A Period of Adjustment

Oops! That giant hissing seem is the gaming balloon that experienced been growing in excess of the several years, slowly shedding air. But, it has not been a tide that decreased all ships nevertheless, as some emerging and growing gaming jurisdictions confirmed sturdy development in 2008.

All round, the business and racetrack on line casino sectors (excluding Indian gaming), skilled a 3.five percent decrease in gaming revenues for 2008, creating a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a obtain of virtually $1 billion in 2008, thus bringing the Business sector market place decrease to $one.eight billion, or 6.7 percent. Nevada was the most significant loser in 2008, dropping nearly $one.3 billion, more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most part, on line casino operators have been caught relatively flat-footed by the extent of the 2008 earnings downturn, as it was not till the 3rd and fourth quarters when it actually nosedived. Driving the crest of yr in excess of yr market place development across the nation and the availability of ample credit history and fairness money, new design and growth proliferated in latest years. These days, faced with the realities of declining, or at very best stagnant demand from customers, a lot of of these tasks are now regarded over-leveraged and/or in excess of-sized. As a result numerous gaming businesses are making an attempt to renegotiate their credit card debt – made more tough by lower valuations – although also paring down operational costs. The latter has turn into a extremely problematic conundrum when working with the competition, especially in these jurisdictions that are now vying for market place shares with new rising casino tasks in neighboring regions. A subject matter we examine a lot more totally in the State by Condition examination segment of this publication.

As a outcome of these problems the gaming sector landscape is now strewn with impending fatalities. Among the much more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the listing grows every 7 days.

“How long will these financial situations persist, and are we at the base however?” are concerns no a single seems to be answering yet. What is obvious however is that most gaming jurisdictions will have to discover how to deal with a scaled-down pie.

Note:
This analysis contains only gaming revenues of licensed casinos and pari-mutuel retailers that offer casino video games, and not Indian gaming functions, card rooms, or little non-casino type slot locations. The total post, which includes profits tables is accessible on our net page.

Enter/Output Product

A crucial facet that appears to have arisen from the ashes of this present pattern is that numerous casino projects have been just as well huge to assist themselves. The input, in conditions of investment decision pounds, was not proportional to the output, in terms of net earnings following personal debt provider, compared to beforehand attained outcomes. A lot more and/or bigger is not always better. Viewing the rise in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the growth of far more comprehensive features in a lot of other jurisdictions. The flaw in this technique nonetheless is that the fees connected with widening industry penetration and occasioned-use, are significantly greater than those incurred to draw in the foundation industry.

As daytripper markets grow to be far more aggressive, on line casino venues will have to depend a lot more and more on their in-home lodge patrons, and measurement their homes (and anticipations) accordingly. While Steve Wynn commenced a key craze in generating up-marketplace mega-places, there basically was not ample demand from customers on the Strip to warrant the many other similar tasks that adopted that aimed at the identical niche.

The trick is to strike a satisfied medium in venture configurations which of program need significantly less of a ‘seat-of-pants’ approach, and 1 that is a lot more examined. A shameless plug for improvement consultants like ourselves.

Other Gaming Pursuits

Even though there are no released thorough information of American Indian gaming revenues, anecdotal proof appears to suggest that this segment has been as hard hit as the Commercial sector. The two Connecticut Indian gaming installations report slot earnings of $1.six billion in 2008, representing a drop of about 7 per cent, or almost $114 million, more than doubling the 3.5 per cent fall from the calendar year ahead of. This market place is seemingly still 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 Department of Gaming reviews that contributions based on a gaming earnings formulation from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 when compared to the earlier 12 months lowering .eight per cent in the initial quarter, 7.5 per cent in the second quarter, 9.5 percent in the third quarter, and 16.one % in the fourth quarter.

