A Period of time of Adjustment

Oops! That big hissing sound is the gaming balloon that had been growing in excess of the several years, little by little dropping air. But, it has not been a tide that decreased all ships however, as some rising and expanding gaming jurisdictions confirmed sturdy expansion in 2008.

All round, the business and racetrack casino sectors (excluding Indian gaming), experienced a 3.5 % drop in gaming revenues for 2008, making a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a gain of practically $1 billion in 2008, therefore bringing the Professional sector marketplace drop to $1.eight billion, or 6.seven per cent. Nevada was the biggest loser in 2008, dropping nearly $one.three billion, far more than half of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most part, on line casino operators ended up caught comparatively flat-footed by the extent of the 2008 profits downturn, as it was not until the 3rd and fourth quarters when it genuinely nosedived. Riding the crest of year in excess of year market place expansion throughout the place and the availability of ample credit rating and fairness funds, new construction and expansion proliferated in latest many years. Today, confronted with the realities of declining, or at greatest stagnant desire, many of these initiatives are now regarded as more than-leveraged and/or more than-sized. As a consequence a lot of gaming firms are attempting to renegotiate their personal debt – produced far more challenging by decrease valuations – whilst also paring down operational charges. The latter has become a extremely problematic conundrum when working with the opposition, particularly in individuals jurisdictions that are now vying for industry shares with new emerging on line casino assignments in neighboring locations. A matter we examine more completely in the Point out by State analysis segment of this publication.

As a consequence of these problems the gaming sector landscape is now strewn with impending fatalities. Amongst the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Amusement, Herbst Gaming and the listing grows each 7 days.

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

Note:
This analysis contains only gaming revenues of licensed casinos and pari-mutuel stores that provide casino video games, and not Indian gaming operations, card rooms, or little non-casino variety slot spots. The total report, such as revenue tables is accessible on our world wide web page.

Input/Output Design

A important aspect that would seem to have arisen from the ashes of this recent craze is that several on line casino tasks were just also huge to assistance on their own. The input, in phrases of expense bucks, was not proportional to the output, in phrases of internet earnings following credit card debt service, compared to formerly achieved benefits. More and/or greater is not constantly better. Viewing the increase in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the growth of much more complete features in many other jurisdictions. The flaw in this technique however is that the costs related with widening market penetration and occasioned-use, are substantially higher than these incurred to draw in the foundation industry.

As daytripper marketplaces grow to be much more competitive, casino venues will have to depend a lot more and much more on their in-property hotel patrons, and dimensions their homes (and expectations) appropriately. Whilst Steve Wynn commenced a major development in generating up-marketplace mega-places, there simply was not enough desire on the Strip to warrant the numerous other related projects that adopted that aimed at the identical niche.

The trick is to strike a content medium in project configurations which of system demand much less of a ‘seat-of-pants’ strategy, and one particular that is much more examined. A shameless plug for growth consultants like ourselves.

Other Gaming Routines

Although there are no published detailed knowledge of American Indian gaming revenues, anecdotal evidence seems to recommend that this section has been as difficult hit as the Professional sector. The two Connecticut Indian gaming installations report slot income of $one.6 billion in 2008, representing a fall of about seven p.c, or virtually $114 million, more than doubling the 3.five % fall from the 12 months prior to. pgslot is seemingly still reeling from the ripple-result of a casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Department of Gaming reports that contributions dependent on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining each and every quarter in 2008 in contrast to the prior year lowering .8 % in the initial quarter, 7.five % in the next quarter, 9.5 p.c in the third quarter, and sixteen.one percent in the fourth quarter.

Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, studies that while calendar 12 months 2008 showed an virtually 2 % progress price in gaming revenues, there was an eight.7 % decline in the third quarter and an practically ten p.c decrease in the fourth quarter of 2008, in comparison with 2007. Gaming profits trends at close by Niagara Falls, Ontario ended up down 1.five% in 2008 compared with 2007.

It truly is been a blended-bag for point out lotteries throughout the place. The North American Association of State & Provincial Lotteries reviews that U.S. lotteries generated a total of $60.6 billion in income in fiscal 2008, up about 3 % from the preceding 12 months but some jurisdictions documented decreases, most notably California, which confirmed an eight p.c drop. Inasmuch as some of these states are on numerous fiscal calendar year ends, it would appear that the knowledge does not replicate the effect of third and/or fourth quarter results.

In accordance to knowledge offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 p.c to $thirteen.7 billion in 2008, as opposed to $14.7 billion in 2007.

Planned & Proposed New Expansions

As beforehand noted, it has been new gaming jurisdictions that have spawned a lot of the progress in yearly casino/racino revenues over the a long time, and their affect is apt to continue into the near potential.

Florida
Miami Dade voters accepted a ballot concern that permits every single of three pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Pet Keep track of and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, although the Calder installation in Miami Gardens has however to declared its ideas. There are numerous other proposals getting deemed that would even more increase on line casino advancement through the state.

Illinois
The state ultimately received all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,two hundred+ sport casino situated in Des Plaines just east of O’Hare. The new facility is not probably to open up right up until 2010. There has also been some discussion about making it possible for an improve in per area gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery system that enables for the improvement of 4 on line casino gaming zones and slots at existing horse and canine tracks seems mired, as only a single facility is presently underneath building, 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 on line casino in Oklahoma, which is situated so shut to the point out line that its parking great deal is in Kansas. The Boot Hill On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and ten desk games, alongside with a second section owing to open in 2011 with 875 slots and twenty table video games. The condition has prolonged the application method for the other 3 zones until finally April, 2009.

