A Period of Adjustment
Oops! That giant hissing seem is the gaming balloon that had been growing more than the many years, slowly shedding air. But, it has not been a tide that reduced all ships nevertheless, as some rising and expanding gaming jurisdictions confirmed robust progress in 2008.
Total, the industrial and racetrack casino sectors (excluding Indian gaming), seasoned a three.5 per cent decline in gaming revenues for 2008, creating a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a achieve of almost $1 billion in 2008, thus bringing the Professional sector market place drop to $1.8 billion, or 6.seven percent. Nevada was the most significant loser in 2008, dropping almost $1.three billion, much more than fifty percent of which stemmed from the Las Vegas Strip section.
For the most component, casino operators were caught relatively flat-footed by the extent of the 2008 income downturn, as it was not right up until the 3rd and fourth quarters when it actually nosedived. Driving the crest of 12 months over year market progress throughout the region and the availability of ample credit score and equity money, new design and expansion proliferated in current several years. Nowadays, faced with the realities of declining, or at ideal stagnant demand, many of these initiatives are now regarded in excess of-leveraged and/or over-sized. As a end result several gaming firms are attempting to renegotiate their personal debt – created much more difficult by reduced valuations – although also paring down operational costs. The latter has grow to be a very problematic conundrum when dealing with the competitors, especially in individuals jurisdictions that are now vying for market place shares with new rising casino tasks in neighboring locations. A topic we examine a lot more completely in the Condition by Condition evaluation section of this publication.
As a consequence of these situations the gaming industry landscape is now strewn with impending fatalities. Amongst the much more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the listing grows every 7 days.
“How long will these financial situations persist, and are we at the base yet?” are questions no one particular seems to be answering but. What is distinct even so is that most gaming jurisdictions will have to find out how to deal with a scaled-down pie.
This investigation involves only gaming revenues of accredited casinos and pari-mutuel shops that provide casino video games, and not Indian gaming operations, card rooms, or modest non-on line casino type slot places. The entire article, like profits tables is accessible on our internet web page.
A important factor that seems to have arisen from the ashes of this present craze is that several casino tasks ended up just also large to assist by themselves. The input, in terms of investment bucks, was not proportional to the output, in conditions of net profit right after debt service, when compared to formerly accomplished outcomes. A lot more and/or bigger is not always far better. Viewing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of far more thorough amenities in many other jurisdictions. The flaw in this approach nonetheless is that the costs associated with widening industry penetration and occasioned-use, are considerably larger than those incurred to entice the foundation market.
As daytripper markets become a lot more aggressive, casino venues will have to rely much more and more on their in-residence hotel patrons, and size their qualities (and expectations) accordingly. While Steve Wynn commenced a major pattern in generating up-market mega-places, there just was not sufficient desire on the Strip to warrant the numerous other related tasks that followed that aimed at the very same area of interest.
The trick is to strike a content medium in project configurations which of course call for much less of a ‘seat-of-pants’ technique, and a single that is far more researched. A shameless plug for development consultants like ourselves.
Other Gaming Routines
Though there are no printed thorough information of American Indian gaming revenues, anecdotal evidence seems to propose that this segment has been as tough hit as the Professional sector. The two Connecticut Indian gaming installations report slot earnings of $one.6 billion in 2008, symbolizing a fall of about 7 per cent, or nearly $114 million, a lot more than doubling the 3.5 p.c drop from the yr ahead of. This market place is seemingly nevertheless 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 Department of Gaming stories that contributions based on a gaming income system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in comparison to the earlier calendar year reducing .8 % in the very first quarter, 7.5 p.c in the second quarter, 9.5 % in the 3rd quarter, and sixteen.1 percent in the fourth quarter.
Some SEC reporting Indian gaming houses report similar decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, stories that although calendar year 2008 showed an almost two percent progress rate in gaming revenues, there was an eight.seven % decrease in the third quarter and an virtually ten per cent decline in the fourth quarter of 2008, when compared with 2007. Gaming profits trends at close by Niagara Falls, Ontario have been down 1.5% in 2008 in contrast with 2007.
