A Time period of Adjustment

Oops! That big hissing sound is the gaming balloon that experienced been expanding more than the several years, gradually getting rid of air. But, it has not been a tide that lowered all ships nevertheless, as some rising and increasing gaming jurisdictions confirmed sturdy expansion in 2008.

General, the professional and racetrack on line casino sectors (excluding Indian gaming), seasoned a three.five p.c decline in gaming revenues for 2008, generating a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a acquire of almost $one billion in 2008, thus bringing the Commercial sector market place decline to $1.8 billion, or 6.7 per cent. Nevada was the greatest loser in 2008, dropping practically $1.three billion, far more than fifty percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most portion, on line casino operators ended up caught fairly flat-footed by the extent of the 2008 income downturn, as it was not till the 3rd and fourth quarters when it actually nosedived. Riding the crest of calendar year over yr industry expansion throughout the nation and the availability of enough credit score and fairness money, new building and enlargement proliferated in recent several years. Right now, faced with the realities of declining, or at greatest stagnant desire, numerous of these projects are now regarded in excess of-leveraged and/or more than-sized. As a outcome many gaming companies are attempting to renegotiate their financial debt – manufactured a lot more difficult by decrease valuations – while also paring down operational expenses. The latter has turn out to be a extremely problematic conundrum when working with the competitors, specifically in these jurisdictions that are now vying for market place shares with new emerging casino assignments in neighboring locations. A matter we examine far more completely in the Condition by State investigation section of this publication.

As a result of these circumstances the gaming market landscape is now strewn with impending fatalities. Amongst the a lot more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the record grows each and every week.

“How lengthy will these economic problems persist, and are we at the bottom however?” are queries no a single appears to be answering nevertheless. What is clear nevertheless is that most gaming jurisdictions will have to find out how to offer with a smaller pie.

Be aware:
This evaluation consists of only gaming revenues of accredited casinos and pari-mutuel stores that supply casino online games, and not Indian gaming functions, card rooms, or little non-on line casino sort slot areas. The total post, such as revenue tables is obtainable on our world wide web page.

Enter/Output Model

A crucial aspect that looks to have arisen from the ashes of this recent development is that many casino tasks ended up just too big to assistance by themselves. The enter, in phrases of investment pounds, was not proportional to the output, in conditions of web profit after personal debt support, compared to beforehand attained outcomes. Much more and/or greater is not often greater. Seeing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the improvement of much more extensive amenities in numerous other jurisdictions. The flaw in this method however is that the costs connected with widening marketplace penetration and occasioned-use, are drastically larger than people incurred to appeal to the base market place.

As daytripper markets turn into more competitive, on line casino venues will have to count a lot more and a lot more on their in-property lodge patrons, and measurement their properties (and anticipations) appropriately. While Steve Wynn started out a key development in creating up-marketplace mega-places, there just was not enough desire on the Strip to warrant the many other equivalent initiatives that adopted that aimed at the same market.

The trick is to strike a pleased medium in undertaking configurations which of course require less of a ‘seat-of-pants’ method, and one that is far more researched. A shameless plug for improvement consultants like ourselves.

Other Gaming Actions

Although there are no revealed comprehensive information of American Indian gaming revenues, anecdotal evidence seems to propose that this phase has been as difficult hit as the Professional sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, representing a drop of about seven percent, or practically $114 million, much more than doubling the 3.5 percent fall from the year ahead of. This marketplace is apparently still 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 Division of Gaming stories that contributions primarily based on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 when compared to the earlier yr reducing .eight p.c in the first quarter, 7.5 percent in the second quarter, nine.5 per cent in the third quarter, and 16.one percent in the fourth quarter.

Some SEC reporting Indian gaming qualities report related decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, studies that whilst calendar 12 months 2008 showed an practically two % growth fee in gaming revenues, there was an 8.seven per cent decline in the 3rd quarter and an nearly ten % drop in the fourth quarter of 2008, when compared with 2007. Gaming earnings traits at close by Niagara Falls, Ontario had been down one.5% in 2008 in comparison with 2007.

It’s been a blended-bag for state lotteries across the nation. The North American Affiliation of State & Provincial Lotteries reports that U.S. lotteries produced a whole of $sixty.6 billion in sales in fiscal 2008, up about three per cent from the prior yr but some jurisdictions reported decreases, most notably California, which confirmed an eight per cent drop. Inasmuch as some of these states are on a variety of fiscal 12 months ends, it would seem to be that the knowledge does not reflect the effect of 3rd and/or fourth quarter final results.

According to knowledge provided by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 p.c to $13.seven billion in 2008, vs . $14.seven billion in 2007.

Prepared & Proposed New Expansions

As beforehand noted, it has been new gaming jurisdictions that have spawned much of the expansion in once-a-year on line casino/racino revenues more than the several years, and their affect is apt to continue into the close to foreseeable future.

Florida
Miami Dade voters accredited a ballot situation that enables each and every of a few pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Dog Track and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has nevertheless to declared its programs. There are several other proposals being regarded that would further increase casino improvement all through the point out.

Illinois
The point out ultimately got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ game on line casino situated in Des Plaines just east of O’Hare. joker gaming is not very likely to open right up until 2010. There has also been some dialogue about enabling an enhance in per location 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 system that enables for the improvement of 4 casino gaming zones and slots at current horse and puppy tracks seems mired, as only 1 facility is presently under building, although three other proposals ended up rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is positioned so close to the point out line that its parking good deal 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, along with a next stage owing to open up in 2011 with 875 slots and twenty table online games. The point out has prolonged the software procedure for the other 3 zones till April, 2009.

