A Time period of Adjustment

Oops! That giant hissing sound is the gaming balloon that had been developing more than the several years, slowly and gradually losing air. But, it has not been a tide that lowered all ships however, as some rising and increasing gaming jurisdictions confirmed robust development in 2008.

Overall, the professional and racetrack casino sectors (excluding Indian gaming), experienced a three.five p.c decline in gaming revenues for 2008, generating a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a obtain of almost $1 billion in 2008, therefore bringing the Commercial sector market decrease to $1.eight billion, or 6.seven p.c. Nevada was the largest loser in 2008, dropping almost $one.three billion, a lot more than fifty percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most part, on line casino operators have been caught reasonably flat-footed by the extent of the 2008 profits downturn, as it was not until the third and fourth quarters when it really nosedived. Using the crest of yr in excess of yr market progress across the nation and the availability of enough credit history and equity resources, new design and growth proliferated in recent many years. These days, confronted with the realities of declining, or at greatest stagnant demand from customers, numerous of these projects are now considered over-leveraged and/or over-sized. As a end result several gaming organizations are trying to renegotiate their credit card debt – made a lot more difficult by lower valuations – although also paring down operational fees. The latter has become a very problematic conundrum when working with the competition, especially in these jurisdictions that are now vying for market shares with new emerging on line casino assignments in neighboring regions. A subject matter we discuss more fully in the Point out by Condition analysis segment of this publication.

As a outcome of these problems the gaming industry landscape is now strewn with impending fatalities. Amid the much more noteworthy troubled corporations are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the record grows each 7 days.

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

Note:
This evaluation consists of only gaming revenues of licensed casinos and pari-mutuel retailers that provide on line casino video games, and not Indian gaming functions, card rooms, or modest non-casino variety slot locations. The total report, like profits tables is available on our world wide web website page.

Enter/Output Model

A essential element that seems to have arisen from the ashes of this present development is that numerous on line casino projects ended up just also massive to assistance themselves. The input, in terms of expenditure bucks, was not proportional to the output, in conditions of internet profit right after personal debt services, in comparison to previously attained final results. A lot more and/or bigger is not often greater. Viewing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the advancement of much more complete facilities in numerous other jurisdictions. The flaw in this strategy however is that the fees connected with widening market place penetration and occasioned-use, are substantially greater than people incurred to attract the base industry.

As daytripper marketplaces turn out to be a lot more aggressive, on line casino venues will have to count a lot more and much more on their in-house lodge patrons, and size their houses (and expectations) appropriately. Even though Steve Wynn began a key trend in producing up-market place mega-destinations, there merely was not adequate need on the Strip to warrant the several other similar tasks that followed that aimed at the very same specialized niche.

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

Other Gaming Actions

Though there are no published comprehensive info of American Indian gaming revenues, anecdotal proof seems to advise that this section has been as tough strike as the Business sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, representing a drop of about seven %, or nearly $114 million, much more than doubling the three.5 percent fall from the year ahead of. This marketplace is apparently nevertheless reeling from the ripple-impact of a on line casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming reviews that contributions based on a gaming revenue method from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 when compared to the prior year reducing .8 per cent in the 1st quarter, 7.5 % in the next quarter, nine.five per cent in the third quarter, and sixteen.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, studies that although calendar year 2008 confirmed an virtually 2 percent expansion charge in gaming revenues, there was an eight.seven % decline in the third quarter and an almost ten p.c decrease in the fourth quarter of 2008, in comparison with 2007. Gaming income traits at close by Niagara Falls, Ontario have been down 1.5% in 2008 in contrast with 2007.

It is been a blended-bag for condition lotteries across the country. The North American Association of Point out & Provincial Lotteries reports that U.S. lotteries created a whole of $sixty.6 billion in sales in fiscal 2008, up about three p.c from the previous year yet some jurisdictions described decreases, most notably California, which confirmed an 8 % drop. Inasmuch as some of these states are on a variety of fiscal calendar year finishes, it would look that the information does not reflect the affect of 3rd and/or fourth quarter outcomes.

In accordance to data presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling seven percent to $thirteen.7 billion in 2008, versus $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As beforehand mentioned, it has been new gaming jurisdictions that have spawned a lot of the growth in once-a-year on line casino/racino revenues above the many years, and their affect is apt to keep on into the in close proximity to long term.

Florida
Miami Dade voters accepted a ballot issue that makes it possible for each and every of 3 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, whilst the Calder set up in Miami Gardens has however to introduced its strategies. There are quite a few other proposals currently being considered that would additional grow on line casino growth through the state.

Illinois
The state lastly received close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a one,200+ recreation casino positioned in Des Plaines just east of O’Hare. The new facility is not likely to open until 2010. There has also been some discussion about permitting an increase in per place gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery system that permits for the improvement of 4 on line casino gaming zones and slots at current horse and dog tracks appears mired, as only one facility is presently under development, although 3 other proposals have 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 found so near to the state line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and 10 table game titles, alongside with a second section owing to open up in 2011 with 875 slots and twenty desk game titles. The state has extended the application process for the other 3 zones until April, 2009.

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

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most modern being the 390 place M Vacation resort in Henderson. There are expansions underway at each Caesars Palace and Challenging Rock and new lodges incorporate two components of the Metropolis Middle undertaking, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino development projects in Baton Rouge and Lake Charles, while delayed, are documented to nonetheless be on-monitor for opening this year and/or early 2010.

Maine
There is a invoice underneath thing to consider that could much more than double Penn National’s slot equipment to 3,000, as effectively as a proposal that would eliminate the restriction that slots be situated in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing regional residents to let slots, could be thinking about shifting to a a lot more hospitable city.

