A Time period of Adjustment

Oops! That big hissing seem is the gaming balloon that experienced been increasing more than the many years, slowly getting rid of air. But, it has not been a tide that decreased all ships nevertheless, as some emerging and growing gaming jurisdictions showed powerful growth in 2008.

All round, the business and racetrack on line casino sectors (excluding Indian gaming), experienced a three.five p.c decline in gaming revenues for 2008, producing a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a achieve of practically $one billion in 2008, thus bringing the Professional sector market decline to $1.eight billion, or 6.7 percent. Nevada was the most significant loser in 2008, dropping virtually $1.three billion, far more than 50 percent of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most element, casino operators have been caught reasonably flat-footed by the extent of the 2008 revenue downturn, as it was not until the third and fourth quarters when it actually nosedived. Driving the crest of 12 months above calendar year market place growth across the nation and the availability of enough credit rating and fairness money, new development and expansion proliferated in modern several years. Today, faced with the realities of declining, or at best stagnant need, a lot of of these tasks are now regarded more than-leveraged and/or in excess of-sized. As a result many gaming organizations are attempting to renegotiate their personal debt – manufactured far more hard by lower valuations – whilst also paring down operational fees. The latter has turn out to be a really problematic conundrum when working with the competitiveness, especially in individuals jurisdictions that are now vying for marketplace shares with new rising on line casino initiatives in neighboring regions. A matter we talk about far more completely in the Point out by Condition analysis segment of this publication.

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

“How lengthy will these economic situations persist, and are we at the bottom but?” are queries no 1 seems to be answering but. What is distinct however is that most gaming jurisdictions will have to understand how to deal with a scaled-down pie.

Notice:
This investigation consists of only gaming revenues of certified casinos and pari-mutuel shops that supply casino video games, and not Indian gaming functions, card rooms, or modest non-casino kind slot locations. The total report, such as earnings tables is obtainable on our web web page.

Enter/Output Product

A important element that appears to have arisen from the ashes of this current trend is that a lot of on line casino tasks were just way too massive to help them selves. The input, in conditions of expenditure dollars, was not proportional to the output, in phrases of web revenue soon after debt provider, when compared to beforehand accomplished results. A lot more and/or larger is not constantly much better. Observing the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the improvement of more extensive features in numerous other jurisdictions. The flaw in this strategy even so is that the expenses linked with widening market place penetration and occasioned-use, are drastically larger than these incurred to appeal to the base marketplace.

As daytripper marketplaces turn out to be far more competitive, casino venues will have to count a lot more and much more on their in-house resort patrons, and measurement their qualities (and expectations) accordingly. While Steve Wynn began a key development in producing up-market place mega-locations, there basically was not enough demand on the Strip to warrant the many other related assignments that adopted that aimed at the identical market.

The trick is to strike a pleased medium in undertaking configurations which of system need significantly less of a ‘seat-of-pants’ approach, and one particular that is far more researched. A shameless plug for advancement consultants like ourselves.

Other Gaming Routines

Though there are no printed detailed info of American Indian gaming revenues, anecdotal proof appears to advise that this segment has been as difficult strike as the Business sector. The two Connecticut Indian gaming installations report slot earnings of $one.six billion in 2008, representing a fall of about 7 p.c, or virtually $114 million, much more than doubling the 3.five percent drop from the year just before. This market is seemingly nonetheless reeling from the ripple-effect of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section of Gaming stories that contributions based on a gaming income system from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 compared to the preceding 12 months reducing .eight per cent in the very first quarter, seven.five percent in the second quarter, nine.5 % in the 3rd quarter, and sixteen.1 per cent in the fourth quarter.

Some SEC reporting Indian gaming houses report similar decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, studies that while calendar yr 2008 confirmed an practically two per cent development price in gaming revenues, there was an eight.seven per cent drop in the 3rd quarter and an virtually 10 per cent decrease in the fourth quarter of 2008, compared with 2007. Gaming profits tendencies at close by Niagara Falls, Ontario have been down one.5% in 2008 in contrast with 2007.

