A Period of time of Adjustment

Oops! That large hissing sound is the gaming balloon that experienced been growing over the a long time, 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 sturdy growth in 2008.

Overall, the commercial and racetrack casino sectors (excluding Indian gaming), seasoned a three.5 p.c drop in gaming revenues for 2008, generating a whole 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 nearly $one billion in 2008, therefore bringing the Business sector market decline to $one.8 billion, or six.7 %. Nevada was the greatest loser in 2008, dropping almost $1.3 billion, far more than fifty percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most part, on line casino operators ended up caught comparatively flat-footed by the extent of the 2008 earnings downturn, as it was not until the third and fourth quarters when it truly nosedived. Using the crest of calendar year more than calendar year marketplace development throughout the place and the availability of sufficient credit score and fairness cash, new design and enlargement proliferated in modern many years. Today, faced with the realities of declining, or at best stagnant demand, a lot of of these initiatives are now considered in excess of-leveraged and/or above-sized. As a consequence several gaming companies are making an attempt to renegotiate their debt – created a lot more challenging by lower valuations – although also paring down operational costs. The latter has grow to be a very problematic conundrum when working with the competition, especially in these jurisdictions that are now vying for industry shares with new emerging casino projects in neighboring locations. A subject matter we go over much more completely in the Condition by Point out examination part of this publication.

As a end result of these conditions the gaming business landscape is now strewn with impending fatalities. Between the more notable troubled companies are Station Casinos, Empire Resorts, Harrah’s Enjoyment, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the record grows every single 7 days.

“How long will these economic problems persist, and are we at the bottom yet?” are questions no 1 appears to be answering yet. What is distinct even so is that most gaming jurisdictions will have to find out how to deal with a smaller pie.

Be aware:
This evaluation contains only gaming revenues of accredited casinos and pari-mutuel stores that supply casino game titles, and not Indian gaming operations, card rooms, or modest non-on line casino kind slot spots. The complete post, like income tables is available on our net website page.

Enter/Output Model

A essential element that looks to have arisen from the ashes of this existing pattern is that numerous casino assignments had been just as well huge to help on their own. The enter, in phrases of investment decision dollars, was not proportional to the output, in terms of web income following personal debt provider, when compared to formerly reached outcomes. Much more and/or larger is not often far better. Looking at the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the advancement of far more comprehensive features in numerous other jurisdictions. The flaw in this approach even so is that the charges connected with widening industry penetration and occasioned-use, are significantly larger than these incurred to entice the base market.

As daytripper markets become a lot more competitive, on line casino venues will have to rely a lot more and much more on their in-residence resort patrons, and measurement their homes (and expectations) accordingly. Whilst Steve Wynn started out a key trend in generating up-industry mega-places, there just was not adequate desire on the Strip to warrant the many other equivalent projects that followed that aimed at the exact same area of interest.

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Other Gaming Pursuits

Although there are no revealed thorough data of American Indian gaming revenues, anecdotal evidence seems to advise that this section has been as tough strike as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, representing a drop of about seven p.c, or virtually $114 million, more than doubling the 3.5 per cent drop from the 12 months just before. This market is seemingly still reeling from the ripple-influence of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Division of Gaming reviews that contributions based mostly on a gaming profits system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the previous yr reducing .eight percent in the very first quarter, seven.5 percent in the 2nd quarter, nine.five percent in the third quarter, and sixteen.one p.c in the fourth quarter.

Some SEC reporting Indian gaming homes report comparable decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, stories that even though calendar year 2008 confirmed an practically 2 per cent growth rate in gaming revenues, there was an eight.seven % drop in the 3rd quarter and an virtually 10 p.c drop in the fourth quarter of 2008, in contrast with 2007. Gaming income trends at nearby Niagara Falls, Ontario were down 1.five% in 2008 compared with 2007.

It truly is been a mixed-bag for state lotteries throughout the nation. The North American Affiliation of Point out & Provincial Lotteries stories that U.S. lotteries produced a overall of $sixty.6 billion in revenue in fiscal 2008, up about three % from the previous 12 months nevertheless some jurisdictions noted decreases, most notably California, which confirmed an eight p.c drop. Inasmuch as some of these states are on numerous fiscal yr finishes, it would seem to be that the data does not replicate the influence of 3rd and/or fourth quarter outcomes.

According to data presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping 7 per cent to $thirteen.7 billion in 2008, versus $14.7 billion in 2007.

Planned & Proposed New Expansions

As earlier famous, it has been new gaming jurisdictions that have spawned considerably of the growth in annual casino/racino revenues in excess of the several years, and their effect is apt to carry on into the around future.

Florida
Miami Dade voters accepted a ballot issue that enables every of a few pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Dog Monitor and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has nevertheless to announced its strategies. There are many other proposals getting regarded that would further grow on line casino development throughout the point out.

Illinois
The condition finally 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 located in Des Plaines just east of O’Hare. The new facility is not likely to open until finally 2010. There has also been some discussion about enabling an improve in for every place gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery software that permits for the development of four on line casino gaming zones and slots at existing horse and pet tracks seems mired, as only one particular facility is presently beneath construction, although three other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not contend with the new Quapaw tribal on line casino in Oklahoma, which is located so near to the condition line that its parking great deal is in Kansas. The Boot Hill On line casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten desk games, alongside with a 2nd section due to open in 2011 with 875 slots and 20 desk online games. The point out has extended the software method for the other 3 zones until April, 2009.

Kentucky
There is nevertheless a lot of ‘jockeying’ heading on, but the prospect of as numerous as 8 slot parlors and racinos seems to be back again on the front-burner, but likely not fixed in the course of 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 both Caesars Palace and Difficult Rock and new hotels consist of two parts of the Town Heart task, and the Fountainebleau.

