A Period of Adjustment

Oops! That large hissing sound is the gaming balloon that had been developing in excess of the many years, little by little shedding air. But, it has not been a tide that decreased all ships even so, as some emerging and expanding gaming jurisdictions showed robust expansion in 2008.

Overall, the industrial and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.five % decrease 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 drop, as they showed a acquire of virtually $1 billion in 2008, therefore bringing the Commercial sector industry decrease to $one.8 billion, or six.7 p.c. Nevada was the largest loser in 2008, dropping practically $one.3 billion, more than fifty percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, on line casino operators ended up caught fairly flat-footed by the extent of the 2008 income downturn, as it was not until the 3rd and fourth quarters when it truly nosedived. Riding the crest of 12 months above year market growth throughout the region and the availability of sufficient credit score and equity resources, new design and growth proliferated in modern a long time. Today, confronted with the realities of declining, or at very best stagnant need, a lot of of these tasks are now regarded over-leveraged and/or more than-sized. As sbobet gaming organizations are trying to renegotiate their credit card debt – produced more tough by reduced valuations – whilst also paring down operational costs. The latter has turn into a really problematic conundrum when working with the competitors, specifically in those jurisdictions that are now vying for industry shares with new rising casino assignments in neighboring areas. A topic we go over far more completely in the Point out by Point out investigation section of this publication.

As a end result of these conditions the gaming industry landscape is now strewn with impending fatalities. Amid the much more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the listing grows every single week.

“How lengthy will these financial problems persist, and are we at the bottom yet?” are questions no one seems to be answering yet. What is very clear nevertheless is that most gaming jurisdictions will have to find out how to offer with a more compact pie.

Be aware:
This investigation consists of only gaming revenues of accredited casinos and pari-mutuel retailers that supply casino game titles, and not Indian gaming functions, card rooms, or tiny non-casino variety slot places. The entire post, such as revenue tables is available on our net web page.

Input/Output Design

A key facet that seems to have arisen from the ashes of this existing trend is that several casino tasks ended up just way too big to help themselves. The enter, in conditions of expense pounds, was not proportional to the output, in conditions of internet income soon after financial debt provider, when compared to previously achieved final results. Much more and/or even bigger is not usually greater. Seeing the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the improvement of a lot more extensive facilities in a lot of other jurisdictions. The flaw in this approach even so is that the costs linked with widening market place penetration and occasioned-use, are drastically larger than these incurred to draw in the base industry.

As daytripper marketplaces turn into much more aggressive, casino venues will have to rely much more and more on their in-home resort patrons, and size their properties (and anticipations) appropriately. While Steve Wynn commenced a major pattern in making up-market mega-locations, there basically was not adequate need on the Strip to warrant the a lot of other related initiatives that followed that aimed at the identical specialized niche.

The trick is to strike a happy medium in task configurations which of program call for much less of a ‘seat-of-pants’ approach, and one that is far more examined. A shameless plug for improvement consultants like ourselves.

Other Gaming Pursuits

Though there are no released thorough info of American Indian gaming revenues, anecdotal evidence appears to advise that this segment has been as difficult hit as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $1.six billion in 2008, symbolizing a drop of about 7 %, or nearly $114 million, more than doubling the three.5 per cent drop from the calendar year before. This market place is apparently even now reeling from the ripple-impact of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Department of Gaming stories that contributions based mostly on a gaming income formula from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the earlier calendar year decreasing .eight percent in the 1st quarter, seven.5 per cent in the 2nd quarter, 9.5 percent in the third quarter, and sixteen.one p.c in the fourth quarter.

Some SEC reporting Indian gaming houses report related decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reviews that even though calendar yr 2008 showed an practically 2 p.c development charge in gaming revenues, there was an eight.seven percent decline in the third quarter and an almost ten percent decrease in the fourth quarter of 2008, in comparison with 2007. Gaming revenue trends at close by Niagara Falls, Ontario ended up down one.five% in 2008 when compared with 2007.

It really is been a blended-bag for condition lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries stories that U.S. lotteries generated a whole of $sixty.six billion in sales in fiscal 2008, up about three per cent from the previous 12 months however some jurisdictions described decreases, most notably California, which confirmed an eight p.c drop. Inasmuch as some of these states are on a variety of fiscal year finishes, it would seem to be that the data does not reflect the impact of third and/or fourth quarter benefits.

In accordance to data provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping 7 % to $13.7 billion in 2008, versus $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As previously mentioned, it has been new gaming jurisdictions that have spawned much of the growth in annual on line casino/racino revenues more than the a long time, and their influence is apt to keep on into the near potential.

Florida
Miami Dade voters authorized a ballot issue that allows every single of three pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Puppy Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to announced its ideas. There are several other proposals getting regarded as that would more expand casino improvement throughout the state.

Illinois
The point out lastly got close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a one,two hundred+ game casino located in Des Plaines just east of O’Hare. The new facility is not likely to open until 2010. There has also been some dialogue about making it possible for an improve in for each location gaming positions and slots at racetracks, even though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery system that permits for the growth of four on line casino gaming zones and slots at existing horse and pet tracks seems mired, as only one particular facility is presently underneath development, although 3 other proposals were 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 close to the state line that its parking whole lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 desk video games, together with a 2nd stage due to open in 2011 with 875 slots and 20 table online games. The state has prolonged the application approach for the other a few zones right up until April, 2009.

