A Period of time of Adjustment

Oops! That huge hissing seem is the gaming balloon that had been growing above the a long time, slowly getting rid of air. But, it has not been a tide that lowered all ships nonetheless, as some rising and increasing gaming jurisdictions confirmed robust development in 2008.

General, the business and racetrack casino sectors (excluding Indian gaming), skilled a three.five p.c decline in gaming revenues for 2008, making a overall of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they showed a achieve of practically $one billion in 2008, thus bringing the Commercial sector industry decrease to $one.8 billion, or 6.7 percent. Nevada was the most significant loser in 2008, dropping virtually $1.three billion, a lot more than half of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most component, 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 really nosedived. Driving the crest of yr above 12 months market progress across the nation and the availability of enough credit history and fairness cash, new construction and enlargement proliferated in modern a long time. Right now, confronted with the realities of declining, or at best stagnant desire, many of these tasks are now deemed above-leveraged and/or in excess of-sized. As a consequence many gaming firms are attempting to renegotiate their financial debt – manufactured much more challenging by lower valuations – even though also paring down operational fees. The latter has become a really problematic conundrum when working with the competitiveness, particularly in these jurisdictions that are now vying for market place shares with new rising on line casino projects in neighboring areas. A topic we examine far more entirely in the Point out by Condition evaluation part of this publication.

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

“How long will these economic problems persist, and are we at the base but?” are inquiries no one particular seems to be answering yet. What is clear nevertheless is that most gaming jurisdictions will have to understand how to deal with a scaled-down pie.

Note:
This examination consists of only gaming revenues of accredited casinos and pari-mutuel stores that supply on line casino game titles, and not Indian gaming operations, card rooms, or small non-on line casino sort slot areas. The total post, which includes income tables is obtainable on our world wide web page.

Enter/Output Design

A essential factor that would seem to have arisen from the ashes of this present trend is that numerous on line casino tasks have been just way too massive to assist them selves. The input, in conditions of expenditure pounds, was not proportional to the output, in phrases of internet income after personal debt provider, when compared to previously accomplished final results. A lot more and/or greater is not always far better. Viewing the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the improvement of much more complete facilities in numerous other jurisdictions. The flaw in this technique even so is that the charges linked with widening market penetration and occasioned-use, are drastically higher than individuals incurred to attract the base market.

As daytripper marketplaces turn into far more aggressive, on line casino venues will have to depend much more and far more on their in-house resort patrons, and measurement their qualities (and anticipations) accordingly. While Steve Wynn started a key pattern in producing up-market mega-places, there basically was not enough desire on the Strip to warrant the several other equivalent initiatives that followed that aimed at the very same area of interest.

The trick is to strike a content medium in undertaking configurations which of training course require significantly less of a ‘seat-of-pants’ strategy, and one that is much more analyzed. A shameless plug for growth consultants like ourselves.

Other Gaming Actions

Even though there are no released comprehensive knowledge of American Indian gaming revenues, anecdotal proof seems to advise that this segment has been as hard strike as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $one.6 billion in 2008, representing a fall of about seven p.c, or virtually $114 million, more than doubling the three.five per cent drop from the yr ahead of. This industry is seemingly even now reeling from the ripple-impact of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming stories that contributions primarily based on a gaming income formula from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 when compared to the earlier year lowering .eight per cent in the first quarter, seven.5 p.c in the second quarter, 9.five percent in the 3rd quarter, and sixteen.one percent in the fourth quarter.

Some SEC reporting Indian gaming houses report comparable decreases. Seneca Gaming, which operates a few Course III casinos in upstate New York, stories that even though calendar year 2008 showed an almost two per cent progress charge in gaming revenues, there was an 8.seven per cent drop in the third quarter and an almost 10 % decline in the fourth quarter of 2008, in comparison with 2007. Gaming revenue tendencies at close by Niagara Falls, Ontario had been down one.five% in 2008 in contrast with 2007.

