A Period of Adjustment

Oops! That huge hissing sound is the gaming balloon that had been developing more than the a long time, little by little getting rid of air. But, it has not been a tide that reduced all ships nonetheless, as some rising and growing gaming jurisdictions showed strong development in 2008.

All round, the industrial and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.5 p.c decline in gaming revenues for 2008, creating a overall 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 virtually $1 billion in 2008, therefore bringing the Industrial sector marketplace decrease to $one.8 billion, or 6.7 %. Nevada was the largest loser in 2008, dropping almost $1.3 billion, more than 50 percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most portion, casino operators were caught fairly flat-footed by the extent of the 2008 revenue downturn, as it was not till the 3rd and fourth quarters when it truly nosedived. Driving the crest of calendar year in excess of yr market growth throughout the country and the availability of enough credit rating and equity money, new construction and growth proliferated in current a long time. Right now, confronted with the realities of declining, or at very best stagnant desire, several of these projects are now deemed above-leveraged and/or over-sized. As a end result several gaming companies are making an attempt to renegotiate their personal debt – created a lot more difficult by lower valuations – whilst also paring down operational fees. The latter has turn out to be a really problematic conundrum when working with the opposition, specifically in people jurisdictions that are now vying for market shares with new rising casino projects in neighboring places. A topic we go over more fully in the Condition by Point out examination section of this publication.

As a outcome of these situations the gaming industry landscape is now strewn with impending fatalities. Between the far more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the listing grows every week.

“How extended will these economic circumstances persist, and are we at the base nevertheless?” are concerns no 1 appears to be answering nevertheless. What is distinct even so is that most gaming jurisdictions will have to discover how to deal with a scaled-down pie.

This analysis includes only gaming revenues of accredited casinos and pari-mutuel retailers that provide casino video games, and not Indian gaming functions, card rooms, or modest non-casino type slot places. The total post, including revenue tables is accessible on our net page.

Enter/Output Model

A crucial element that seems to have arisen from the ashes of this recent trend is that many on line casino tasks were just too large to support themselves. The input, in phrases of expenditure bucks, was not proportional to the output, in terms of web profit soon after personal debt service, in comparison to previously reached benefits. More and/or bigger is not often far better. Looking at the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the growth of far more complete features in several other jurisdictions. The flaw in this method even so is that the fees related with widening industry penetration and occasioned-use, are substantially greater than people incurred to appeal to the foundation marketplace.

As daytripper marketplaces turn out to be a lot more competitive, casino venues will have to count much more and more on their in-house resort patrons, and measurement their homes (and anticipations) appropriately. Even though Steve Wynn commenced a significant development in generating up-industry mega-destinations, there simply was not enough need on the Strip to warrant the numerous other related tasks that followed that aimed at the same area of interest.

The trick is to strike a pleased medium in project configurations which of program need considerably less of a ‘seat-of-pants’ technique, and one that is far more researched. A shameless plug for advancement consultants like ourselves.

Other Gaming Activities

Though there are no revealed thorough information of American Indian gaming revenues, anecdotal proof seems to propose that this section has been as hard hit as the Industrial sector. The two Connecticut Indian gaming installations report slot earnings of $one.six billion in 2008, representing a fall of about seven per cent, or nearly $114 million, far more than doubling the 3.5 per cent drop from the 12 months before. This market is seemingly nevertheless reeling from the ripple-result of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Office of Gaming reviews that contributions dependent on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 when compared to the earlier year reducing .8 p.c in the 1st quarter, 7.five percent in the second quarter, nine.5 per cent in the third quarter, and 16.one % in the fourth quarter.

Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, studies that even though calendar calendar year 2008 showed an virtually two p.c growth charge in gaming revenues, there was an eight.seven percent decline in the third quarter and an virtually 10 p.c decline in the fourth quarter of 2008, when compared with 2007. Gaming income traits at nearby Niagara Falls, Ontario have been down one.five% in 2008 when compared with 2007.

