A Period of Adjustment

Oops! That huge hissing seem is the gaming balloon that had been increasing in excess of the several years, gradually getting rid of air. But, it has not been a tide that reduced all ships nonetheless, as some rising and expanding gaming jurisdictions confirmed powerful progress in 2008.

Total, the business and racetrack casino sectors (excluding Indian gaming), seasoned a 3.five percent decline in gaming revenues for 2008, producing a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of almost $one billion in 2008, therefore bringing the Industrial sector market place drop to $1.8 billion, or 6.seven per cent. Nevada was the greatest loser in 2008, dropping almost $1.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, casino operators were caught comparatively flat-footed by the extent of the 2008 revenue downturn, as it was not right up until the 3rd and fourth quarters when it really nosedived. Using the crest of year in excess of 12 months market expansion throughout the nation and the availability of ample credit and equity money, new development and expansion proliferated in current many years. Right now, faced with the realities of declining, or at very best stagnant demand from customers, several of these initiatives are now considered more than-leveraged and/or in excess of-sized. As a outcome a lot of gaming companies are trying to renegotiate their personal debt – produced more difficult by reduced valuations – whilst also paring down operational costs. The latter has turn out to be a quite problematic conundrum when dealing with the competitors, specially in these jurisdictions that are now vying for industry shares with new emerging casino assignments in neighboring locations. A subject matter we talk about far more completely in the Condition by Condition analysis area of this publication.

As a consequence of these problems the gaming market landscape is now strewn with impending fatalities. Amid the a lot more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the listing grows every 7 days.

“How lengthy will these financial problems persist, and are we at the bottom but?” are queries no one seems to be answering however. What is clear even so is that most gaming jurisdictions will have to understand how to offer with a smaller pie.

Note:
This analysis involves only gaming revenues of accredited casinos and pari-mutuel retailers that supply on line casino games, and not Indian gaming operations, card rooms, or little non-on line casino variety slot locations. The entire write-up, such as earnings tables is available on our internet page.

Enter/Output Design

A crucial element that looks to have arisen from the ashes of this recent development is that several on line casino assignments had been just as well large to help by themselves. The enter, in conditions of expenditure pounds, was not proportional to the output, in conditions of internet revenue right after financial debt support, when compared to beforehand achieved outcomes. More and/or larger is not usually better. Seeing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the growth of much more extensive facilities in a lot of other jurisdictions. The flaw in this method nevertheless is that the charges connected with widening marketplace penetration and occasioned-use, are drastically increased than people incurred to draw in the base market.

As daytripper marketplaces become far more competitive, casino venues will have to count far more and more on their in-property lodge patrons, and measurement their houses (and anticipations) accordingly. While Steve Wynn began a main trend in producing up-industry mega-destinations, there merely was not ample demand on the Strip to warrant the many other comparable tasks that adopted that aimed at the identical niche.

The trick is to strike a content medium in task configurations which of training course require much less of a ‘seat-of-pants’ method, and one particular that is a lot more studied. A shameless plug for development consultants like ourselves.

Other Gaming Activities

Even though there are no released thorough info of American Indian gaming revenues, anecdotal evidence seems to suggest that this segment has been as difficult strike as the Industrial sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, symbolizing a drop of about 7 %, or virtually $114 million, far more than doubling the 3.5 percent drop from the 12 months before. This market is apparently still reeling from the ripple-effect of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Division of Gaming stories that contributions dependent on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 in contrast to the earlier 12 months decreasing .8 % in the first quarter, 7.5 percent in the next quarter, 9.5 % in the third quarter, and 16.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, studies that even though calendar 12 months 2008 confirmed an nearly 2 percent expansion rate in gaming revenues, there was an eight.seven % drop in the third quarter and an practically 10 % drop in the fourth quarter of 2008, in comparison with 2007. Gaming profits developments at close by Niagara Falls, Ontario ended up down 1.five% in 2008 when compared with 2007.

It really is been a combined-bag for state lotteries across the nation. The North American Affiliation of State & Provincial Lotteries studies that U.S. lotteries created a complete of $60.six billion in income in fiscal 2008, up about 3 % from the previous yr nevertheless some jurisdictions described decreases, most notably California, which showed an 8 p.c drop. Inasmuch as some of these states are on various fiscal calendar year finishes, it would look that the info does not replicate the impact of 3rd and/or fourth quarter final results.

According to information supplied by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling seven per cent to $thirteen.seven billion in 2008, vs . $fourteen.7 billion in 2007.

Planned & Proposed New Expansions

As formerly observed, it has been new gaming jurisdictions that have spawned considerably of the growth in annual on line casino/racino revenues over the years, and their influence is apt to carry on into the around future.

Florida
Miami Dade voters approved a ballot problem that allows every single of three pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Pet Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has however to announced its strategies. There are quite a few other proposals becoming deemed that would even more grow on line casino growth through the state.

Illinois
The state ultimately received around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,two hundred+ sport casino situated in Des Plaines just east of O’Hare. The new facility is not likely to open up until 2010. There has also been some discussion about permitting an increase in for every location gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery software that allows for the advancement of four on line casino gaming zones and slots at current horse and dog tracks seems mired, as only a single facility is presently under design, even though 3 other proposals had 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 near to the condition line that its parking great deal is in Kansas. The Boot Hill On line casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk video games, alongside with a next stage due to open in 2011 with 875 slots and twenty table games. The state has prolonged the software procedure for the other three zones right up until April, 2009.

Kentucky
There is nonetheless a whole lot of ‘jockeying’ going on, but the prospect of as many as 8 slot parlors and racinos appears to be again on the entrance-burner, but probably not fixed in the course of the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most recent becoming the 390 place M Vacation resort in Henderson. There are expansions underway at the two Caesars Palace and Challenging Rock and new accommodations include two factors of the Town Centre task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino development initiatives in Baton Rouge and Lake Charles, while delayed, are reported to even now be on-monitor for opening this calendar year and/or early 2010.