It is been a combined-bag for point out lotteries throughout the nation. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries created a whole of $sixty.six billion in income in fiscal 2008, up about three percent from the earlier year nevertheless some jurisdictions described decreases, most notably California, which confirmed an 8 per cent fall. Inasmuch as some of these states are on numerous fiscal year finishes, it would appear that the information does not replicate the effect of 3rd and/or fourth quarter results.

According to yoursite.com presented by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, slipping 7 percent to $13.7 billion in 2008, versus $fourteen.seven billion in 2007.

Prepared & Proposed New Expansions

As earlier noted, it has been new gaming jurisdictions that have spawned significantly of the expansion in yearly on line casino/racino revenues over the several years, and their impact is apt to keep on into the near foreseeable future.

Florida
Miami Dade voters accredited a ballot situation that enables every single of three pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Canine Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to declared its strategies. There are numerous other proposals getting regarded that would even more grow on line casino improvement all through the state.

Illinois
The state last but not least acquired close to to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Enjoyment, LLC for a 1,two hundred+ sport on line casino situated in Des Plaines just east of O’Hare. The new facility is not likely to open up until 2010. There has also been some discussion about allowing an enhance in per place gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery plan that makes it possible for for the improvement of four casino gaming zones and slots at existing horse and pet tracks seems mired, as only a single facility is presently below building, even though a few other proposals have been rescinded. The only bidder on the Cherokee County agreement, claimed it could not compete with the new Quapaw tribal on line casino in Oklahoma, which is located so near to the condition line that its parking good deal is in Kansas. The Boot Hill On line casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table games, along with a next phase due to open up in 2011 with 875 slots and 20 desk game titles. The point out has extended the application procedure for the other 3 zones right up until April, 2009.

Kentucky
There is even now a whole lot of ‘jockeying’ heading on, but the prospect of as several as 8 slot parlors and racinos appears to be again on the front-burner, but probably not resolved throughout the current legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to occur on line in 2009, with the most modern becoming the 390 place M Vacation resort in Henderson. There are expansions underway at both Caesars Palace and Difficult Rock and new hotels contain two factors of the City Middle undertaking, and the Fountainebleau.

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

Maine
There is a invoice below consideration that could a lot more than double Penn National’s slot equipment to 3,000, as nicely as a proposal that would remove the restriction that slots be situated in five miles of the track. Scarborough Downs, which has been unsuccessful in convincing local people to permit slots, could be taking into consideration relocating to a more hospitable city.

Maryland
A referendum was approved in November, 2008 that allows for the development of 5 casinos with a overall of fifteen,000 slots, and now the bidding war is afoot though it is not as intensive as the state had anticipated.

Mississippi
Grand Soleil Casino Vacation resort in Natchez had been slated to open up in 2008, but has operate into various financing issues and even though the hotel portion is open up, the riverboat is described to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, whilst scaled back again fairly, is nonetheless on monitor to open this calendar year.

New England
Massachusetts, a sleeping-big in phrases of market place prospective, is still maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but are not able to seem to be to muster the political assistance. A current research accomplished by Dartmouth University estimates that Massachusetts resident expended more than $920 million previous 12 months at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an alternative to create casinos, nonetheless the subject is most likely to be revisited, especially if Massachusetts decides to go forward. There are also attempts in Maine to rethink its choices.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot devices at racetracks by not too long ago agreeing to carry on augmenting purses with an further tax. The governor even so, has appointed a new panel to examine the state’s sagging racing software which ironically, can only be preserved by allowing the tracks to have slot equipment specially at the Meadowlands. (See The Nor’easter Squeeze segment)

New York
Just when it looked as if Aqueduct’s four,five hundred VLT facility would ultimately be designed, the winning bidder indicated an incapability to make the needed $370 million fee, citing the present lending weather, and throwing the venture again into the lap of the governor. Although the marketplace demand in the area could be deemed fairly powerful, the prospect of extra opposition from close by Belmont could have an affect on Aqueduct’s underlining economic feasibility, specifically thinking about that a bit considerably less than 30% of the web acquire is retained by the operator.

