A Period of time of Adjustment

Oops! That huge hissing seem is the gaming balloon that had been developing above the years, gradually losing air. But, it has not been a tide that lowered all ships nonetheless, as some rising and increasing gaming jurisdictions showed robust development in 2008.

mega888 , the business and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a three.five p.c decrease in gaming revenues for 2008, generating a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a obtain of almost $one billion in 2008, thus bringing the Professional sector market place drop to $one.8 billion, or six.7 percent. Nevada was the greatest loser in 2008, dropping virtually $1.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most element, casino operators had been caught relatively flat-footed by the extent of the 2008 earnings downturn, as it was not until finally the third and fourth quarters when it really nosedived. Riding the crest of 12 months above calendar year industry expansion across the place and the availability of sufficient credit and equity cash, new development and expansion proliferated in recent many years. Right now, confronted with the realities of declining, or at ideal stagnant need, many of these projects are now deemed above-leveraged and/or above-sized. As a outcome a lot of gaming businesses are trying to renegotiate their personal debt – produced far more challenging by decrease valuations – although also paring down operational costs. The latter has become a very problematic conundrum when dealing with the competitiveness, specifically in those jurisdictions that are now vying for industry shares with new rising on line casino tasks in neighboring locations. A topic we examine a lot more entirely in the Point out by Point out investigation part of this publication.

As a consequence of these situations the gaming sector landscape is now strewn with impending fatalities. Amongst the a lot more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows each and every 7 days.

“How prolonged will these financial circumstances persist, and are we at the bottom however?” are queries no one particular appears to be answering however. What is distinct however is that most gaming jurisdictions will have to discover how to deal with a more compact pie.

Observe:
This examination consists of only gaming revenues of licensed casinos and pari-mutuel shops that supply casino online games, and not Indian gaming operations, card rooms, or small non-on line casino type slot areas. The complete post, which includes revenue tables is obtainable on our internet webpage.

Enter/Output Model

A essential facet that looks to have arisen from the ashes of this present trend is that several on line casino tasks ended up just way too large to support by themselves. The input, in terms of investment bucks, was not proportional to the output, in phrases of web profit soon after debt provider, in comparison to previously achieved results. Much more and/or larger is not constantly greater. Seeing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the improvement of far more comprehensive features in several other jurisdictions. The flaw in this strategy however is that the expenses connected with widening market place penetration and occasioned-use, are considerably greater than these incurred to draw in the foundation market.

As daytripper markets become a lot more aggressive, casino venues will have to rely more and more on their in-home lodge patrons, and size their homes (and expectations) appropriately. Whilst Steve Wynn commenced a key pattern in making up-market place mega-places, there basically was not enough need on the Strip to warrant the numerous other equivalent initiatives that adopted that aimed at the same niche.

The trick is to strike a happy medium in task configurations which of course demand considerably less of a ‘seat-of-pants’ technique, and a single that is a lot more researched. A shameless plug for advancement consultants like ourselves.

Other Gaming Routines

Although there are no released in depth info of American Indian gaming revenues, anecdotal evidence seems to recommend that this segment has been as tough strike as the Industrial sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, representing a drop of about 7 percent, or nearly $114 million, a lot more than doubling the 3.5 percent drop from the 12 months just before. This industry is apparently nonetheless reeling from the ripple-impact of a casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section of Gaming reports that contributions primarily based on a gaming income formula from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in contrast to the earlier calendar year reducing .eight % in the first quarter, 7.five per cent in the 2nd quarter, nine.5 per cent in the third quarter, and sixteen.1 % in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reviews that whilst calendar yr 2008 showed an nearly two per cent progress fee in gaming revenues, there was an 8.seven per cent drop in the 3rd quarter and an virtually 10 per cent decrease in the fourth quarter of 2008, when compared with 2007. Gaming income trends at close by Niagara Falls, Ontario have been down 1.five% in 2008 in contrast with 2007.

It’s been a combined-bag for state lotteries across the country. The North American Affiliation of Condition & Provincial Lotteries stories that U.S. lotteries created a complete of $sixty.six billion in sales in fiscal 2008, up about three per cent from the preceding calendar year but some jurisdictions described decreases, most notably California, which showed an 8 p.c fall. Inasmuch as some of these states are on a variety of fiscal year finishes, it would seem that the data does not mirror the influence of third and/or fourth quarter benefits.

According to information presented by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, falling seven % to $13.seven billion in 2008, versus $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As earlier observed, it has been new gaming jurisdictions that have spawned a lot of the expansion in yearly casino/racino revenues more than the years, and their influence is apt to continue into the around long term.

Florida
Miami Dade voters approved a ballot issue that makes it possible for each of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Puppy Monitor and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has nevertheless to announced its ideas. There are several other proposals becoming considered that would more increase on line casino development through the condition.

Illinois
The state ultimately got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,two hundred+ match on line casino situated 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 allowing an improve in per place gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that permits for the growth of four on line casino gaming zones and slots at present horse and puppy tracks appears mired, as only a single facility is presently below development, although a few other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is positioned so close to the state line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 desk video games, along with a next stage owing to open up in 2011 with 875 slots and twenty desk online games. The point out has prolonged the software approach for the other 3 zones until April, 2009.

Kentucky
There is nevertheless a lot of ‘jockeying’ going on, but the prospect of as numerous as 8 slot parlors and racinos appears to be back on the entrance-burner, but very likely not resolved during the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most modern currently being the 390 area M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Difficult Rock and new lodges incorporate two components of the Town Heart undertaking, and the Fountainebleau.