It really is been a blended-bag for state lotteries throughout the region. The North American Association of Condition & Provincial Lotteries reviews that U.S. lotteries generated a total of $60.6 billion in revenue in fiscal 2008, up about 3 percent from the previous year nevertheless some jurisdictions described decreases, most notably California, which showed an eight per cent drop. Inasmuch as some of these states are on various fiscal calendar year finishes, it would seem that the knowledge does not reflect the affect of 3rd and/or fourth quarter outcomes.
In accordance to info offered by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling 7 % to $13.7 billion in 2008, versus $fourteen.7 billion in 2007.
Planned & Proposed New Expansions
As formerly observed, it has been new gaming jurisdictions that have spawned a lot of the development in once-a-year on line casino/racino revenues above the several years, and their effect is apt to proceed into the near foreseeable future.
Miami Dade voters accredited a ballot concern that enables every of a few pari-mutuels to have a casino facility of up to two,000 slot devices. The Flagler Dog Observe and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has but to introduced its ideas. There are many other proposals becoming regarded as that would further expand on line casino improvement during the point out.
The condition last but not least got around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,two hundred+ game casino located 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 dialogue about enabling an increase in for every spot gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.
sexy gaming ‘s expanded lottery plan that makes it possible for for the development of four on line casino gaming zones and slots at current horse and puppy tracks seems mired, as only a single facility is presently below design, while a few other proposals ended up rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is positioned so shut to the condition line that its parking whole lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table games, alongside with a second phase because of to open in 2011 with 875 slots and 20 table video games. The state has prolonged the software process for the other a few zones right up until April, 2009.
There is still a lot of ‘jockeying’ likely on, but the prospect of as a lot of as eight slot parlors and racinos seems to be back on the entrance-burner, but likely not resolved in the course of the current legislative session.
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most modern getting the 390 place M Resort in Henderson. There are expansions underway at the two Caesars Palace and Hard Rock and new accommodations consist of two factors of the City Center task, and the Fountainebleau.
Pinnacle Entertainment’s new on line casino improvement tasks in Baton Rouge and Lake Charles, even though delayed, are documented to nonetheless be on-monitor for opening this calendar year and/or early 2010.
There is a invoice beneath thought that could a lot more than double Penn National’s slot machines to 3,000, as effectively as a proposal that would get rid of the restriction that slots be positioned inside 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to let slots, might be considering shifting to a more hospitable city.
A referendum was accepted in November, 2008 that allows for the development of 5 casinos with a complete of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as powerful as the point out experienced anticipated.
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open up in 2008, but has run into a variety of funding issues and while the lodge portion is open, the riverboat is described to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back considerably, is even now on keep track of to open up this calendar year.
Massachusetts, a sleeping-big in terms of industry likely, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to appear to muster the political help. A modern study concluded by Dartmouth University estimates that Massachusetts resident put in far more than $920 million previous 12 months at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an alternative to create casinos, however the topic is very likely to be revisited, specially if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its choices.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by lately agreeing to carry on augmenting purses with an further tax. The governor nevertheless, has appointed a new panel to review 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 segment)
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would finally be designed, the successful bidder indicated an incapacity to make the necessary $370 million charge, citing the current lending local weather, and throwing the task again into the lap of the governor. Even though the market demand from customers in the area could be regarded very robust, the prospect of added competitors from nearby Belmont could have an affect on Aqueduct’s underlining economic feasibility, especially contemplating that marginally less than thirty% of the net win is retained by the operator.
Strategies to relocate Monticello Raceway into a resort intricate are becoming reconsidered probably owing to both the probable opening of at the very least one or maybe two racino functions in the NY metro location, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.
But one more gaming proposal is being put forth in Ohio, after final year’s version was turned down by the voters. This plan phone calls for a single casino every in the state’s premier cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision needed of $250 million, as well as an original licensing charge of $50 million, and a 33 per cent tax on gaming revenue.
