A Time period of Adjustment

Oops! That large hissing seem is the gaming balloon that experienced been increasing above the years, little by little getting rid of air. But, it has not been a tide that lowered all ships even so, as some emerging and growing gaming jurisdictions confirmed robust development in 2008.

Overall, the professional and racetrack casino sectors (excluding Indian gaming), skilled a three.5 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 showed a acquire of virtually $one billion in 2008, thus bringing the Professional sector market decrease to $1.eight billion, or 6.seven percent. Nevada was the greatest loser in 2008, dropping nearly $one.3 billion, a lot more than 50 percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most element, on line casino operators ended up caught relatively flat-footed by the extent of the 2008 profits downturn, as it was not until finally the 3rd and fourth quarters when it really nosedived. Riding the crest of year over yr market place progress across the country and the availability of enough credit rating and fairness resources, new development and expansion proliferated in current several years. Nowadays, confronted with the realities of declining, or at very best stagnant demand, a lot of of these initiatives are now deemed above-leveraged and/or above-sized. As a consequence many gaming businesses are attempting to renegotiate their debt – manufactured far more tough by decrease valuations – whilst also paring down operational fees. The latter has turn out to be a extremely problematic conundrum when working with the opposition, specially in individuals jurisdictions that are now vying for industry shares with new emerging casino assignments in neighboring locations. A matter we discuss a lot more totally in the Condition by Condition examination section of this publication.

As a outcome of these problems the gaming business landscape is now strewn with impending fatalities. Between the a lot more noteworthy troubled companies are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the list grows every 7 days.

“How long will these economic problems persist, and are we at the bottom however?” are inquiries no one appears to be answering yet. What is very clear however is that most gaming jurisdictions will have to find out how to deal with a smaller sized pie.

This examination involves only gaming revenues of licensed casinos and pari-mutuel shops that offer you on line casino video games, and not Indian gaming operations, card rooms, or small non-casino kind slot spots. The entire report, which includes earnings tables is available on our internet page.

Enter/Output Model

A key element that would seem to have arisen from the ashes of this present craze is that several casino projects have been just also massive to support them selves. The input, in phrases of expense pounds, was not proportional to the output, in conditions of web profit right after personal debt services, when compared to earlier reached outcomes. Far more and/or larger is not constantly better. Seeing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of much more complete facilities in several other jurisdictions. The flaw in this method nevertheless is that the costs related with widening market place penetration and occasioned-use, are considerably increased than individuals incurred to attract the base marketplace.

As daytripper markets become much more aggressive, on line casino venues will have to count a lot more and more on their in-property hotel patrons, and size their properties (and anticipations) appropriately. Although Steve Wynn commenced a main development in creating up-market place mega-locations, there just was not adequate demand from customers on the Strip to warrant the a lot of other comparable tasks that adopted that aimed at the exact same specialized niche.

The trick is to strike a pleased medium in venture configurations which of system require considerably less of a ‘seat-of-pants’ technique, and 1 that is a lot more analyzed. A shameless plug for development consultants like ourselves.

Other Gaming Pursuits

Although there are no released detailed data of American Indian gaming revenues, anecdotal proof appears to suggest that this segment has been as challenging hit as the Professional sector. The two Connecticut Indian gaming installations report slot profits of $1.6 billion in 2008, representing a fall of about seven per cent, or virtually $114 million, more than doubling the 3.five percent fall from the calendar year just before. This market is apparently even now reeling from the ripple-effect of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section of Gaming reports that contributions based mostly on a gaming profits formulation from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 when compared to the preceding 12 months reducing .8 percent in the 1st quarter, 7.5 % in the second quarter, nine.five p.c in the 3rd quarter, and sixteen.1 p.c in the fourth quarter.

Some SEC reporting Indian gaming homes report related decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, reviews that while calendar year 2008 confirmed an almost 2 p.c progress charge in gaming revenues, there was an 8.7 % decline in the third quarter and an practically 10 percent decrease in the fourth quarter of 2008, in comparison with 2007. Gaming revenue trends at nearby Niagara Falls, Ontario were down one.five% in 2008 compared with 2007.