It is been a combined-bag for point out lotteries across the place. The North American Affiliation of Condition & Provincial Lotteries reports that U.S. lotteries produced a overall of $60.six billion in income in fiscal 2008, up about 3 p.c from the previous year yet some jurisdictions described decreases, most notably California, which showed an 8 percent fall. Inasmuch as some of these states are on a variety of fiscal calendar year finishes, it would appear that the information does not mirror the impact of 3rd and/or fourth quarter results.

According to data provided by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling seven % to $thirteen.seven billion in 2008, compared to $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As earlier mentioned, it has been new gaming jurisdictions that have spawned much of the expansion in once-a-year casino/racino revenues above the several years, and their influence is apt to carry on into the around future.

Miami Dade voters authorized a ballot situation that permits every single of 3 pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Puppy Track and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to introduced its plans. There are numerous other proposals getting deemed that would even more expand casino growth throughout the condition.

The point out last but not least acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,two hundred+ match casino located in Des Plaines just east of O’Hare. The new facility is not very likely to open until finally 2010. There has also been some dialogue about enabling an boost in per area gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

The state’s expanded lottery system that allows for the advancement of 4 casino gaming zones and slots at existing horse and puppy tracks appears mired, as only one facility is presently below design, whilst 3 other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is situated so shut to the condition line that its parking good deal is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and ten table game titles, along with a 2nd period thanks to open up in 2011 with 875 slots and 20 desk games. The condition has prolonged the application method for the other 3 zones right up until April, 2009.

There is still a great deal of ‘jockeying’ heading on, but the prospect of as numerous as 8 slot parlors and racinos appears to be back again on the entrance-burner, but probably not settled throughout the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most latest becoming the 390 place M Resort in Henderson. There are expansions underway at equally Caesars Palace and Tough Rock and new hotels consist of two factors of the Metropolis Heart venture, and the Fountainebleau.

Pinnacle Entertainment’s new casino advancement initiatives in Baton Rouge and Lake Charles, whilst delayed, are noted to even now be on-observe for opening this year and/or early 2010.

There is a bill underneath thing to consider that could more than double Penn National’s slot devices to 3,000, as well as a proposal that would eliminate the restriction that slots be found within 5 miles of the observe. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to enable slots, may possibly be taking into consideration transferring to a much more hospitable town.

A referendum was approved in November, 2008 that permits for the improvement of five casinos with a overall of 15,000 slots, and now the bidding war is afoot even though it is not as extreme as the point out experienced expected.

Grand Soleil Casino Vacation resort in Natchez experienced been slated to open in 2008, but has operate into a variety of financing issues and whilst the lodge portion is open up, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back again somewhat, is still on keep track of to open this 12 months.

New England
Massachusetts, a sleeping-giant in terms of marketplace likely, is even now maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can’t look to muster the political assistance. A latest examine finished by Dartmouth University estimates that Massachusetts resident spent more than $920 million last yr at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an selection to create casinos, nonetheless the topic is likely to be revisited, particularly if Massachusetts decides to go ahead. There are also makes an attempt in Maine to reconsider its possibilities.

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 carry on augmenting purses with an extra tax. The governor nonetheless, has appointed a new panel to examine the state’s sagging racing system which ironically, can only be preserved by enabling the tracks to have slot machines specifically at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it seemed as if Aqueduct’s four,five hundred VLT facility would finally be developed, the successful bidder indicated an lack of ability to make the essential $370 million payment, citing the recent lending weather, and throwing the project back into the lap of the governor. Although the marketplace desire in the location could be considered really powerful, the prospect of additional competitors from nearby Belmont could have an influence on Aqueduct’s underlining economic feasibility, particularly contemplating that slightly much less than thirty% of the web earn is retained by the operator.

Ideas to relocate Monticello Raceway into a resort sophisticated are being reconsidered perhaps owing to the two the probable opening of at least a single or maybe two racino operations in the NY metro region, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

But an additional gaming proposal is being place forth in Ohio, soon after very last year’s version was turned down by the voters. This plan calls for 1 casino every single in the state’s premier metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment necessary of $250 million, as effectively as an preliminary licensing payment of $fifty million, and a 33 p.c tax on gaming earnings.