Kentucky
There is even now a whole lot of ‘jockeying’ heading on, but the prospect of as several as eight slot parlors and racinos seems to be again on the front-burner, but very likely not resolved in the course of the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most latest getting the 390 space M Resort in Henderson. There are expansions underway at both Caesars Palace and Hard Rock and new resorts consist of two parts of the City Middle undertaking, and the Fountainebleau.

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

Maine
There is a invoice beneath thing to consider that could more than double Penn National’s slot machines to 3,000, as properly as a proposal that would get rid of the restriction that slots be situated within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to permit slots, may possibly be taking into consideration transferring to a a lot more hospitable town.

Maryland
A referendum was accredited in November, 2008 that makes it possible for for the growth of five casinos with a complete of 15,000 slots, and now the bidding war is afoot although it is not as intense as the state had expected.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open up in 2008, but has operate into numerous funding troubles and although the hotel part is open, the riverboat is documented to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back somewhat, is nevertheless on track to open up this 12 months.

New England
Massachusetts, a sleeping-large in phrases of market place prospective, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but cannot seem to muster the political support. A modern examine concluded by Dartmouth College estimates that Massachusetts resident put in much more than $920 million last yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an option to develop casinos, even so the topic is likely to be revisited, specifically if Massachusetts decides to go forward. There are also makes an attempt 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 not too long ago agreeing to carry on augmenting purses with an extra tax. The governor nevertheless, has appointed a new panel to review the state’s sagging racing system which ironically, can only be preserved by allowing the tracks to have slot machines especially at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would finally be designed, the successful bidder indicated an lack of ability to make the required $370 million price, citing the present lending local climate, and throwing the venture back into the lap of the governor. Despite the fact that the market demand in the region could be deemed fairly robust, the prospect of added competitiveness from close by Belmont could have an affect on Aqueduct’s underlining economic feasibility, specifically taking into consideration that slightly significantly less than thirty% of the net win is retained by the operator.

Strategies to relocate Monticello Raceway into a resort intricate are getting reconsidered probably owing to the two the probable opening of at minimum 1 or maybe two racino functions in the NY metro spot, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

Ohio
Yet another gaming proposal is becoming put forth in Ohio, after final year’s version was turned down by the voters. This program calls for one on line casino each in the state’s greatest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expense needed of $250 million, as well as an first licensing payment of $50 million, and a 33 per cent tax on gaming profits.

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

South Dakota
The Lodge at Deadwood is slated to open up in the Slide of 2009, and consist of three hundred game titles, 140 rooms and a extensive variety of features.

Texas
Legislators are proposing a voter referendum that would amend the state structure to permit casino gambling in specified places, as nicely as enable gambling on American Indian lands in Texas and at current racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. Condition govt has proffered the idea of enabling the vacation resort to offer casino game titles, but this energy is in as well early a phase to have any traction 1 way or an additional.

Indian Gaming
A modern Supreme Courtroom ruling that restricts the using of lands into believe in on behalf of federally acknowledged American Indian tribes has more stymied some new Class III gaming assignments across the region. In addition, there have been eleven Indian on line casino initiatives turned down by the DOI very last yr because of its new rule that casinos have to be near ample to a reservation that tribal members can operate at them. It has been suggested that the new Obama administration may well be much more sympathetic to the improvement of Indian gaming assignments, but this concern has but to be dealt with.

Meanwhile, there are other Class III initiatives in the different levels of development. The Seneca on line casino venture in Buffalo, NY, while operating a modest short term facility, has delayed an currently beneath construction permanent facility until finally the market place rebounds. They have also expressed an curiosity in establishing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is getting challenged, and could affect their ideas for greater projects. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this year, and other individuals are in the preparing stage. Texas could let the reopening of Indian gaming facilities and let other location 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 Course III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming earnings in Atlantic City has declined seven.six %, from $four.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is locating itself in an intense comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast ended up situated in Atlantic Metropolis, the place it seemed as if it might really even eclipse the Las Vegas Strip’s annual gaming revenues.

Little by little even so its marketplace share was being encroached on, very first by the growth of a huge Course III gaming procedure in Connecticut, and then one more slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and at some point two operations in Philadelphia, the noose is tightening about Atlantic City’s long term potential clients. It truly is reliance on day-trippers lulled it into a fake sense of protection, and it now finds by itself having to redefine its mission assertion to “destination resort.”

The only dilemma with this method however is that it is unwell-geared up to pull it off. For all intents and needs, Atlantic Metropolis is beneath-roomed and/or more than-gamed. There is basically not enough working day-tripper market to go around, and their efficient trading location is tightening, as the peripheral populations northward now/will have far more ready entry to a widened provide 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 accessibility, the city’s only genuine aggressive advantages are its lodge ability and the availability of table video games, though the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately compete as a spot resort the metropolis needs to produce extra guest rooms and not always gaming capability. By comparison, the Las Vegas Strip properties – accurate gaming places, in that they do not have much of a day-journey marketplace, other than for the ‘locals’ – have an average of .87 gaming positions per guest area whilst Atlantic City’s common is 2.seventy four positions for each visitor place.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, both of which added new rooms in 2008, have been the minimum impacted by the newest downturn. The Borgata knowledgeable a gaming revenue drop of 1.six percent, although Harrah’s Marina documented a four.nine p.c improve in contrast to 2007. Moreover, the most difficult strike venues, specifically 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 homes and Resorts with the hoped for sale of the Tropicana has been additional delayed, and dropping valuation.

With a regular rise in gaming revenues through 2006, the metropolis seemed key for additional advancement, which precipitated organizing for four new vacation resort tasks, every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion task remains an iron skeleton, Pinnacle Amusement has announced it may possibly find to sell its razed Sands internet site, MGM Mirage has shelved its on line casino programs, and Penn Countrywide appears to have stopped its pursuit of the Bader Discipline airport web site.

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