It truly is been a mixed-bag for point out lotteries across the nation. The North American Association of Point out & Provincial Lotteries studies that U.S. lotteries created a overall of $60.six billion in income in fiscal 2008, up about 3 % from the preceding 12 months however some jurisdictions reported decreases, most notably California, which confirmed an eight % fall. Inasmuch as some of these states are on numerous fiscal calendar year finishes, it would seem that the information does not reflect the influence of third and/or fourth quarter results.

In accordance to info presented by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling 7 % to $thirteen.seven billion in 2008, vs . $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As earlier observed, it has been new gaming jurisdictions that have spawned significantly of the expansion in yearly casino/racino revenues above the a long time, and their impact is apt to keep on into the around potential.

Miami Dade voters accredited a ballot situation that enables each of three pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Pet Keep track of and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to declared its ideas. There are numerous other proposals being considered that would even more broaden casino improvement through the point out.

The state lastly acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,200+ sport on line casino positioned in Des Plaines just east of O’Hare. The new facility is not very likely to open up right up until 2010. There has also been some discussion about permitting an boost in for each area gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

The state’s expanded lottery system that allows for the advancement of four casino gaming zones and slots at existing horse and canine tracks appears mired, as only one particular facility is presently below construction, even though 3 other proposals had been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is located so shut to the point out 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 table video games, together with a next section owing to open in 2011 with 875 slots and 20 desk games. The point out has prolonged the application procedure for the other three zones till April, 2009.

There is nonetheless a great deal of ‘jockeying’ heading on, but the prospect of as several as eight slot parlors and racinos appears to be again on the front-burner, but likely not solved for the duration of the current legislative session.

Las Vegas
There are about 14,000 rooms scheduled to appear on line in 2009, with the most recent getting the 390 area M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Challenging Rock and new hotels consist of two elements of the Town Centre task, and the Fountainebleau.

Pinnacle Entertainment’s new on line casino growth tasks in Baton Rouge and Lake Charles, even though delayed, are reported to nevertheless be on-track for opening this calendar year and/or early 2010.

There is a bill beneath consideration that could far more than double Penn National’s slot equipment to three,000, as properly as a proposal that would eliminate the restriction that slots be positioned within five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing nearby people to let slots, may possibly be thinking about transferring to a far more hospitable town.

A referendum was approved in November, 2008 that makes it possible for for the growth of 5 casinos with a whole of fifteen,000 slots, and now the bidding war is afoot although it is not as powerful as the condition experienced anticipated.

Grand Soleil On line casino Resort in Natchez had been slated to open up in 2008, but has run into various financing issues and even though the hotel portion is open, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, even though scaled back again somewhat, is nonetheless on keep track of to open this calendar year.

New England
Massachusetts, a sleeping-giant in phrases of market place possible, is nonetheless maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but can not appear to muster the political help. A modern review accomplished by Dartmouth College estimates that Massachusetts resident expended far more than $920 million final year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an choice to develop casinos, nevertheless the matter is probably to be revisited, particularly if Massachusetts decides to go forward. There are also makes an attempt in Maine to rethink its alternatives.

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 carry on augmenting purses with an additional tax. The governor even so, has appointed a new panel to research the state’s sagging racing plan which ironically, can only be preserved by permitting the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze area)

New York
Just when it seemed as if Aqueduct’s 4,500 VLT facility would lastly be designed, the profitable bidder indicated an inability to make the necessary $370 million price, citing the recent lending local climate, and throwing the venture again into the lap of the governor. Even though the marketplace need in the area could be regarded as quite robust, the prospect of extra competition from nearby Belmont could have an affect on Aqueduct’s underlining financial feasibility, especially thinking about that a bit much less than thirty% of the internet win is retained by the operator.

Programs to relocate Monticello Raceway into a vacation resort sophisticated are currently being reconsidered possibly owing to equally the possible opening of at the very least one particular or probably two racino functions in the NY metro spot, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

But an additional gaming proposal is currently being put forth in Ohio, following last year’s model was turned down by the voters. This prepare calls for one casino every single in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimal expense needed of $250 million, as nicely as an original licensing charge of $50 million, and a 33 per cent tax on gaming revenue.