Some SEC reporting Indian gaming houses report equivalent decreases. Seneca Gaming, which operates 3 Course III casinos in upstate New York, reviews that even though calendar yr 2008 confirmed an practically 2 per cent expansion price in gaming revenues, there was an eight.7 per cent decline in the third quarter and an practically 10 per cent decline in the fourth quarter of 2008, in comparison with 2007. Gaming income developments at nearby Niagara Falls, Ontario ended up down one.5% in 2008 in comparison with 2007.

It truly is been a combined-bag for condition lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries stories that U.S. lotteries generated a total of $60.6 billion in revenue in fiscal 2008, up about three % from the previous 12 months yet some jurisdictions reported decreases, most notably California, which showed an eight percent drop. Inasmuch as some of these states are on a variety of fiscal year finishes, it would look that the info does not replicate the impact of third and/or fourth quarter outcomes.

In accordance to information offered by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping seven p.c to $13.7 billion in 2008, versus $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As formerly observed, it has been new gaming jurisdictions that have spawned considerably of the growth in annual on line casino/racino revenues over the a long time, and their impact is apt to carry on into the in close proximity to future.

Florida
Miami Dade voters accredited a ballot issue that enables each and every of 3 pari-mutuels to have a on line casino facility of up to 2,000 slot devices. The Flagler Canine Keep track of and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder installation in Miami Gardens has but to declared its plans. 우리카지노 There are several other proposals getting regarded that would more grow casino advancement through the point out.

Illinois
The state lastly acquired about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,two hundred+ match casino found 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 dialogue about enabling an increase in for every area gaming positions and slots at racetracks, although neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery plan that makes it possible for for the growth of 4 casino gaming zones and slots at present horse and pet tracks appears mired, as only one facility is presently underneath construction, whilst three other proposals had been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is located so close to the condition line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table video games, together with a 2nd stage because of to open in 2011 with 875 slots and 20 table games. The point out has prolonged the application approach for the other 3 zones right up until April, 2009.

Kentucky
There is nonetheless a great deal of ‘jockeying’ likely on, but the prospect of as a lot of as 8 slot parlors and racinos seems to be again on the entrance-burner, but very likely not fixed in the course of the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to come on line in 2009, with the most current becoming the 390 place M Resort in Henderson. There are expansions underway at both Caesars Palace and Tough Rock and new accommodations contain two elements of the City Middle venture, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino development initiatives in Baton Rouge and Lake Charles, while delayed, are noted to even now be on-track for opening this yr and/or early 2010.

Maine
There is a monthly bill under consideration that could much more than double Penn National’s slot equipment to 3,000, as well as a proposal that would remove the restriction that slots be positioned in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing local inhabitants to permit slots, could be taking into consideration transferring to a much more hospitable town.

Maryland
A referendum was accredited in November, 2008 that enables for the advancement of five casinos with a total of 15,000 slots, and now the bidding war is afoot although it is not as powerful as the point out had expected.

Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open in 2008, but has operate into a variety of funding issues and while the lodge portion is open up, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back relatively, is still on keep track of to open this year.

New England
Massachusetts, a sleeping-large in phrases of marketplace likely, is still maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but can’t look to muster the political support. A latest study finished by Dartmouth College estimates that Massachusetts resident spent far more than $920 million last yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an selection to build casinos, however the subject matter is likely to be revisited, specifically if Massachusetts decides to go ahead. There are also attempts in Maine to rethink its possibilities.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by recently agreeing to continue augmenting purses with an further tax. The governor even so, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by making it possible for the tracks to have slot devices especially at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would finally be developed, the successful bidder indicated an incapability to make the essential $370 million fee, citing the current lending climate, and throwing the venture back again into the lap of the governor. Though the industry desire in the location could be considered fairly robust, the prospect of further competitiveness from nearby Belmont could have an impact on Aqueduct’s underlining financial feasibility, especially thinking about that marginally less than 30% of the internet acquire is retained by the operator.

