A Period of time of Adjustment

Oops! That big hissing sound is the gaming balloon that experienced been developing above the many years, little by little getting rid of air. But, it has not been a tide that decreased all ships however, as some rising and increasing gaming jurisdictions showed robust progress in 2008.

Overall, the professional and racetrack on line casino sectors (excluding Indian gaming), experienced a three.five p.c decrease in gaming revenues for 2008, making a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a achieve of almost $1 billion in 2008, therefore bringing the Commercial sector industry decline to $1.eight billion, or six.seven percent. Nevada was the most significant loser in 2008, dropping almost $one.three billion, more than 50 percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most element, on line casino operators have been caught fairly flat-footed by the extent of the 2008 profits downturn, as it was not right up until the third and fourth quarters when it genuinely nosedived. Driving the crest of yr over calendar year industry expansion throughout the region and the availability of enough credit history and fairness cash, new design and enlargement proliferated in latest many years. Nowadays, faced with the realities of declining, or at greatest stagnant desire, several of these projects are now regarded as above-leveraged and/or more than-sized. As a result a lot of gaming firms are attempting to renegotiate their personal debt – manufactured much more difficult by reduce valuations – whilst also paring down operational charges. The latter has turn out to be a very problematic conundrum when dealing with the competitors, especially in people jurisdictions that are now vying for marketplace shares with new rising casino tasks in neighboring areas. A subject matter we go over a lot more entirely in the Point out by State examination segment of this publication.

As a end result of these conditions the gaming industry landscape is now strewn with impending fatalities. Between the much more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the checklist grows each week.

“How extended will these economic conditions persist, and are we at the bottom but?” are concerns no one appears to be answering yet. What is very clear nonetheless is that most gaming jurisdictions will have to learn how to offer with a scaled-down pie.

Notice:
This examination consists of only gaming revenues of accredited casinos and pari-mutuel retailers that offer on line casino games, and not Indian gaming operations, card rooms, or tiny non-on line casino sort slot locations. The complete write-up, such as income tables is available on our web webpage.

Enter/Output Model

A important facet that seems to have arisen from the ashes of this recent craze is that a lot of casino assignments ended up just way too massive to help by themselves. The input, in terms of expense pounds, was not proportional to the output, in phrases of net income soon after credit card debt support, in contrast to earlier reached results. Much more and/or greater is not constantly much better. Viewing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of far more extensive features in numerous other jurisdictions. The flaw in this method nevertheless is that the costs linked with widening market place penetration and occasioned-use, are considerably larger than individuals incurred to draw in the base marketplace.

As daytripper markets become much more aggressive, casino venues will have to rely a lot more and a lot more on their in-residence resort patrons, and dimensions their homes (and anticipations) appropriately. Although Steve Wynn commenced a major development in making up-market place mega-destinations, there merely was not sufficient desire on the Strip to warrant the many 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 system demand considerably less of a ‘seat-of-pants’ method, and one particular that is much more studied. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Though there are no printed thorough information of American Indian gaming revenues, anecdotal proof appears to propose that this segment has been as hard hit as the Commercial sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, representing a fall of about 7 p.c, or virtually $114 million, more than doubling the three.5 percent drop from the calendar year ahead of. This marketplace is evidently even now reeling from the ripple-result of a casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Office of Gaming studies that contributions based mostly on a gaming profits formula from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in contrast to the previous 12 months lowering .8 percent in the first quarter, seven.five percent in the 2nd quarter, nine.5 p.c in the 3rd quarter, and sixteen.1 percent in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, stories that although calendar calendar year 2008 confirmed an nearly two p.c expansion fee in gaming revenues, there was an 8.seven % drop in the third quarter and an almost ten percent decrease in the fourth quarter of 2008, in contrast with 2007. Gaming revenue trends at close by Niagara Falls, Ontario ended up down one.5% in 2008 compared with 2007.

It is been a mixed-bag for condition lotteries throughout the nation. The North American Affiliation of Point out & Provincial Lotteries studies that U.S. lotteries created a overall of $60.6 billion in revenue in fiscal 2008, up about 3 % from the previous year but some jurisdictions described decreases, most notably California, which showed an eight p.c fall. Inasmuch as some of these states are on different fiscal yr ends, it would appear that the knowledge does not mirror the effect of third and/or fourth quarter results.

According to knowledge presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping seven % to $13.7 billion in 2008, versus $14.seven billion in 2007.

Planned & Proposed New Expansions

As earlier mentioned, it has been new gaming jurisdictions that have spawned significantly of the growth in yearly on line casino/racino revenues over the years, and their affect is apt to continue into the near foreseeable future.

Florida
Miami Dade voters accredited a ballot issue that permits each of a few pari-mutuels to have a on line casino facility of up to two,000 slot devices. The Flagler Puppy Observe and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has but to declared its strategies. There are quite a few other proposals becoming regarded that would even more increase casino improvement through the state.

Illinois
The point out lastly received all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ match on line casino found 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 discussion about enabling an increase in per location gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that allows for the development of four on line casino gaming zones and slots at present horse and canine tracks appears mired, as only 1 facility is presently below design, whilst a few other proposals have been rescinded. The only bidder on the Cherokee County deal, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is positioned so shut to the condition line that its parking whole lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk video games, together with a next section owing to open in 2011 with 875 slots and twenty desk online games. The point out has extended the application process for the other a few zones right up until April, 2009.

