A Period of time of Adjustment

Oops! That big hissing seem is the gaming balloon that experienced been increasing in excess of the many years, slowly and gradually getting rid of air. But, oncapan.com has not been a tide that lowered all ships nonetheless, as some emerging and expanding gaming jurisdictions showed powerful progress in 2008.

Overall, the business and racetrack casino sectors (excluding Indian gaming), knowledgeable a 3.5 percent decrease in gaming revenues for 2008, making a whole of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a gain of virtually $one billion in 2008, thus bringing the Professional sector marketplace drop to $one.eight billion, or six.7 percent. Nevada was the greatest loser in 2008, dropping almost $1.three billion, more than 50 percent of which stemmed from the Las Vegas Strip segment.

Hunkering Down

For the most part, on line casino operators had been caught fairly flat-footed by the extent of the 2008 revenue downturn, as it was not until the third and fourth quarters when it genuinely nosedived. Using the crest of year over 12 months marketplace growth across the region and the availability of sufficient credit and equity resources, new design and enlargement proliferated in modern several years. These days, faced with the realities of declining, or at very best stagnant need, a lot of of these projects are now regarded above-leveraged and/or above-sized. As a outcome numerous gaming organizations are attempting to renegotiate their debt – produced a lot more challenging by reduced valuations – even though also paring down operational charges. The latter has turn out to be a quite problematic conundrum when working with the opposition, specially in people jurisdictions that are now vying for industry shares with new rising casino initiatives in neighboring regions. A matter we examine a lot more completely in the State by Condition investigation part of this publication.

As a end result of these circumstances the gaming market landscape is now strewn with impending fatalities. Between the more noteworthy troubled firms are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the list grows each week.

“How prolonged will these economic problems persist, and are we at the bottom but?” are concerns no one particular seems to be answering nevertheless. What is obvious however is that most gaming jurisdictions will have to find out how to offer with a smaller sized pie.

Note:
This examination involves only gaming revenues of licensed casinos and pari-mutuel retailers that supply casino online games, and not Indian gaming functions, card rooms, or small non-on line casino type slot areas. The whole article, like profits tables is accessible on our net website page.

Enter/Output Model

A crucial facet that seems to have arisen from the ashes of this current pattern is that many casino tasks had been just too large to support by themselves. The enter, in conditions of investment bucks, was not proportional to the output, in phrases of internet profit following personal debt provider, when compared to previously reached results. More and/or even bigger is not always far better. Looking at the increase in non-gaming earnings at the Las Vegas Strip resorts, gave impetus to the development of much more extensive facilities in several other jurisdictions. The flaw in this technique nevertheless is that the fees linked with widening market penetration and occasioned-use, are significantly greater than people incurred to appeal to the base market place.

As daytripper marketplaces turn into far more competitive, on line casino venues will have to rely more and far more on their in-property hotel patrons, and measurement their houses (and expectations) appropriately. While Steve Wynn started a main craze in making up-industry mega-places, there just was not sufficient desire on the Strip to warrant the several other related initiatives that followed that aimed at the identical market.

The trick is to strike a pleased medium in undertaking configurations which of training course demand much less of a ‘seat-of-pants’ method, and a single that is much more examined. A shameless plug for growth consultants like ourselves.

Other Gaming Pursuits

Even though there are no printed thorough info of American Indian gaming revenues, anecdotal proof appears to recommend that this phase has been as tough strike as the Commercial sector. The two Connecticut Indian gaming installations report slot income of $1.6 billion in 2008, representing a drop of about seven p.c, or virtually $114 million, much more than doubling the 3.5 % fall from the year prior to. This marketplace is evidently nevertheless reeling from the ripple-impact of a casino enlargement in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Office of Gaming stories that contributions based mostly on a gaming income method from the state’s 23 Indian gaming casinos, have been declining every single quarter in 2008 when compared to the preceding yr reducing .8 per cent in the very first quarter, 7.5 percent in the second quarter, 9.5 % in the 3rd quarter, and sixteen.one p.c in the fourth quarter.

Some SEC reporting Indian gaming qualities report equivalent decreases. Seneca Gaming, which operates 3 Class III casinos in upstate New York, stories that whilst calendar 12 months 2008 showed an almost 2 per cent expansion price in gaming revenues, there was an 8.seven p.c decline in the third quarter and an practically ten % decrease in the fourth quarter of 2008, when compared with 2007. Gaming earnings tendencies at nearby Niagara Falls, Ontario ended up down one.five% in 2008 in contrast with 2007.