Kentucky
There is nevertheless a lot of ‘jockeying’ going on, but the prospect of as several as 8 slot parlors and racinos seems to be back again on the front-burner, but probably not settled throughout the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest getting the 390 place M Resort in Henderson. There are expansions underway at equally Caesars Palace and Difficult Rock and new hotels contain two parts of the City Center task, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino advancement assignments in Baton Rouge and Lake Charles, even though delayed, are described to nonetheless be on-keep track of for opening this yr and/or early 2010.

Maine
There is a invoice below consideration that could far more than double Penn National’s slot equipment to 3,000, as properly as a proposal that would take away the restriction that slots be located in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to permit slots, may be considering relocating to a a lot more hospitable city.

Maryland
A referendum was approved in November, 2008 that permits for the improvement of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the point out experienced expected.

Mississippi
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into numerous funding problems and although the lodge portion is open up, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled again fairly, is nonetheless on track to open this year.

New England
Massachusetts, a sleeping-large in conditions of market place prospective, is still maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can not seem to be to muster the political support. A recent review accomplished by Dartmouth College estimates that Massachusetts resident expended much more than $920 million final calendar year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to produce casinos, nonetheless the matter is probably to be revisited, especially if Massachusetts decides to go ahead. There are also tries in Maine to rethink its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by just lately agreeing to carry on augmenting purses with an added tax. The governor even so, has appointed a new panel to research the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot equipment particularly at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would ultimately be created, the winning bidder indicated an lack of ability to make the necessary $370 million price, citing the present lending local weather, and throwing the task back into the lap of the governor. Despite the fact that the marketplace need in the region could be regarded quite powerful, the prospect of additional competitors from nearby Belmont could have an effect on Aqueduct’s underlining economic feasibility, especially thinking about that somewhat much less than thirty% of the web acquire is retained by the operator.

Plans to relocate Monticello Raceway into a resort complex are becoming reconsidered possibly owing to each the probable opening of at minimum one or possibly two racino functions in the NY metro area, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.

Ohio
But an additional gaming proposal is getting put forth in Ohio, following final year’s edition was turned down by the voters. This prepare calls for one particular casino each and every in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure required of $250 million, as well as an original licensing payment of $fifty 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 project in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot services still wallow in a political mire, but are predicted to begin building this year.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and contain 300 games, 140 rooms and a extensive variety of features.

Texas
Legislators are proposing a voter referendum that would amend the state structure to let casino gambling in selected places, as effectively 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 filed for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer. Condition govt has proffered the notion of making it possible for the resort to offer casino online games, but this energy is in too early a phase to have any traction one way or an additional.

Indian Gaming
A recent Supreme Court ruling that restricts the getting of lands into have confidence in on behalf of federally identified American Indian tribes has even more stymied some new Class III gaming tasks across the nation. In addition, there had been eleven Indian on line casino assignments turned down by the DOI very last year since of its new rule that casinos must be near ample to a reservation that tribal customers can work at them. It has been recommended that the new Obama administration may possibly be more sympathetic to the advancement of Indian gaming initiatives, but this issue has yet to be addressed.

In the meantime, there are other Class III assignments in the different phases of advancement. The Seneca casino venture in Buffalo, NY, whilst functioning a little momentary facility, has delayed an already beneath construction everlasting facility until the marketplace rebounds. They have also expressed an desire in building a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could impact their strategies for more substantial projects. There are new Indian gaming assignments established to open up in Michigan and Oklahoma this year, and other individuals are in the planning stage. Texas may allow the reopening of Indian gaming amenities and enable other location and there are ideas afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to a few new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming revenue in Atlantic Town has declined seven.six p.c, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is obtaining by itself in an intense comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast had been found in Atlantic City, where it appeared as if it may well in fact even eclipse the Las Vegas Strip’s annual gaming revenues.

Little by little nonetheless its market place share was currently being encroached on, 1st by the growth of a big Class III gaming procedure in Connecticut, and then 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 at some point two functions in Philadelphia, the noose is tightening about Atlantic City’s potential prospective customers. It’s reliance on day-trippers lulled it into a untrue feeling of security, and it now finds alone possessing to redefine its mission statement to “destination vacation resort.”

The only problem with this method even so is that it is ill-equipped to pull it off. For all intents and purposes, Atlantic Town is under-roomed and/or in excess of-gamed. There is basically not adequate working day-tripper market to go all around, and their effective investing location is tightening, as the peripheral populations northward now/will have much more ready entry to a widened supply in New York (Yonkers, and quickly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean access, the city’s only real competitive positive aspects are its hotel capability and the availability of desk games, although the latter is likely to eventuate in Pennsylvania, and perhaps Delaware. In get to adequately compete as a location vacation resort the town wants to build extra guest rooms and not essentially gaming ability. By comparison, the Las Vegas Strip houses – true gaming destinations, in that they do not have much of a working day-journey market, other than for the ‘locals’ – have an common of .87 gaming positions for each visitor space although Atlantic City’s common is two.74 positions per guest space.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, the two of which added new rooms in 2008, had been the the very least impacted by the newest downturn. The Borgata skilled a gaming earnings drop of 1.six p.c, whilst Harrah’s Marina noted a 4.nine percent increase in comparison to 2007. Additionally, the toughest hit venues, specifically 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, which includes the the Trump houses and Resorts with the hoped for sale of the Tropicana has been additional delayed, and getting rid of valuation.

With a constant rise in gaming revenues through 2006, the city seemed primary for more advancement, which precipitated organizing for four new resort tasks, every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion undertaking continues to be an iron skeleton, Pinnacle Enjoyment has declared it may possibly seek to offer its razed Sands internet site, MGM Mirage has shelved its casino strategies, and Penn Nationwide appears to have stopped its pursuit of the Bader Subject airport site.