Kentucky
There is nevertheless a lot of ‘jockeying’ likely on, but the prospect of as numerous as 8 slot parlors and racinos seems to be back again on the entrance-burner, but likely not fixed for the duration of the existing legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest getting the 390 room M Resort in Henderson. There are expansions underway at the two Caesars Palace and Tough Rock and new lodges include two parts of the City Centre project, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new casino growth tasks in Baton Rouge and Lake Charles, although delayed, are reported to still be on-track for opening this 12 months and/or early 2010.

www.lucawin.com
There is a invoice underneath thought that could far more than double Penn National’s slot machines to three,000, as well as a proposal that would eliminate the restriction that slots be found within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing local people to enable slots, may be thinking about shifting to a much more hospitable city.

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

Mississippi
Grand Soleil On line casino Vacation resort in Natchez had been slated to open up in 2008, but has run into different funding problems and while the lodge part is open up, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back considerably, is even now on keep track of to open up this year.

New England
Massachusetts, a sleeping-large in terms of industry possible, is nevertheless maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot look to muster the political assistance. A recent review completed by Dartmouth University estimates that Massachusetts resident expended far more than $920 million final year at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to produce casinos, nonetheless the subject matter is likely to be revisited, particularly if Massachusetts decides to go forward. There are also tries in Maine to reconsider its options.

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 proceed augmenting purses with an further tax. The governor nevertheless, has appointed a new panel to review the state’s sagging racing software which ironically, can only be preserved by permitting the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze part)

New York
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would lastly be designed, the successful bidder indicated an incapability to make the essential $370 million payment, citing the present lending climate, and throwing the project back into the lap of the governor. Though the market need in the area could be deemed quite sturdy, the prospect of additional competitiveness from close by Belmont could have an impact on Aqueduct’s underlining economic feasibility, specifically considering that somewhat considerably less than 30% of the net acquire is retained by the operator.

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

Ohio
However another gaming proposal is being put forth in Ohio, after previous year’s model was turned down by the voters. This prepare calls for a single on line casino each in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure necessary of $250 million, as properly as an preliminary licensing price of $50 million, and a 33 % tax on gaming profits.

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

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and include 300 online games, 140 rooms and a broad range of amenities.

Texas
Legislators are proposing a voter referendum that would amend the condition structure to enable on line casino gambling in specified areas, as properly 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 bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer you. State authorities has proffered the notion of allowing the vacation resort to offer you casino video games, but this energy is in also early a stage to have any traction a single way or an additional.

Indian Gaming
A latest Supreme Court ruling that restricts the using of lands into believe in on behalf of federally regarded American Indian tribes has further stymied some new Class III gaming projects across the country. Moreover, there have been eleven Indian casino projects turned down by the DOI last 12 months due to the fact of its new rule that casinos must be around sufficient to a reservation that tribal customers can perform at them. It has been advised that the new Obama administration might be more sympathetic to the growth of Indian gaming tasks, but this issue has but to be addressed.

Meanwhile, there are other Class III tasks in the numerous levels of advancement. The Seneca casino venture in Buffalo, NY, although running a modest short term facility, has delayed an presently beneath building long lasting facility till the market rebounds. They have also expressed an fascination in developing a casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could effect their plans for bigger initiatives. There are new Indian gaming projects established to open up in Michigan and Oklahoma this 12 months, and others are in the arranging phase. Texas may possibly allow the reopening of Indian gaming facilities and let other location and there are strategies afoot by the Navajos in Arizona to build extra casinos. California is poised to open two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming earnings in Atlantic City has declined seven.six %, from $4.nine billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the city is locating alone in an powerful comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast had been found in Atlantic Town, the place it appeared as if it may possibly truly even eclipse the Las Vegas Strip’s annual gaming revenues.

Little by little nonetheless its market place share was being encroached on, very first by the improvement of a huge Class III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then video clip lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening about Atlantic City’s foreseeable future potential customers. It’s reliance on working day-trippers lulled it into a bogus sense of protection, and it now finds alone possessing to redefine its mission statement to “spot vacation resort.”

The only issue with this technique nonetheless is that it is unwell-outfitted to pull it off. For all intents and purposes, Atlantic Metropolis is beneath-roomed and/or above-gamed. There is merely not ample day-tripper market place to go all around, and their effective buying and selling area is tightening, as the peripheral populations northward now/will have more ready accessibility to a widened provide in New York (Yonkers, and soon at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean access, the city’s only actual competitive benefits are its resort capacity and the availability of table video games, even though the latter is likely to eventuate in Pennsylvania, and potentially Delaware. In purchase to sufficiently compete as a destination vacation resort the metropolis needs to build additional guest rooms and not automatically gaming capability. By comparison, the Las Vegas Strip homes – real gaming destinations, in that they do not have a lot of a day-vacation market, other than for the ‘locals’ – have an typical of .87 gaming positions per guest room whilst Atlantic City’s common is two.seventy four positions for each guest place.

It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, the two of which extra new rooms in 2008, had been the the very least impacted by the most recent downturn. The Borgata seasoned a gaming earnings drop of one.six percent, even though Harrah’s Marina described a 4.9 per cent increase in contrast to 2007. Furthermore, the hardest 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, such as the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.

With a regular increase in gaming revenues by way of 2006, the town seemed key for further advancement, which precipitated preparing for 4 new resort tasks, every single of which have now been indefinitely delayed. Revel Amusement Group’s $two.five billion undertaking continues to be an iron skeleton, Pinnacle Leisure has announced it may well seek to market its razed Sands website, MGM Mirage has shelved its on line casino ideas, and Penn Countrywide appears to have stopped its pursuit of the Bader Field airport site.