It truly is been a combined-bag for state lotteries across the nation. The North American Association of Point out & Provincial Lotteries studies that U.S. lotteries generated a whole of $60.6 billion in revenue in fiscal 2008, up about three p.c from the earlier yr yet some jurisdictions reported decreases, most notably California, which confirmed an eight p.c drop. Inasmuch as some of these states are on different fiscal year finishes, it would appear that the knowledge does not mirror the affect of third and/or fourth quarter final results.

According to information provided by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, falling seven % to $13.7 billion in 2008, compared to $14.7 billion in 2007.

Planned & Proposed New Expansions

As previously noted, it has been new gaming jurisdictions that have spawned much of the expansion in annual on line casino/racino revenues above the a long time, and their influence is apt to proceed into the in close proximity to long term.

Florida
Miami Dade voters accepted a ballot situation that enables each and every of a few pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Puppy Track and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has however to announced its plans. There are quite a few other proposals getting deemed that would further expand on line casino growth throughout the point out.

Illinois
The state last but not least acquired around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Amusement, LLC for a 1,200+ recreation casino found in Des Plaines just east of O’Hare. The new facility is not probably to open up till 2010. There has also been some dialogue about permitting an enhance in for each spot gaming positions and slots at racetracks, despite the fact that neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery plan that permits for the development of 4 casino gaming zones and slots at existing horse and pet tracks appears mired, as only 1 facility is presently underneath design, while a few other proposals have been rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is positioned so close to the point out line that its parking whole lot is in Kansas. The Boot Hill Casino Resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and ten table game titles, together with a next phase because of to open up in 2011 with 875 slots and 20 desk games. The point out has extended the application method for the other a few zones until finally April, 2009.

Kentucky
There is still a great deal of ‘jockeying’ heading on, but the prospect of as several as eight slot parlors and racinos seems to be back again on the entrance-burner, but most likely not resolved for the duration of the recent legislative session.

Las Vegas
There are about 14,000 rooms scheduled to come on line in 2009, with the most current currently being the 390 place M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Challenging Rock and new accommodations include two factors of the City Centre task, and the Fountainebleau.

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

Maine
There is a bill below consideration that could much more than double Penn National’s slot devices to three,000, as properly as a proposal that would eliminate the restriction that slots be found in five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing nearby people to permit slots, might be taking into consideration moving to a more hospitable city.

Maryland
A referendum was authorized in November, 2008 that enables for the development of 5 casinos with a overall of 15,000 slots, and now the bidding war is afoot despite the fact that it is not as intense as the point out had expected.

Mississippi
Grand Soleil On line casino Resort in Natchez experienced been slated to open in 2008, but has operate into different funding concerns and even though the lodge part is open, the riverboat is noted to open in the Spring of ’09. Harrah’s Margaritaville On line casino in Biloxi, although scaled back again relatively, is nevertheless on track to open this calendar year.

New England
Massachusetts, a sleeping-huge in phrases of market likely, is nevertheless maneuvering to open up casinos/racinos, and/or a Class III Indian gaming facility, but are not able to seem to be to muster the political help. A latest study finished by Dartmouth College estimates that Massachusetts resident spent more than $920 million very last 12 months at Connecticut casinos and slot device parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an choice to build casinos, nonetheless the subject is likely to be revisited, specifically if Massachusetts decides to go forward. 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 not too long ago agreeing to continue augmenting purses with an further tax. The governor nonetheless, has appointed a new panel to examine the state’s sagging racing plan which ironically, can only be preserved by enabling the tracks to have slot devices particularly at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it appeared as if Aqueduct’s four,five hundred VLT facility would ultimately be developed, the winning bidder indicated an lack of ability to make the necessary $370 million price, citing the current lending climate, and throwing the task again into the lap of the governor. Even though the industry demand from customers in the region could be regarded as fairly robust, the prospect of further opposition from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, especially thinking about that slightly significantly less than thirty% of the net get is retained by the operator.

Strategies to relocate Monticello Raceway into a resort sophisticated are currently being reconsidered possibly owing to the two the possible opening of at the very least 1 or possibly two racino operations in the NY metro location, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.

Ohio
Yet an additional gaming proposal is being set forth in Ohio, soon after final year’s model was turned down by the voters. This prepare phone calls for one particular on line casino each in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a least investment required of $250 million, as effectively as an preliminary licensing fee of $fifty million, and a 33 % tax on gaming income.

