the 3rd quarter and an practically 10 p.c drop in the fourth quarter of 2008, in comparison with 2007. Gaming profits developments at close by Niagara Falls, Ontario ended up down 1.5% in 2008 in comparison with 2007.
It is been a blended-bag for condition lotteries across the region. pussy888 of State & Provincial Lotteries reports that U.S. lotteries generated a whole of $60.6 billion in sales in fiscal 2008, up about 3 p.c from the previous 12 months but some jurisdictions described decreases, most notably California, which showed an eight % drop. Inasmuch as some of these states are on a variety of fiscal year finishes, it would seem to be that the information does not replicate the influence of third and/or fourth quarter final results.
In accordance to data presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling seven % to $thirteen.seven billion in 2008, compared to $14.7 billion in 2007.
Planned & Proposed New Expansions
As formerly famous, it has been new gaming jurisdictions that have spawned considerably of the expansion in annual casino/racino revenues more than the a long time, and their influence is apt to continue into the around future.
Miami Dade voters authorized a ballot concern that allows every of three pari-mutuels to have a on line casino facility of up to 2,000 slot equipment. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has however to declared its strategies. There are quite a few other proposals being deemed that would even more grow on line casino improvement through the condition.
The point out finally obtained close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ game on line casino positioned in Des Plaines just east of O’Hare. The new facility is not likely to open up until finally 2010. There has also been some discussion about permitting an boost in for each location gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.
The state’s expanded lottery system that makes it possible for for the development of four casino gaming zones and slots at existing horse and dog tracks seems mired, as only 1 facility is presently beneath development, whilst 3 other proposals were rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is situated so near to the condition line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table games, together with a next phase due to open up in 2011 with 875 slots and twenty table game titles. The condition has prolonged the application approach for the other 3 zones right up until April, 2009.
There is still a good deal of ‘jockeying’ heading on, but the prospect of as numerous as eight slot parlors and racinos appears to be again on the entrance-burner, but very likely not solved throughout the existing legislative session.
There are about fourteen,000 rooms scheduled to arrive on line in 2009, with the most current being the 390 place M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Tough Rock and new accommodations contain two factors of the Metropolis Heart task, and the Fountainebleau.
Pinnacle Entertainment’s new on line casino advancement projects in Baton Rouge and Lake Charles, whilst delayed, are reported to nonetheless be on-keep track of for opening this calendar year and/or early 2010.
There is a monthly bill below thought that could far more than double Penn National’s slot equipment to three,000, as effectively as a proposal that would take away the restriction that slots be situated within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional people to enable slots, could be contemplating transferring to a a lot more hospitable town.
A referendum was approved in November, 2008 that enables for the advancement of five casinos with a whole of fifteen,000 slots, and now the bidding war is afoot even though it is not as intensive as the state had anticipated.
Grand Soleil On line casino Resort in Natchez experienced been slated to open in 2008, but has operate into a variety of funding troubles and while the lodge part is open, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back again relatively, is nonetheless on keep track of to open up this year.
Massachusetts, a sleeping-large in phrases of marketplace prospective, is nevertheless maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to muster the political help. A recent research accomplished by Dartmouth College estimates that Massachusetts resident put in far more than $920 million last 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an choice to create casinos, however the matter is most likely to be revisited, especially if Massachusetts decides to go forward. There are also tries in Maine to rethink its alternatives.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by just lately agreeing to keep on augmenting purses with an further tax. The governor nevertheless, has appointed a new panel to examine the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot devices specifically at the Meadowlands. (See The Nor’easter Squeeze part)
Just when it looked as if Aqueduct’s four,500 VLT facility would ultimately be developed, the profitable bidder indicated an inability to make the required $370 million charge, citing the present lending local climate, and throwing the task again into the lap of the governor. Though the market place desire in the location could be considered quite sturdy, the prospect of added competition from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, specially contemplating that slightly significantly less than thirty% of the web get is retained by the operator.
Programs to relocate Monticello Raceway into a resort complicated are currently being reconsidered perhaps owing to the two the possible opening of at minimum one 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.