The Sands in Bethlehem is thanks to open in the Spring of ’09, and the new Rivers task in Pittsburgh is predicted to be operational in August, ’09 whilst Philadelphia’s two slot amenities even now wallow in a political mire, but are anticipated to begin building this year.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and contain three hundred video games, one hundred forty rooms and a vast assortment of features.

Legislators are proposing a voter referendum that would amend the condition constitution to allow casino gambling in designated locations, as properly as permit gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an supply. State authorities has proffered the idea of enabling the vacation resort to provide on line casino online games, but this effort is in too early a phase to have any traction 1 way or another.

Indian Gaming
A latest Supreme Court ruling that restricts the taking of lands into trust on behalf of federally acknowledged American Indian tribes has even more stymied some new Class III gaming initiatives throughout the nation. Moreover, there have been eleven Indian on line casino assignments rejected by the DOI last 12 months simply because of its new rule that casinos should be near sufficient to a reservation that tribal members can function at them. It has been recommended that the new Obama administration may well be far more sympathetic to the improvement of Indian gaming initiatives, but this situation has yet to be addressed.

In the meantime, there are other Course III projects in the a variety of levels of advancement. The Seneca on line casino venture in Buffalo, NY, even though working a tiny short term facility, has delayed an previously under design long lasting facility until finally the market place rebounds. They have also expressed an curiosity in building a casino in the Catskills. The state gaming compact with Seminoles in Florida is being challenged, and could influence their ideas for more substantial projects. There are new Indian gaming tasks established to open in Michigan and Oklahoma this yr, and other people are in the arranging stage. Texas may possibly enable the reopening of Indian gaming facilities and let other venue and there are strategies afoot by the Navajos in Arizona to assemble added casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming income in Atlantic Town has declined seven.six per cent, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is locating itself in an extreme comp-war with the Pennsylvania venues. At lottovip432 in the Northeast ended up positioned in Atlantic Metropolis, where it seemed as if it may possibly actually even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly even so its market share was getting encroached on, very first by the development of a huge Course III gaming operation in Connecticut, and then another slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most just lately Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening close to Atlantic City’s long term potential customers. It is reliance on day-trippers lulled it into a untrue feeling of safety, and it now finds alone possessing to redefine its mission assertion to “vacation spot resort.”

The only problem with this approach however is that it is ill-geared up to pull it off. For all intents and purposes, Atlantic City is under-roomed and/or more than-gamed. There is simply not enough day-tripper industry to go close to, and their powerful buying and selling region is tightening, as the peripheral populations northward now/will have more completely ready entry to a widened supply in New York (Yonkers, and shortly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only genuine competitive rewards are its lodge capacity and the availability of table video games, despite the fact that the latter is probably to eventuate in Pennsylvania, and possibly Delaware. In purchase to adequately compete as a location vacation resort the metropolis wants to build additional guest rooms and not necessarily gaming capacity. By comparison, the Las Vegas Strip qualities – accurate gaming locations, in that they do not have considerably of a day-vacation industry, apart from for the ‘locals’ – have an typical of .87 gaming positions per visitor area whilst Atlantic City’s typical is two.seventy four positions for each guest room.

It is not a coincidence that Atlantic City’s two premier resorts, the Borgata and Harrah’s Marina, the two of which included new rooms in 2008, were the minimum impacted by the most recent downturn. The Borgata experienced a gaming profits fall of 1.6 per cent, while Harrah’s Marina reported a four.9 % enhance compared to 2007. Furthermore, the hardest hit venues, particularly 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, including the the Trump homes 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 by way of 2006, the metropolis seemed primary for further improvement, which precipitated organizing for 4 new vacation resort initiatives, each of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion task continues to be an iron skeleton, Pinnacle Entertainment has declared it might seek out to offer its razed Sands web site, MGM Mirage has shelved its on line casino ideas, and Penn National appears to have stopped its pursuit of the Bader Subject airport website.

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