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is envisioned to be operational in August, ’09 although Philadelphia’s two slot services even now wallow in a political mire, but are predicted to start construction this calendar year.
The Lodge at Deadwood is slated to open in the Fall of 2009, and consist of three hundred games, a hundred and forty rooms and a extensive variety of facilities.
Legislators are proposing a voter referendum that would amend the point out constitution to enable on line casino gambling in selected places, as properly as allow gambling on American Indian lands in Texas and at existing racetracks.
The Greenbriar, the state’s venerable vacation resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an supply. Point out federal government has proffered the idea of enabling the resort to supply on line casino video games, but this work is in also early a stage to have any traction one way or an additional.
A modern Supreme Court ruling that restricts the getting of lands into have faith in on behalf of federally identified American Indian tribes has even more stymied some new Course III gaming assignments throughout the region. Moreover, there were eleven Indian casino tasks rejected by the DOI very last 12 months simply because of its new rule that casinos have to be around adequate to a reservation that tribal members can work at them. It has been advised that the new Obama administration may possibly be far more sympathetic to the growth of Indian gaming projects, but this concern has yet to be resolved.
Meanwhile, there are other Course III initiatives in the a variety of phases of development. The Seneca casino project in Buffalo, NY, whilst functioning a small momentary facility, has delayed an currently beneath development long lasting facility till the market place rebounds. They have also expressed an fascination in developing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could effect their ideas for bigger assignments. There are new Indian gaming assignments set to open in Michigan and Oklahoma this 12 months, and other people are in the planning stage. Texas may possibly allow the reopening of Indian gaming services and allow other venue and there are programs afoot by the Navajos in Arizona to assemble additional casinos. California is poised to open two to three new Course III casinos in 2009/ten.
The Nor’easter Squeeze
Complete gaming earnings in Atlantic Town has declined 7.six p.c, from $4.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the town is obtaining alone in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast ended up situated in Atlantic City, exactly where it seemed as if it may well actually even eclipse the Las Vegas Strip’s once-a-year gaming revenues.
Little by little even so its industry share was currently being encroached upon, very first by the advancement of a massive Course III gaming operation in Connecticut, and then another slots operations in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.
Now, with the planned opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening close to Atlantic City’s long term prospective customers. It really is reliance on day-trippers lulled it into a bogus sense of security, and it now finds alone obtaining to redefine its mission assertion to “vacation spot resort.”
The only problem with this approach even so is that it is unwell-outfitted to pull it off. For all intents and functions, Atlantic Metropolis is beneath-roomed and/or more than-gamed. There is just not sufficient day-tripper market place to go around, and their effective trading location is tightening, as the peripheral populations northward now/will have more prepared access to a widened supply 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 access, the city’s only genuine competitive advantages are its lodge potential and the availability of table games, though the latter is likely to eventuate in Pennsylvania, and possibly Delaware. In get to sufficiently compete as a spot vacation resort the city requirements to produce added guest rooms and not essentially gaming capacity. By comparison, the Las Vegas Strip properties – true gaming locations, in that they do not have considerably of a day-vacation market, apart from for the ‘locals’ – have an typical of .87 gaming positions per guest area while Atlantic City’s common is two.seventy four positions for every guest room.
It is not a coincidence that Atlantic City’s two premier accommodations, the Borgata and Harrah’s Marina, both of which additional new rooms in 2008, were the the very least impacted by the most current downturn. The Borgata seasoned a gaming income drop of 1.6 %, although Harrah’s Marina reported a four.nine % increase in contrast to 2007. In addition, the most difficult hit venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest quantity 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 even more delayed, and getting rid of valuation.
With a steady rise in gaming revenues via 2006, the town appeared primary for further development, which precipitated arranging for four new resort tasks, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.5 billion venture stays an iron skeleton, Pinnacle Enjoyment has announced it might look for to promote its razed Sands site, MGM Mirage has shelved its casino plans, and Penn Nationwide seems to have stopped its pursuit of the Bader Field airport site.