The Sands in Bethlehem is owing to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is envisioned 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 yr.

South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and consist of three hundred games, one hundred forty rooms and a extensive variety of facilities.

Legislators are proposing a voter referendum that would amend the point out structure to permit on line casino gambling in selected areas, as effectively as enable gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. State govt has proffered the notion of allowing the resort to offer you on line casino games, but this hard work is in too early a stage to have any traction a single way or another.

Indian Gaming
A recent Supreme Courtroom ruling that restricts the taking of lands into trust on behalf of federally identified American Indian tribes has more stymied some new Course III gaming tasks throughout the region. Moreover, there ended up eleven Indian casino assignments turned down by the DOI last year simply because of its new rule that casinos must be close to sufficient to a reservation that tribal members can operate at them. It has been suggested that the new Obama administration may be far more sympathetic to the development of Indian gaming projects, but this concern has however to be dealt with.

In the meantime, there are other Class III assignments in the a variety of stages of development. The Seneca on line casino venture in Buffalo, NY, while running a small momentary facility, has delayed an previously beneath construction long term facility until the market rebounds. They have also expressed an fascination in creating a casino in the Catskills. The point out gaming compact with Seminoles in Florida is getting challenged, and could effect their strategies for bigger initiatives. There are new Indian gaming initiatives set to open up in Michigan and Oklahoma this yr, and others are in the arranging stage. Texas could enable the reopening of Indian gaming facilities and let other venue and there are programs afoot by the Navajos in Arizona to build further casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming revenue in Atlantic Metropolis has declined 7.6 %, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the town is locating by itself in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast ended up found in Atlantic City, the place it appeared as if it may possibly in fact even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly and gradually however its market place share was becoming encroached upon, very first by the growth of a massive Course III gaming procedure in Connecticut, and then yet another slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the prepared opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening about Atlantic City’s foreseeable future potential customers. It really is reliance on day-trippers lulled it into a fake feeling of safety, and it now finds by itself having to redefine its mission statement to “spot vacation resort.”

Bet King 777 with this method nonetheless is that it is sick-geared up to pull it off. For all intents and needs, Atlantic Town is underneath-roomed and/or over-gamed. There is merely not adequate working day-tripper market place to go all around, and their efficient investing location is tightening, as the peripheral populations northward now/will have far more ready entry to a widened offer in New York (Yonkers, and before long at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only genuine aggressive positive aspects are its lodge potential and the availability of desk online games, although the latter is likely to eventuate in Pennsylvania, and potentially Delaware. In purchase to sufficiently compete as a vacation spot resort the town requirements to build added visitor rooms and not automatically gaming ability. By comparison, the Las Vegas Strip homes – accurate gaming destinations, in that they do not have much of a working day-journey marketplace, other than for the ‘locals’ – have an average of .87 gaming positions for every visitor area even though Atlantic City’s typical is 2.seventy four positions for every visitor space.

It is not a coincidence that Atlantic City’s two greatest accommodations, the Borgata and Harrah’s Marina, both of which included new rooms in 2008, ended up the the very least impacted by the latest downturn. The Borgata experienced a gaming profits fall of one.6 %, although Harrah’s Marina described a four.9 percent increase when compared to 2007. Additionally, the toughest hit venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest amount 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 losing valuation.

With a steady increase in gaming revenues through 2006, the city seemed key for further advancement, which precipitated arranging for 4 new vacation resort tasks, each of which have now been indefinitely delayed. Revel Amusement Group’s $2.5 billion project continues to be an iron skeleton, Pinnacle Enjoyment has introduced it may look for to market its razed Sands website, MGM Mirage has shelved its casino strategies, and Penn Nationwide appears to have stopped its pursuit of the Bader Subject airport internet site.


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