It truly is been a mixed-bag for state lotteries across the country. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries generated a whole of $60.6 billion in sales in fiscal 2008, up about 3 p.c from the preceding calendar year yet some jurisdictions noted decreases, most notably California, which showed an eight p.c drop. Inasmuch as some of these states are on various fiscal yr finishes, it would appear that the knowledge does not replicate the impact of third and/or fourth quarter benefits.

According to information supplied by Equibase, horse racing pari-mutuel revenues continue their downward spiral, slipping seven per cent to $13.seven billion in 2008, versus $fourteen.seven billion in 2007.

Planned & Proposed New Expansions

As earlier mentioned, it has been new gaming jurisdictions that have spawned much of the development in once-a-year casino/racino revenues over the a long time, and their impact is apt to carry on into the close to foreseeable future.

Florida
Miami Dade voters accepted a ballot situation that enables every single of a few pari-mutuels to have a on line casino facility of up to two,000 slot machines. The Flagler Dog Observe and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has however to declared its programs. There are several other proposals currently being considered that would additional increase casino advancement during the condition.

Illinois
The condition finally obtained about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,two hundred+ match on line casino positioned in Des Plaines just east of O’Hare. The new facility is not most likely to open up right up until 2010. There has also been some discussion about allowing an improve in per place gaming positions and slots at racetracks, despite the fact that neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery plan that makes it possible for for the advancement of 4 casino gaming zones and slots at current horse and dog tracks seems mired, as only 1 facility is presently below design, although 3 other proposals were 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 point out line that its parking lot is in Kansas. The Boot Hill On line casino Vacation resort in Dodge City is planing a December 2009 opening with 575 slots and 10 table online games, alongside with a 2nd stage due to open up in 2011 with 875 slots and twenty table video games. The condition has prolonged the software procedure for the other a few zones until finally April, 2009.

Kentucky
There is even now a lot of ‘jockeying’ heading on, but the prospect of as several as 8 slot parlors and racinos appears to be again on the entrance-burner, but likely not settled during the present legislative session.

Las Vegas
There are about 14,000 rooms scheduled to occur on line in 2009, with the most latest getting the 390 place M Resort in Henderson. There are expansions underway at both Caesars Palace and Challenging Rock and new accommodations consist of two components of the City Center undertaking, and the Fountainebleau.

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

Maine
There is a invoice below thought that could far more than double Penn National’s slot machines to 3,000, as properly as a proposal that would take away the restriction that slots be found within 5 miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing neighborhood people to enable slots, may be thinking about moving to a far more hospitable city.

Maryland
A referendum was accepted in November, 2008 that enables for the advancement of five casinos with a complete of fifteen,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the point out had predicted.

Mississippi
Grand Soleil On line casino Resort in Natchez had been slated to open in 2008, but has run into a variety of funding concerns and while the lodge part is open up, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled back again somewhat, is even now on monitor to open up this year.

New England
Massachusetts, a sleeping-large in conditions of market place possible, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but can not seem to muster the political support. A modern examine concluded by Dartmouth University estimates that Massachusetts resident spent a lot more than $920 million final yr at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an selection to build casinos, nonetheless the subject matter is very 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 devices at racetracks by just lately agreeing to continue augmenting purses with an extra tax. The governor nevertheless, has appointed a new panel to review the state’s sagging racing program which ironically, can only be preserved by enabling the tracks to have slot equipment particularly at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would ultimately be produced, the profitable bidder indicated an incapability to make the needed $370 million charge, citing the present lending local weather, and throwing the task back into the lap of the governor. Despite the fact that the market place desire in the area could be deemed fairly robust, the prospect of further opposition from close by Belmont could have an effect on Aqueduct’s underlining economic feasibility, particularly considering that marginally significantly less than 30% of the net acquire is retained by the operator.

Plans to relocate Monticello Raceway into a vacation resort sophisticated are being reconsidered maybe owing to equally the probable opening of at least one or perhaps two racino functions in the NY metro area, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.

Ohio
But another gaming proposal is currently being place forth in Ohio, right after previous year’s variation was turned down by the voters. This strategy calls for one particular casino every single in the state’s premier towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum expenditure essential of $250 million, as properly as an preliminary licensing fee of $50 million, and a 33 percent tax on gaming earnings.

Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers project in Pittsburgh is expected to be operational in August, ’09 even though Philadelphia’s two slot amenities even now wallow in a political mire, but are predicted to start off design this 12 months.

South Dakota
The Lodge at Deadwood is slated to open in the Drop of 2009, and include 300 games, 140 rooms and a vast range of facilities.

Texas
Legislators are proposing a voter referendum that would amend the state constitution to permit casino gambling in designated places, as effectively as let gambling on American Indian lands in Texas and at existing racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for individual bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer. Point out federal government has proffered the idea of enabling the resort to provide casino games, but this energy is in also early a phase to have any traction a single way or another.

Indian Gaming
A modern Supreme Court docket ruling that restricts the taking of lands into trust on behalf of federally acknowledged American Indian tribes has additional stymied some new Class III gaming assignments across the nation. Moreover, there have been eleven Indian casino tasks rejected by the DOI final calendar year since of its new rule that casinos must be near ample to a reservation that tribal users can work at them. It has been suggested that the new Obama administration may be much more sympathetic to the development of Indian gaming tasks, but this problem has nevertheless to be tackled.

Meanwhile, there are other Class III tasks in the different phases of advancement. The Seneca casino project in Buffalo, NY, whilst functioning a tiny momentary facility, has delayed an previously under design everlasting facility till the market rebounds. They have also expressed an curiosity in developing a on line casino in the Catskills. The state gaming compact with Seminoles in Florida is becoming challenged, and could influence their plans for greater assignments. There are new Indian gaming initiatives set to open in Michigan and Oklahoma this year, and other folks are in the organizing phase. Texas may possibly let the reopening of Indian gaming amenities and enable other location and there are ideas afoot by the Navajos in Arizona to assemble additional casinos. California is poised to open up two to three new Class III casinos in 2009/10.

The Nor’easter Squeeze

Total gaming income in Atlantic Town has declined seven.six percent, from $four.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the metropolis is obtaining by itself in an intense comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast have been located in Atlantic Metropolis, exactly where it looked as if it may possibly really even eclipse the Las Vegas Strip’s yearly gaming revenues.

Slowly nevertheless its industry share was currently being encroached upon, initial by the development of a big 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 just lately Pennsylvania.

Now, with the prepared opening of slot operations in Maryland, the impending opening of a new casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening close to Atlantic City’s potential potential customers. 온카 is reliance on working day-trippers lulled it into a bogus feeling of stability, and it now finds by itself possessing to redefine its mission assertion to “vacation spot resort.”

The only problem with this approach however is that it is unwell-outfitted to pull it off. For all intents and needs, Atlantic Town is beneath-roomed and/or in excess of-gamed. There is merely not enough working day-tripper industry to go about, and their powerful investing area is tightening, as the peripheral populations northward now/will have far more all set obtain to a widened source in New York (Yonkers, and quickly at Aqueduct and probably Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean entry, the city’s only real competitive rewards are its resort capacity and the availability of table game titles, though the latter is likely to eventuate in Pennsylvania, and potentially Delaware. In purchase to sufficiently contend as a destination resort the town requirements to produce additional visitor rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip homes – correct gaming locations, in that they do not have a lot of a working day-journey industry, except for the ‘locals’ – have an regular of .87 gaming positions for every visitor area even though Atlantic City’s typical is two.74 positions for each guest area.

It is not a coincidence that Atlantic City’s two biggest hotels, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, have been the the very least impacted by the most current downturn. The Borgata knowledgeable a gaming income fall of one.6 per cent, even though Harrah’s Marina documented a four.nine % enhance when compared to 2007. Furthermore, the toughest 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, such as the the Trump properties and Resorts with the hoped for sale of the Tropicana has been more delayed, and getting rid of valuation.

With a continual rise in gaming revenues via 2006, the metropolis appeared key for further improvement, which precipitated preparing for 4 new resort assignments, each and every of which have now been indefinitely delayed. Revel Leisure Group’s $2.5 billion task remains an iron skeleton, Pinnacle Amusement has introduced it may find to offer its razed Sands internet site, MGM Mirage has shelved its casino strategies, and Penn Countrywide seems to have stopped its pursuit of the Bader Field airport web site.

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