Plans to relocate Monticello Raceway into a resort sophisticated are becoming reconsidered perhaps owing to both the probable opening of at minimum a single or maybe 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
Yet one more gaming proposal is becoming place forth in Ohio, soon after last year’s edition was turned down by the voters. This prepare phone calls for one particular casino every single in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expense essential 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 due to open in the Spring of ’09, and the new Rivers project in Pittsburgh is anticipated to be operational in August, ’09 while Philadelphia’s two slot services still wallow in a political mire, but are predicted to start development this yr.

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

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

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for bankruptcy, but has a new suitor in Marriott Accommodations, who have reportedly tendered an provide. Condition authorities has proffered the notion of making it possible for the vacation resort to offer casino online games, but this energy is in too early a phase to have any traction 1 way or yet another.

Indian Gaming
A latest Supreme Court ruling that restricts the getting of lands into have faith in on behalf of federally recognized American Indian tribes has more stymied some new Class III gaming assignments across the nation. Moreover, there have been eleven Indian on line casino tasks rejected by the DOI previous calendar year because of its new rule that casinos have to be in close proximity to enough to a reservation that tribal users can function at them. It has been suggested that the new Obama administration may well be far more sympathetic to the growth of Indian gaming projects, but this issue has nevertheless to be resolved.

Meanwhile, there are other Course III projects in the various stages of advancement. The Seneca on line casino task in Buffalo, NY, whilst functioning a tiny short-term facility, has delayed an presently beneath design long term facility right up until the marketplace rebounds. They have also expressed an interest in developing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is currently being challenged, and could affect their ideas for more substantial projects. There are new Indian gaming projects established to open in Michigan and Oklahoma this 12 months, and other individuals are in the organizing stage. Texas may possibly allow the reopening of Indian gaming facilities and let other venue and there are ideas afoot by the Navajos in Arizona to build additional casinos. California is poised to open up two to a few new Class III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming income in Atlantic Metropolis has declined 7.6 %, from $four.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the city is finding by itself in an intense comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast had been located in Atlantic Metropolis, where it seemed as if it may actually even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Slowly however its industry share was getting encroached on, very first by the growth of a massive Course III gaming operation in Connecticut, and then another slots operations 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 casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening around Atlantic City’s long term prospective customers. It truly is reliance on working day-trippers lulled it into a false sense of safety, and it now finds itself obtaining to redefine its mission statement to “destination vacation resort.”

The only dilemma with this technique even so is that it is unwell-equipped to pull it off. For all intents and functions, Atlantic Metropolis is underneath-roomed and/or in excess of-gamed. There is basically not ample day-tripper marketplace to go close to, and their powerful buying and selling location is tightening, as the peripheral populations northward now/will have a lot more prepared accessibility to a widened offer in New York (Yonkers, and soon 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 resort capacity and the availability of table video games, though the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In purchase to adequately contend as a spot resort the town demands to build added guest rooms and not always gaming capacity. By comparison, the Las Vegas Strip qualities – correct gaming locations, in that they do not have much of a working day-excursion market, other than for the ‘locals’ – have an regular of .87 gaming positions per visitor area whilst Atlantic City’s common is 2.seventy four positions for each guest place.

It is not a coincidence that Atlantic City’s two largest resorts, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, had been the least impacted by the most recent downturn. The Borgata experienced a gaming revenue fall of one.six %, whilst Harrah’s Marina reported a 4.nine % increase in contrast to 2007. Additionally, the toughest strike venues, namely 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, like the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been even more delayed, and getting rid of valuation.

With a steady increase in gaming revenues by way of 2006, the city seemed primary for more advancement, which precipitated arranging for four new vacation resort tasks, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $two.5 billion project continues to be an iron skeleton, Pinnacle Entertainment has announced it may possibly seek out to sell its razed Sands web site, MGM Mirage has shelved its on line casino programs, and Penn National seems to have stopped its pursuit of the Bader Field airport web site.

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