Pennsylvania
The Sands in Bethlehem is because of to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot facilities nonetheless wallow in a political mire, but are predicted to start off construction this calendar year.

South Dakota
The Lodge at Deadwood is slated to open in the Tumble of 2009, and include three hundred games, a hundred and forty rooms and a extensive assortment of features.

Texas
Legislators are proposing a voter referendum that would amend the state constitution to allow on line casino gambling in designated locations, as well 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 you. State federal government has proffered the notion of making it possible for the resort to offer casino online games, but this effort is in also early a stage to have any traction a single way or another.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the taking of lands into have confidence in on behalf of federally recognized American Indian tribes has additional stymied some new Course III gaming tasks across the nation. Additionally, there were eleven Indian on line casino assignments rejected by the DOI previous calendar year due to the fact of its new rule that casinos should be in close proximity to adequate to a reservation that tribal users can function at them. It has been suggested that the new Obama administration may possibly be far more sympathetic to the improvement of Indian gaming projects, but this concern has yet to be dealt with.

In the meantime, there are other Class III assignments in the a variety of stages of advancement. The Seneca on line casino undertaking in Buffalo, NY, although running a small short term facility, has delayed an currently below construction everlasting facility till the industry rebounds. They have also expressed an interest in developing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is getting challenged, and could effect their strategies for more substantial tasks. There are new Indian gaming initiatives set to open up in Michigan and Oklahoma this 12 months, and others are in the organizing phase. Texas may allow the reopening of Indian gaming amenities and enable other location and there are ideas afoot by the Navajos in Arizona to construct further casinos. California is poised to open up two to 3 new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Total gaming earnings in Atlantic Metropolis has declined 7.6 %, from $four.9 billion in 2007 to $4.five billion in 2008 with decreases continuing into 2009, as the town is finding by itself in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast ended up positioned in Atlantic Metropolis, exactly where it looked as if it may well truly even eclipse the Las Vegas Strip’s annual gaming revenues.

Gradually nevertheless its market share was becoming encroached on, 1st by the development of a huge Course III gaming operation 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 not too long ago Pennsylvania.

Now, with the planned opening of slot operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two operations in Philadelphia, the noose is tightening around Atlantic City’s potential prospects. It’s reliance on day-trippers lulled it into a false feeling of stability, and it now finds by itself having to redefine its mission assertion to “vacation spot vacation resort.”

The only difficulty with this strategy however is that it is ill-outfitted to pull it off. For all intents and reasons, Atlantic City is under-roomed and/or over-gamed. There is just not adequate day-tripper market place to go about, and their powerful trading location is tightening, as the peripheral populations northward now/will have more completely ready entry to a widened provide in New York (Yonkers, and quickly at Aqueduct and perhaps Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only genuine aggressive rewards are its hotel capacity and the availability of table online games, although the latter is likely to eventuate in Pennsylvania, and probably Delaware. In get to sufficiently contend as a location vacation resort the metropolis needs to create added guest rooms and not automatically gaming capacity. By comparison, the Las Vegas Strip qualities – true gaming locations, in that they do not have a lot of a day-journey industry, other than for the ‘locals’ – have an average of .87 gaming positions per guest space although Atlantic City’s common is 2.seventy four positions for every visitor place.

It is not a coincidence that Atlantic City’s two greatest hotels, the Borgata and Harrah’s Marina, both of which extra new rooms in 2008, had been the the very least impacted by the most recent downturn. The Borgata experienced a gaming earnings fall of one.six per cent, even though Harrah’s Marina noted a four.nine percent improve compared to 2007. In addition, the toughest hit venues, namely the AC Hilton, Resorts and the Trump Marina, also have the smallest amount of rooms. In the meantime some of the venues are teetering on viability, such as the the Trump homes and Resorts with the hoped for sale of the Tropicana has been more delayed, and getting rid of valuation.

With a regular increase in gaming revenues by way of 2006, the town seemed prime for further advancement, which precipitated planning for four new resort tasks, each of which have now been indefinitely delayed. Revel Leisure Group’s $two.five billion project remains an iron skeleton, Pinnacle Enjoyment has introduced it might find to offer its razed Sands web site, MGM Mirage has shelved its casino plans, and Penn National seems to have stopped its pursuit of the Bader Discipline airport website.

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