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

Maine
There is a invoice beneath consideration that could a lot more than double Penn National’s slot equipment to three,000, as nicely as a proposal that would take away the restriction that slots be positioned inside of 5 miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing nearby inhabitants to let slots, could be considering relocating to a much more hospitable city.

Maryland
A referendum was authorized in November, 2008 that allows for the improvement of 5 casinos with a complete of 15,000 slots, and now the bidding war is afoot though it is not as intense as the point out had predicted.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open in 2008, but has operate into various financing issues and even though the lodge part is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled back fairly, is still on track to open this calendar year.

New England
Massachusetts, a sleeping-large in conditions of marketplace likely, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but cannot look to muster the political assist. A recent research finished by Dartmouth College estimates that Massachusetts resident put in much more than $920 million final 12 months at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an selection to build casinos, even so the matter is probably to be revisited, specially if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its options.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by lately agreeing to proceed augmenting purses with an additional tax. The governor however, 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 devices especially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it seemed as if Aqueduct’s four,500 VLT facility would finally be created, the winning bidder indicated an incapability to make the required $370 million payment, citing the existing lending weather, and throwing the task back again into the lap of the governor. Though the marketplace need in the area could be regarded really robust, the prospect of additional competitors from nearby Belmont could have an effect on Aqueduct’s underlining economic feasibility, specifically thinking about that somewhat less than thirty% of the net get is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort complex are being reconsidered maybe owing to the two the possible opening of at least 1 or possibly two racino functions in the NY metro area, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Ohio
However one more gaming proposal is becoming set forth in Ohio, following final year’s version was turned down by the voters. This prepare calls for one on line casino each in the state’s greatest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expense essential of $250 million, as effectively as an initial licensing payment of $fifty million, and a 33 per cent tax on gaming revenue.

Pennsylvania
The Sands in Bethlehem is because of to open up 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 amenities still wallow in a political mire, but are anticipated to commence development this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Fall of 2009, and incorporate 300 video games, 140 rooms and a broad selection of features.

Texas
Legislators are proposing a voter referendum that would amend the condition structure to let on line casino gambling in specified locations, as nicely as permit gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an provide. State govt has proffered the idea of enabling the resort to offer you casino online games, but this effort is in too early a stage to have any traction 1 way or yet another.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the having of lands into have confidence in on behalf of federally regarded American Indian tribes has additional stymied some new Course III gaming initiatives throughout the country. Moreover, there had been eleven Indian casino tasks rejected by the DOI final calendar year because of its new rule that casinos have to be around sufficient to a reservation that tribal members can function at them. It has been suggested that the new Obama administration may possibly be much more sympathetic to the improvement of Indian gaming initiatives, but this situation has yet to be addressed.

In the meantime, there are other Class III initiatives in the a variety of levels of advancement. The Seneca on line casino undertaking in Buffalo, NY, even though operating a small temporary facility, has delayed an presently below development long lasting facility right up until the market place rebounds. They have also expressed an curiosity in creating a casino in the Catskills. The state gaming compact with Seminoles in Florida is currently being challenged, and could effect their ideas for greater projects. There are new Indian gaming projects established to open in Michigan and Oklahoma this calendar year, and other individuals are in the planning stage. Texas could allow the reopening of Indian gaming facilities and permit other venue and there are strategies afoot by the Navajos in Arizona to build extra casinos. California is poised to open two to 3 new Course III casinos in 2009/10.

The Nor’easter Squeeze

Overall gaming revenue in Atlantic City has declined 7.6 %, from $four.9 billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the city is obtaining by itself in an powerful comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast ended up situated in Atlantic Metropolis, where it appeared as if it might actually even eclipse the Las Vegas Strip’s annual gaming revenues.

Little by little nonetheless its market place share was being encroached on, initial by the development of a huge Course III gaming procedure 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 just lately Pennsylvania.

Now, with the prepared opening of slot operations 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 prospects. It’s reliance on day-trippers lulled it into a bogus sense of security, and it now finds itself getting to redefine its mission assertion to “destination vacation resort.”

The only difficulty with this approach nevertheless is that it is ill-equipped to pull it off. For all intents and purposes, Atlantic Town is below-roomed and/or more than-gamed. There is basically not enough day-tripper industry to go all around, and their effective buying and selling spot is tightening, as the peripheral populations northward now/will have much more completely ready entry to a widened provide in New York (Yonkers, and quickly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean accessibility, the city’s only genuine competitive benefits are its hotel ability and the availability of desk game titles, even though the latter is very likely to eventuate in Pennsylvania, and potentially Delaware. In buy to sufficiently compete as a spot vacation resort the metropolis demands to develop extra guest rooms and not essentially gaming ability. By comparison, the Las Vegas Strip homes – true gaming destinations, in that they do not have considerably of a day-vacation industry, apart from for the ‘locals’ – have an typical of .87 gaming positions for each guest room although Atlantic City’s typical is two.seventy four positions for each guest place.

It is not a coincidence that Atlantic City’s two largest accommodations, the Borgata and Harrah’s Marina, the two of which added new rooms in 2008, were the the very least impacted by the newest downturn. The Borgata experienced a gaming revenue fall of one.6 %, while Harrah’s Marina reported a 4.9 per cent increase compared to 2007. In addition, the most difficult strike venues, particularly 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, such as the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and dropping valuation.

With a continual rise in gaming revenues via 2006, the city appeared key for further growth, which precipitated arranging for four new resort assignments, every single of which have now been indefinitely delayed. Revel Amusement Group’s $2.five billion project stays an iron skeleton, Pinnacle Leisure has declared it might seek to promote its razed Sands website, MGM Mirage has shelved its casino ideas, and Penn Nationwide seems to have stopped its pursuit of the Bader Subject airport internet site.