Maryland
A referendum was authorized in November, 2008 that enables for the growth of five casinos with a overall of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the condition had predicted.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open up in 2008, but has operate into various funding concerns and while the resort portion is open up, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back again fairly, is still on observe to open this calendar year.

New England
Massachusetts, a sleeping-huge in phrases of industry prospective, is still maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can not appear to muster the political assist. A recent study completed by Dartmouth University estimates that Massachusetts resident put in far more than $920 million final 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an option to produce casinos, nevertheless the subject is most likely to be revisited, specifically if Massachusetts decides to go ahead. There are also tries in Maine to rethink its possibilities.

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 keep on augmenting purses with an added tax. The governor nonetheless, has appointed a new panel to research the state’s sagging racing software which ironically, can only be preserved by enabling the tracks to have slot devices specially at the Meadowlands. ufabet (See The Nor’easter Squeeze segment)

New York
Just when it seemed as if Aqueduct’s 4,five hundred VLT facility would last but not least be developed, the winning bidder indicated an incapability to make the necessary $370 million fee, citing the recent lending weather, and throwing the project back again into the lap of the governor. Even though the industry need in the area could be deemed really robust, the prospect of added opposition from nearby Belmont could have an effect on Aqueduct’s underlining financial feasibility, especially thinking about that a bit considerably less than thirty% of the net win is retained by the operator.

Ideas to relocate Monticello Raceway into a resort sophisticated are getting reconsidered possibly owing to equally the possible opening of at minimum one or possibly two racino operations in the NY metro region, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.

Ohio
However another gaming proposal is being place forth in Ohio, following very last year’s edition was turned down by the voters. This strategy phone calls for one on line casino each and every in the state’s biggest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment decision required of $250 million, as well as an initial licensing fee of $50 million, and a 33 % tax on gaming income.

Pennsylvania
The Sands in Bethlehem is due to open in the Spring of ’09, and the new Rivers venture in Pittsburgh is expected to be operational in August, ’09 whilst Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are expected to begin construction this 12 months.

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

Texas
Legislators are proposing a voter referendum that would amend the state constitution to permit on line casino gambling in selected areas, as well as enable gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for personal bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an supply. Condition govt has proffered the notion of permitting the resort to provide on line casino online games, but this effort is in as well early a phase to have any traction a single way or yet another.

Indian Gaming
A latest Supreme Court ruling that restricts the getting of lands into trust on behalf of federally identified American Indian tribes has even more stymied some new Course III gaming assignments across the country. Furthermore, there had been eleven Indian casino projects turned down by the DOI final calendar year due to the fact of its new rule that casinos need to be around adequate to a reservation that tribal customers can operate at them. It has been proposed that the new Obama administration might be much more sympathetic to the advancement of Indian gaming tasks, but this issue has however to be resolved.

In the meantime, there are other Course III assignments in the various phases of development. The Seneca on line casino venture in Buffalo, NY, even though running a modest momentary facility, has delayed an already below construction long lasting facility right up until the industry rebounds. They have also expressed an desire in building a casino in the Catskills. The state gaming compact with Seminoles in Florida is getting challenged, and could impact their programs for bigger tasks. There are new Indian gaming assignments set to open in Michigan and Oklahoma this year, and others are in the preparing stage. Texas may possibly enable the reopening of Indian gaming services and permit other location and there are ideas afoot by the Navajos in Arizona to assemble further casinos. California is poised to open two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming income in Atlantic Town has declined 7.six per cent, from $four.9 billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the city is finding itself in an intense comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast had been situated in Atlantic Town, in which it looked as if it might really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Gradually nonetheless its market place share was being encroached upon, first by the advancement of a big Course III gaming procedure in Connecticut, and then one more slots operations 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 on line casino in Bethlehem, PA, and eventually two operations in Philadelphia, the noose is tightening about Atlantic City’s future prospects. It is reliance on working day-trippers lulled it into a false sense of safety, and it now finds by itself possessing to redefine its mission statement to “vacation spot vacation resort.”

The only difficulty with this method however is that it is sick-outfitted to pull it off. For all intents and needs, Atlantic Metropolis is beneath-roomed and/or in excess of-gamed. There is merely not ample working day-tripper marketplace to go about, and their successful investing location is tightening, as the peripheral populations northward now/will have far more completely ready accessibility to a widened supply 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 access, the city’s only actual competitive advantages are its resort potential and the availability of desk games, despite the fact that the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In get to adequately compete as a location vacation resort the town needs to build additional visitor rooms and not always gaming capability. By comparison, the Las Vegas Strip properties – true gaming destinations, in that they do not have much of a day-vacation market place, apart from for the ‘locals’ – have an regular of .87 gaming positions per visitor space even though Atlantic City’s regular is 2.seventy four positions for each visitor area.

It is not a coincidence that Atlantic City’s two biggest lodges, the Borgata and Harrah’s Marina, each of which extra new rooms in 2008, have been the least impacted by the most current downturn. The Borgata experienced a gaming income drop of one.six percent, whilst Harrah’s Marina documented a 4.nine % boost in comparison to 2007. Additionally, 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, which includes the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been further delayed, and losing valuation.

With a continual rise in gaming revenues through 2006, the city seemed key for more improvement, which precipitated arranging for 4 new vacation resort tasks, every single of which have now been indefinitely delayed. Revel Entertainment Group’s $2.five billion task remains an iron skeleton, Pinnacle Amusement has declared it may possibly seek out to sell its razed Sands web site, MGM Mirage has shelved its on line casino plans, and Penn National appears to have stopped its pursuit of the Bader Subject airport web site.