A Interval of Adjustment

Oops! That big hissing seem is the gaming balloon that experienced been increasing more than the years, slowly losing air. But, it has not been a tide that lowered all ships nevertheless, as some emerging and growing gaming jurisdictions showed robust progress in 2008.

Overall, the industrial and racetrack casino sectors (excluding Indian gaming), skilled a 3.5 per cent decrease 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 fall, as they confirmed a achieve of virtually $one billion in 2008, therefore bringing the Business sector market place drop to $one.eight billion, or 6.7 p.c. Nevada was the greatest loser in 2008, dropping practically $one.three billion, more than fifty percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most component, on line casino operators had been caught reasonably flat-footed by the extent of the 2008 income downturn, as it was not right up until the 3rd and fourth quarters when it truly nosedived. Riding the crest of calendar year more than year marketplace growth throughout the country and the availability of sufficient credit rating and equity resources, new building and growth proliferated in current a long time. Today, faced with the realities of declining, or at very best stagnant need, several of these projects are now deemed in excess of-leveraged and/or more than-sized. As a consequence many gaming firms are trying to renegotiate their credit card debt – made far more difficult by decrease valuations – although also paring down operational fees. The latter has grow to be a really problematic conundrum when dealing with the opposition, especially in people jurisdictions that are now vying for industry shares with new emerging on line casino assignments in neighboring areas. A matter we go over a lot more completely in the Point out by State investigation area of this publication.

As a outcome of these conditions the gaming business landscape is now strewn with impending fatalities. Amongst the a lot more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the listing grows each 7 days.

“How long will these economic conditions persist, and are we at the base but?” are inquiries no 1 appears to be answering however. What is clear however is that most gaming jurisdictions will have to discover how to deal with a smaller sized pie.

Observe:
This evaluation consists of only gaming revenues of accredited casinos and pari-mutuel stores that supply on line casino video games, and not Indian gaming functions, card rooms, or modest non-casino variety slot areas. The total post, such as income tables is available on our net web page.

Input/Output Design

A crucial element that would seem to have arisen from the ashes of this present development is that several casino initiatives had been just as well massive to assist by themselves. The input, in conditions of investment bucks, was not proportional to the output, in phrases of net revenue after debt service, compared to formerly accomplished results. A lot more and/or bigger is not usually much better. Looking at the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the advancement of far more extensive facilities in many other jurisdictions. The flaw in this method nonetheless is that the costs connected with widening industry penetration and occasioned-use, are significantly increased than these incurred to entice the foundation marketplace.

As daytripper marketplaces turn out to be much more competitive, casino venues will have to count a lot more and a lot more on their in-property hotel patrons, and dimension their homes (and expectations) appropriately. Even though Steve Wynn started a significant trend in creating up-marketplace mega-places, there simply was not adequate desire on the Strip to warrant the numerous other comparable assignments that followed that aimed at the same specialized niche.

The trick is to strike a content medium in project configurations which of training course call for significantly less of a ‘seat-of-pants’ method, and one particular that is more studied. A shameless plug for advancement consultants like ourselves.

Other Gaming Pursuits

Although there are no released detailed info of American Indian gaming revenues, anecdotal proof seems to recommend that this phase has been as difficult hit as the Commercial sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, representing a drop of about 7 percent, or almost $114 million, more than doubling the 3.5 per cent fall from the year just before. This industry is evidently 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 Division of Gaming reports that contributions based on a gaming earnings formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 in comparison to the prior year decreasing .8 percent in the very first quarter, 7.five % in the second quarter, nine.five per cent in the third quarter, and 16.1 % in the fourth quarter.

Some SEC reporting Indian gaming homes report related decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, studies that even though calendar yr 2008 showed an almost two per cent expansion charge in gaming revenues, there was an 8.7 percent decline in the third quarter and an virtually 10 p.c drop in the fourth quarter of 2008, compared with 2007. Gaming income trends at close by Niagara Falls, Ontario have been down one.five% in 2008 compared with 2007.