But an additional gaming proposal is currently being put forth in Ohio, following previous year’s version was turned down by the voters. This strategy phone calls for 1 on line casino each and every in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure needed of $250 million, as well as an initial licensing payment of $50 million, and a 33 % tax on gaming earnings.
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is expected to be operational in August, ’09 even though Philadelphia’s two slot amenities nonetheless wallow in a political mire, but are anticipated to commence building this yr.
The Lodge at Deadwood is slated to open in the Fall of 2009, and consist of three hundred video games, 140 rooms and a broad selection of features.
Legislators are proposing a voter referendum that would amend the condition constitution to enable casino gambling in designated regions, as effectively as allow gambling on American Indian lands in Texas and at existing racetracks.
The Greenbriar, the state’s venerable vacation resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer you. State government has proffered the idea of enabling the resort to offer casino video games, but this effort is in too early a phase to have any traction 1 way or an additional.
A latest Supreme Courtroom ruling that restricts the getting of lands into have faith in on behalf of federally recognized American Indian tribes has additional stymied some new Class III gaming assignments throughout the region. In addition, there ended up eleven Indian casino projects rejected by the DOI previous calendar year because of its new rule that casinos have to be in close proximity to ample to a reservation that tribal members can function at them. It has been advised that the new Obama administration may possibly be much more sympathetic to the advancement of Indian gaming tasks, but this issue has however to be resolved.
Meanwhile, there are other Class III assignments in the a variety of phases of growth. The Seneca on line casino undertaking in Buffalo, NY, although working a small temporary facility, has delayed an currently below construction long term facility until finally the market rebounds. They have also expressed an curiosity in establishing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could impact their plans for more substantial assignments. There are new Indian gaming tasks established to open in Michigan and Oklahoma this year, and other individuals are in the preparing phase. Texas could enable the reopening of Indian gaming facilities and permit other venue and there are strategies afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to a few new Course III casinos in 2009/10.
The Nor’easter Squeeze
Total gaming revenue in Atlantic City has declined seven.6 %, from $four.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is finding by itself in an intense comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast have been found in Atlantic City, the place it looked as if it may well actually even eclipse the Las Vegas Strip’s annual gaming revenues.
Slowly and gradually however its industry share was becoming encroached upon, very first by the improvement of a huge Class III gaming procedure in Connecticut, and then yet another slots functions in Rhode Island, and then 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 functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and sooner or later two functions in Philadelphia, the noose is tightening all around Atlantic City’s potential prospective customers. It really is reliance on working day-trippers lulled it into a false perception of stability, and it now finds by itself obtaining to redefine its mission statement to “location vacation resort.”
The only dilemma with this approach nonetheless is that it is ill-equipped to pull it off. For all intents and purposes, Atlantic Town is below-roomed and/or in excess of-gamed. There is merely not enough working day-tripper marketplace to go close to, and their efficient investing location is tightening, as the peripheral populations northward now/will have far more prepared obtain to a widened offer 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 obtain, the city’s only real competitive rewards are its lodge capability and the availability of desk games, even though the latter is most likely to eventuate in Pennsylvania, and possibly Delaware. In get to adequately compete as a spot vacation resort the city requirements to develop added guest rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip properties – correct gaming locations, in that they do not have a lot of a day-journey industry, except for the ‘locals’ – have an regular of .87 gaming positions for every visitor area whilst Atlantic City’s common is two.seventy four positions for every visitor area.
It is not a coincidence that Atlantic City’s two greatest hotels, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, ended up the least impacted by the latest downturn. The Borgata experienced a gaming revenue drop of 1.six percent, while Harrah’s Marina described a four.9 % improve when compared to 2007. Moreover, the hardest hit venues, particularly the AC Hilton, Resorts and the Trump Marina, also have the smallest variety of rooms. In the meantime some of the venues are teetering on viability, like the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been even more delayed, and dropping valuation.
With a regular increase in gaming revenues through 2006, the city seemed prime for even more growth, which precipitated planning for 4 new resort tasks, each of which have now been indefinitely delayed. Revel Entertainment Group’s $two.five billion undertaking continues to be an iron skeleton, Pinnacle Amusement has announced it may well find to promote its razed Sands web site, MGM Mirage has shelved its casino strategies, and Penn National appears to have stopped its pursuit of the Bader Field airport website.