Kentucky
There is nevertheless a great deal of ‘jockeying’ going on, but the prospect of as numerous as 8 slot parlors and racinos seems to be back again on the entrance-burner, but most likely not fixed during the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most current getting the 390 space M Resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new lodges contain two elements of the City Middle project, and the Fountainebleau.

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

Maine
There is a bill underneath thing to consider that could far more than double Penn National’s slot devices to 3,000, as well as a proposal that would remove the restriction that slots be situated inside 5 miles of the track. Scarborough Downs, which has been unsuccessful in convincing local residents to enable slots, may possibly be considering transferring to a more hospitable town.

Maryland
A referendum was authorized in November, 2008 that enables for the growth of five casinos with a whole of 15,000 slots, and now the bidding war is afoot even though it is not as extreme as the state experienced predicted.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has operate into different funding concerns and even though the resort part 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 somewhat, is nonetheless on track to open up this yr.

New England
Massachusetts, a sleeping-giant in terms of marketplace likely, is still maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but cannot look to muster the political assist. A modern research accomplished by Dartmouth University estimates that Massachusetts resident expended a lot more than $920 million final 12 months at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an choice to build casinos, nevertheless the subject is most likely to be revisited, specially 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 devices at racetracks by just lately agreeing to continue augmenting purses with an added tax. The governor nonetheless, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot machines especially at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would last but not least be designed, the successful bidder indicated an incapability to make the essential $370 million price, citing the recent lending local climate, and throwing the task again into the lap of the governor. Though the market demand in the region could be regarded as really sturdy, the prospect of added competition from close by Belmont could have an influence on Aqueduct’s underlining financial feasibility, especially considering that marginally considerably less than 30% of the internet win is retained by the operator.

Programs to relocate Monticello Raceway into a resort intricate are becoming reconsidered possibly owing to both the probable opening of at minimum one particular or perhaps two racino operations in the NY metro region, and the resurfacing of initiatives to development a Class III Indian gaming facility in the Catskills.

Ohio
But yet another gaming proposal is being set forth in Ohio, following very last year’s model was turned down by the voters. This prepare calls for one on line casino each and every in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expense needed of $250 million, as well as an original licensing charge of $fifty million, and a 33 percent tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot facilities even now wallow in a political mire, but are predicted to start design this yr.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and consist of 300 online games, a hundred and forty rooms and a vast assortment of facilities.

Texas
Legislators are proposing a voter referendum that would amend the point out constitution to let casino gambling in selected locations, as properly as let gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an offer. Point out federal government has proffered the idea of making it possible for the resort to offer on line casino game titles, but this work is in way too early a phase to have any traction a single way or one more.

Indian Gaming
A recent Supreme Court docket ruling that restricts the taking of lands into believe in on behalf of federally regarded American Indian tribes has additional stymied some new Class III gaming assignments throughout the nation. Moreover, there have been eleven Indian casino projects rejected by the DOI final calendar year since of its new rule that casinos have to be near enough to a reservation that tribal customers can operate at them. It has been advised that the new Obama administration may possibly be much more sympathetic to the development of Indian gaming projects, but this situation has yet to be resolved.

In the meantime, there are other Course III tasks in the different phases of improvement. The Seneca casino project in Buffalo, NY, whilst operating a modest momentary facility, has delayed an already underneath building permanent facility right up until the market rebounds. They have also expressed an desire in building a casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could affect their programs for larger projects. There are new Indian gaming assignments established to open in Michigan and Oklahoma this yr, and other individuals are in the planning stage. Texas could allow the reopening of Indian gaming amenities and enable other venue and there are strategies afoot by the Navajos in Arizona to assemble extra casinos. California is poised to open up two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming income in Atlantic City has declined 7.six per cent, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is obtaining itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast have been located in Atlantic City, exactly where it seemed as if it may well actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly nonetheless its industry share was getting encroached upon, very first by the improvement of a large Course III gaming operation 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 prepared opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening around Atlantic City’s foreseeable future potential clients. It really is reliance on day-trippers lulled it into a fake sense of protection, and it now finds by itself getting to redefine its mission statement to “location resort.”

The only problem with this approach however is that it is sick-geared up to pull it off. For all intents and purposes, Atlantic Metropolis is under-roomed and/or more than-gamed. There is simply not ample day-tripper marketplace to go about, and their powerful buying and selling location is tightening, as the peripheral populations northward now/will have much more all set access 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 genuine competitive advantages are its resort ability and the availability of desk online games, even though the latter is most likely to eventuate in Pennsylvania, and potentially Delaware. In buy to adequately contend as a destination resort the metropolis demands to produce additional guest rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip properties – true gaming locations, in that they do not have a lot of a day-journey industry, except for the ‘locals’ – have an average of .87 gaming positions for each guest place whilst Atlantic City’s typical is 2.74 positions for each visitor area.

It is not a coincidence that Atlantic City’s two greatest lodges, the Borgata and Harrah’s Marina, each of which included new rooms in 2008, ended up the minimum impacted by the latest downturn. The Borgata seasoned a gaming revenue fall of one.6 percent, although Harrah’s Marina described a four.9 percent boost in contrast to 2007. Moreover, the most difficult strike 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, like 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 steady increase in gaming revenues by means of 2006, the town appeared prime for more improvement, which precipitated organizing for 4 new resort initiatives, every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.five billion venture stays an iron skeleton, Pinnacle Entertainment has declared it may look for to promote its razed Sands website, MGM Mirage has shelved its on line casino programs, and Penn National appears to have stopped its pursuit of the Bader Area airport website.