Louisiana
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.

Maine
There is a monthly bill below consideration that could far more than double Penn National’s slot devices to three,000, as effectively as a proposal that would take away the restriction that slots be found within 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing local inhabitants to permit slots, may possibly be thinking about transferring to a far more hospitable town.

Maryland
A referendum was authorized 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 extreme as the condition had anticipated.

Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open up in 2008, but has operate into various funding issues and while the hotel part is open, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, while scaled again fairly, is even now on monitor to open this yr.

New England
Massachusetts, a sleeping-big in conditions of industry possible, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot seem to muster the political assistance. A latest review concluded by Dartmouth College estimates that Massachusetts resident expended much more than $920 million previous yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an option to build casinos, nonetheless the subject is very likely to be revisited, specifically if Massachusetts decides to go forward. There are also makes an attempt in Maine to reconsider its alternatives.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by recently agreeing to proceed augmenting purses with an further tax. The governor even so, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by permitting the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it appeared as if Aqueduct’s 4,five hundred VLT facility would finally be designed, the profitable bidder indicated an lack of ability to make the necessary $370 million payment, citing the current lending local weather, and throwing the venture again into the lap of the governor. Though the marketplace demand in the region could be deemed very powerful, the prospect of additional competition from nearby Belmont could have an effect on Aqueduct’s underlining economic feasibility, especially taking into consideration that a bit less than thirty% of the net earn is retained by the operator.

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

Ohio
However an additional gaming proposal is becoming place forth in Ohio, after previous year’s version was turned down by the voters. This plan phone calls for 1 on line casino every single in the state’s premier metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense required of $250 million, as well as an initial licensing charge of $50 million, and a 33 per cent tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is anticipated to be operational in August, ’09 even though Philadelphia’s two slot amenities even now wallow in a political mire, but are predicted to begin development this yr.

South Dakota
The Lodge at Deadwood is slated to open up in the Drop of 2009, and incorporate 300 video games, one hundred forty rooms and a extensive assortment of facilities.

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

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer. Point out authorities has proffered the notion of enabling the vacation resort to offer you casino games, but this hard work is in as well early a stage to have any traction one way or one more.

Indian Gaming
A latest Supreme Court ruling that restricts the taking of lands into believe in on behalf of federally acknowledged American Indian tribes has further stymied some new Course III gaming projects throughout the region. Additionally, there have been eleven Indian on line casino tasks turned down by the DOI very last year due to the fact of its new rule that casinos have to be around adequate to a reservation that tribal associates can perform at them. It has been suggested that the new Obama administration may be a lot more sympathetic to the development of Indian gaming assignments, but this issue has however to be tackled.

Meanwhile, there are other Class III projects in the a variety of stages of improvement. The Seneca casino project in Buffalo, NY, while operating a little short-term facility, has delayed an presently below construction everlasting facility until finally the marketplace rebounds. They have also expressed an interest in building a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is becoming challenged, and could affect their strategies for larger projects. There are new Indian gaming initiatives set to open up in Michigan and Oklahoma this year, and other people are in the preparing stage. Texas may possibly allow the reopening of Indian gaming facilities and allow other venue and there are programs afoot by the Navajos in Arizona to assemble extra casinos. California is poised to open two to a few new Class III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming earnings in Atlantic Town has declined seven.six per cent, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the metropolis is finding by itself in an intense comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast were found in Atlantic City, in which it appeared as if it might truly even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually however its market share was being encroached upon, initial by the growth of a huge Class III gaming operation in Connecticut, and then one more slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most not too long ago Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening about Atlantic City’s long term prospective customers. It really is reliance on day-trippers lulled it into a fake sense of stability, and it now finds itself obtaining to redefine its mission assertion to “spot vacation resort.”

The only issue with this method nonetheless is that it is ill-equipped to pull it off. For all intents and functions, Atlantic Town is underneath-roomed and/or over-gamed. There is just not enough working day-tripper market place to go around, and their successful investing area is tightening, as the peripheral populations northward now/will have much more completely ready obtain to a widened source in New York (Yonkers, and soon 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 real competitive benefits are its resort capability and the availability of desk game titles, even though the latter is very likely to eventuate in Pennsylvania, and possibly Delaware. In buy to adequately contend as a vacation spot resort the town demands to build additional guest rooms and not always gaming capability. By comparison, the Las Vegas Strip qualities – correct gaming destinations, in that they do not have significantly of a working day-journey market place, besides for the ‘locals’ – have an regular of .87 gaming positions for every visitor room although Atlantic City’s common is two.74 positions for every visitor area.

It is not a coincidence that Atlantic City’s two greatest resorts, the Borgata and Harrah’s Marina, equally of which added new rooms in 2008, have been the least impacted by the most recent downturn. The Borgata experienced a gaming earnings drop of one.6 percent, while Harrah’s Marina reported a four.9 % increase in comparison to 2007. Furthermore, the toughest hit venues, namely 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, including the the Trump properties and Resorts with the hoped for sale of the Tropicana has been more delayed, and getting rid of valuation.

With a continual increase in gaming revenues by way of 2006, the metropolis seemed prime for more growth, which precipitated arranging for 4 new resort assignments, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.5 billion task stays an iron skeleton, Pinnacle Entertainment has introduced it may possibly look for to sell its razed Sands internet site, MGM Mirage has shelved its on line casino strategies, and Penn Countrywide seems to have stopped its pursuit of the Bader Discipline airport website.