It really is been a combined-bag for condition lotteries across the nation. The North American Affiliation of Condition & Provincial Lotteries reviews that U.S. lotteries generated a total of $sixty.six billion in product sales in fiscal 2008, up about 3 per cent from the previous 12 months but some jurisdictions noted decreases, most notably California, which showed an eight per cent fall. Inasmuch as some of these states are on different fiscal 12 months ends, it would look that the information does not reflect the affect of 3rd and/or fourth quarter outcomes.

In accordance to knowledge offered by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 per cent to $thirteen.7 billion in 2008, vs . $14.7 billion in 2007.

Prepared & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have spawned significantly of the progress in once-a-year casino/racino revenues over the many years, and their affect is apt to continue into the in close proximity to long term.

Florida
Miami Dade voters accepted a ballot issue that allows each and every of a few pari-mutuels to have a casino facility of up to two,000 slot machines. The Flagler Puppy Keep track of and Miami Jai-Alai are reportedly preparing opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has nevertheless to introduced its programs. There are quite a few other proposals becoming regarded as that would more grow on line casino development during the condition.

Illinois
The point out finally got all 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 most likely to open until finally 2010. There has also been some discussion about allowing an boost in for each spot gaming positions and slots at racetracks, though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery software that permits for the improvement of 4 on line casino gaming zones and slots at existing horse and dog tracks appears mired, as only one facility is presently below building, whilst 3 other proposals ended up rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is found so shut to the condition line that its parking whole lot is in Kansas. The Boot Hill On line casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 table online games, alongside with a second phase due to open in 2011 with 875 slots and twenty desk games. The state has prolonged the software process for the other a few zones until finally April, 2009.

Kentucky
There is even now a lot of ‘jockeying’ going on, but the prospect of as a lot of as eight slot parlors and racinos appears to be again on the front-burner, but most likely not resolved for the duration of the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most recent becoming the 390 room M Resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new hotels incorporate two parts of the Town Middle venture, and the Fountainebleau.

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

Maine
There is a bill below thought that could a lot more than double Penn National’s slot machines to three,000, as well as a proposal that would remove the restriction that slots be found in five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to allow slots, may possibly be thinking about shifting to a a lot more hospitable city.

Maryland
A referendum was accredited in November, 2008 that enables for the improvement of 5 casinos with a total of 15,000 slots, and now the bidding war is afoot even though it is not as extreme as the condition had predicted.

Mississippi
Grand Soleil On line casino Vacation resort in Natchez experienced been slated to open in 2008, but has run into a variety of funding troubles and although the resort portion is open up, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back again relatively, is still on keep track of to open this calendar year.

New England
Massachusetts, a sleeping-large in phrases of industry likely, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but cannot look to muster the political help. A recent examine accomplished by Dartmouth College estimates that Massachusetts resident put in far 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 choice to create casinos, nevertheless the topic is most likely to be revisited, specifically if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its choices.

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 added tax. The governor nevertheless, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by allowing the tracks to have slot devices particularly 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 ultimately be produced, the successful bidder indicated an incapability to make the needed $370 million price, citing the recent lending local climate, and throwing the task back into the lap of the governor. Though the marketplace demand from customers in the location could be regarded fairly strong, the prospect of added opposition from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, specifically taking into consideration that somewhat significantly less than thirty% of the web win is retained by the operator.

Ideas to relocate Monticello Raceway into a resort sophisticated are currently being reconsidered maybe owing to both the probable opening of at minimum a single or probably two racino functions in the NY metro region, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

Ohio
Yet another gaming proposal is currently being set forth in Ohio, soon after very last year’s edition was turned down by the voters. This strategy calls for 1 casino each and every in the state’s largest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expenditure needed of $250 million, as effectively as an preliminary licensing fee of $50 million, and a 33 p.c tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is expected to be operational in August, ’09 whilst Philadelphia’s two slot services even now wallow in a political mire, but are expected to begin design this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Fall of 2009, and consist of three hundred online games, a hundred and forty rooms and a extensive selection of features.