Maine
There is a invoice beneath consideration that could more than double Penn National’s slot machines to three,000, as well as a proposal that would eliminate the restriction that slots be situated in 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing nearby residents to enable slots, may be considering transferring to a a lot more hospitable town.

Maryland
A referendum was authorized in November, 2008 that permits for the growth of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the point out had expected.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into a variety of funding issues and whilst the resort portion is open, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled back again considerably, is nonetheless on monitor to open up this calendar year.

New England
Massachusetts, a sleeping-large in phrases of industry likely, is nonetheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can’t look to muster the political assistance. A modern study completed by Dartmouth University estimates that Massachusetts resident spent more than $920 million final calendar 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 develop casinos, even so the matter is most likely to be revisited, especially if Massachusetts decides to go ahead. There are also makes an attempt in Maine to reconsider its choices.

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 proceed augmenting purses with an added tax. The governor even so, has appointed a new panel to research the state’s sagging racing software which ironically, can only be preserved by enabling the tracks to have slot devices specially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it looked as if Aqueduct’s 4,500 VLT facility would last but not least be designed, the winning bidder indicated an incapability to make the necessary $370 million price, citing the existing lending climate, and throwing the undertaking again into the lap of the governor. Despite the fact that the marketplace demand in the location could be regarded fairly robust, the prospect of additional competitors from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, specifically considering that somewhat considerably less than 30% of the net acquire is retained by the operator.

Strategies to relocate Monticello Raceway into a vacation resort complicated are getting reconsidered maybe owing to equally the possible opening of at least one or probably two racino operations in the NY metro spot, and the resurfacing of initiatives to growth a Course III Indian gaming facility in the Catskills.

Ohio
Nevertheless one more gaming proposal is currently being put forth in Ohio, right after last year’s version was turned down by the voters. This strategy phone calls for one casino each and every in the state’s biggest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal investment decision necessary of $250 million, as properly as an first licensing fee of $50 million, and a 33 per cent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 although Philadelphia’s two slot services still wallow in a political mire, but are predicted to start off design this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and contain 300 games, one hundred forty rooms and a vast selection of amenities.

Texas
Legislators are proposing a voter referendum that would amend the state structure to allow on line casino gambling in designated areas, as nicely 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 submitted for bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. Point out govt has proffered the idea of permitting the vacation resort to provide on line casino game titles, but this work is in way too early a phase to have any traction a single way or yet another.

Indian Gaming
A latest Supreme Court ruling that restricts the taking of lands into believe in on behalf of federally regarded American Indian tribes has additional stymied some new Class III gaming assignments throughout the nation. In addition, there were eleven Indian casino tasks turned down by the DOI final year since of its new rule that casinos should be in close proximity to sufficient to a reservation that tribal users can operate at them. It has been proposed that the new Obama administration may well be more sympathetic to the improvement of Indian gaming tasks, but this issue has however to be resolved.

In the meantime, there are other Course III tasks in the various phases of advancement. The Seneca on line casino task in Buffalo, NY, whilst functioning a modest short-term facility, has delayed an already below building long term facility right up until the marketplace 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 getting challenged, and could affect their strategies for larger projects. There are new Indian gaming tasks established to open up in Michigan and Oklahoma this year, and other folks are in the preparing phase. Texas could let the reopening of Indian gaming facilities and allow other venue and there are plans afoot by the Navajos in Arizona to construct further casinos. California is poised to open two to three new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming revenue in Atlantic City has declined seven.six %, from $four.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the town is obtaining by itself in an extreme comp-war with the Pennsylvania venues. At mbit casino review in the Northeast had been positioned in Atlantic Town, exactly where it appeared as if it may possibly actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Gradually however its market share was getting encroached upon, 1st by the growth of a huge Course III gaming procedure in Connecticut, and then an additional slots operations 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 eventually two functions in Philadelphia, the noose is tightening all around Atlantic City’s future potential customers. It truly is reliance on day-trippers lulled it into a untrue perception of safety, and it now finds itself getting to redefine its mission statement to “spot resort.”

The only issue with this method nevertheless is that it is unwell-geared up to pull it off. For all intents and needs, Atlantic City is underneath-roomed and/or above-gamed. There is basically not enough day-tripper market to go around, and their effective buying and selling location is tightening, as the peripheral populations northward now/will have more completely ready access to a widened source in New York (Yonkers, and before long 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 true aggressive positive aspects are its hotel capability and the availability of desk online games, even though the latter is likely to eventuate in Pennsylvania, and probably Delaware. In purchase to adequately compete as a location vacation resort the town demands to create extra guest rooms and not always gaming ability. By comparison, the Las Vegas Strip houses – correct gaming places, in that they do not have significantly of a day-excursion market place, besides for the ‘locals’ – have an typical of .87 gaming positions for every guest place while Atlantic City’s typical is two.74 positions for each visitor room.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, equally of which additional new rooms in 2008, have been the the very least impacted by the newest downturn. The Borgata experienced a gaming profits drop of 1.six per cent, even though Harrah’s Marina described a 4.9 percent boost in contrast to 2007. Furthermore, the most difficult hit venues, namely 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, such as the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and dropping valuation.

With a steady increase in gaming revenues via 2006, the town seemed primary for further development, which precipitated preparing for 4 new resort tasks, each of which have now been indefinitely delayed. Revel Leisure Group’s $2.five billion undertaking continues to be an iron skeleton, Pinnacle Amusement has introduced it might find to market its razed Sands site, MGM Mirage has shelved its casino ideas, and Penn National appears to have stopped its pursuit of the Bader Subject airport internet site.