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 current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer. Point out authorities has proffered the notion of allowing the resort to offer on line casino games, but this energy is in too early a phase to have any traction one particular way or another.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the using of lands into trust on behalf of federally acknowledged American Indian tribes has additional stymied some new Course III gaming projects throughout the region. Furthermore, there had been eleven Indian on line casino projects rejected by the DOI final 12 months because of its new rule that casinos need to be near adequate to a reservation that tribal members can perform at them. It has been advised that the new Obama administration may be far more sympathetic to the development of Indian gaming projects, but this situation has but to be resolved.

Meanwhile, there are other Course III tasks in the different stages of development. The Seneca casino task in Buffalo, NY, although operating a little short term facility, has delayed an previously beneath development long term facility until the market rebounds. They have also expressed an desire in developing a casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could influence their programs for greater projects. There are new Indian gaming tasks set to open up in Michigan and Oklahoma this yr, and other folks are in the planning phase. Texas could permit the reopening of Indian gaming amenities and allow other location and there are strategies afoot by the Navajos in Arizona to build additional casinos. California is poised to open two to a few new Class III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming income in Atlantic Metropolis has declined seven.six p.c, from $four.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the metropolis is locating alone in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast ended up positioned in Atlantic Metropolis, exactly where it appeared as if it may possibly truly even eclipse the Las Vegas Strip’s yearly gaming revenues.

Little by little even so its market share was being encroached upon, first by the development of a massive Course III gaming procedure in Connecticut, and then an additional slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new casino in Bethlehem, PA, and sooner or later two operations in Philadelphia, the noose is tightening close to Atlantic City’s future prospects. It really is reliance on day-trippers lulled it into a fake sense of stability, and it now finds alone possessing to redefine its mission assertion to “vacation spot resort.”

mega888 The only difficulty with this method nonetheless is that it is ill-equipped to pull it off. For all intents and reasons, Atlantic Metropolis is underneath-roomed and/or more than-gamed. There is basically not ample working day-tripper industry to go around, and their effective buying and selling area is tightening, as the peripheral populations northward now/will have a lot more completely ready accessibility to a widened offer 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 entry, the city’s only true competitive advantages are its resort capacity and the availability of desk games, despite the fact that the latter is most likely to eventuate in Pennsylvania, and possibly Delaware. In get to sufficiently contend as a spot vacation resort the city needs to produce added visitor rooms and not necessarily gaming capacity. By comparison, the Las Vegas Strip homes – accurate gaming locations, in that they do not have a lot of a working day-excursion market place, besides for the ‘locals’ – have an regular of .87 gaming positions for every visitor space whilst Atlantic City’s average is two.74 positions for each visitor room.

It is not a coincidence that Atlantic City’s two greatest hotels, the Borgata and Harrah’s Marina, the two of which additional new rooms in 2008, ended up the minimum impacted by the newest downturn. The Borgata seasoned a gaming earnings fall of one.6 p.c, while Harrah’s Marina described a 4.nine percent improve in comparison to 2007. Furthermore, the most difficult hit venues, specifically the AC Hilton, Resorts and the Trump Marina, also have the smallest variety of rooms. In the meantime some of the venues are teetering on viability, like the the Trump properties and Resorts with the hoped for sale of the Tropicana has been even more delayed, and getting rid of valuation.

With a constant increase in gaming revenues through 2006, the metropolis appeared primary for more development, which precipitated preparing for 4 new vacation resort projects, each of which have now been indefinitely delayed. Revel Amusement Group’s $2.5 billion venture remains an iron skeleton, Pinnacle Entertainment has declared it may possibly find to sell its razed Sands website, MGM Mirage has shelved its casino ideas, and Penn Nationwide seems to have stopped its pursuit of the Bader Field airport web site.