Ideas to relocate Monticello Raceway into a vacation resort complicated are currently being reconsidered perhaps owing to each the possible opening of at least one or perhaps two racino functions in the NY metro region, and the resurfacing of initiatives to advancement a Class III Indian gaming facility in the Catskills.

Ohio
Yet one more gaming proposal is currently being set forth in Ohio, right after final year’s version was turned down by the voters. This prepare calls for one particular casino every in the state’s largest metropolitan areas: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision needed of $250 million, as nicely as an original licensing fee of $50 million, and a 33 p.c tax on gaming income.

Pennsylvania
The Sands in Bethlehem is thanks to open up in the Spring of ’09, and the new Rivers venture in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are predicted to start design this yr.

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

Texas
Legislators are proposing a voter referendum that would amend the point out structure to enable on line casino gambling in designated places, as nicely as let gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable resort facility has submitted for personal bankruptcy, but has a new suitor in Marriott Resorts, who have reportedly tendered an offer you. State authorities has proffered the notion of enabling the resort to provide on line casino video games, but this energy is in also early a phase to have any traction one way or an additional.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the getting of lands into believe in on behalf of federally acknowledged American Indian tribes has further stymied some new Course III gaming tasks across the nation. Additionally, there were eleven Indian casino tasks turned down by the DOI final 12 months simply because of its new rule that casinos have to be near enough to a reservation that tribal customers can perform at them. It has been advised that the new Obama administration might be more sympathetic to the advancement of Indian gaming projects, but this issue has but to be dealt with.

In the meantime, there are other Class III assignments in the different stages of improvement. The Seneca casino venture in Buffalo, NY, while running a little short term facility, has delayed an already below design permanent facility till the industry rebounds. They have also expressed an fascination in building a casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could affect their plans for bigger tasks. There are new Indian gaming assignments set to open up in Michigan and Oklahoma this 12 months, and other folks are in the preparing stage. Texas may permit the reopening of Indian gaming services and let other venue and there are programs afoot by the Navajos in Arizona to construct extra casinos. California is poised to open up two to a few new Class III casinos in 2009/ten.

The Nor’easter Squeeze

Complete gaming revenue in Atlantic Metropolis has declined 7.six percent, from $four.nine billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the town is obtaining alone in an powerful comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast have been located in Atlantic Metropolis, exactly where it looked as if it may really even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly however its market share was being encroached on, first by the advancement of a massive Course III gaming operation in Connecticut, and then one more slots functions in Rhode Island, and then online video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most 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 ultimately two functions in Philadelphia, the noose is tightening around Atlantic City’s long term prospects. It truly is reliance on working day-trippers lulled it into a untrue perception of security, and it now finds itself obtaining to redefine its mission assertion to “location resort.”

The only dilemma with this strategy nonetheless is that it is sick-equipped to pull it off. For all intents and needs, Atlantic Town is underneath-roomed and/or over-gamed. There is just not adequate working day-tripper marketplace to go about, and their powerful buying and selling spot is tightening, as the peripheral populations northward now/will have a lot more completely ready obtain to a widened offer 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 true aggressive rewards are its lodge capacity and the availability of desk game titles, though the latter is very likely to eventuate in Pennsylvania, and potentially Delaware. In get to sufficiently compete as a vacation spot vacation resort the metropolis needs to produce further visitor rooms and not necessarily gaming potential. By comparison, the Las Vegas Strip qualities – true gaming locations, in that they do not have considerably of a day-trip market place, other than for the ‘locals’ – have an typical of .87 gaming positions for each visitor space although Atlantic City’s average is two.seventy four positions for every visitor area.

It is not a coincidence that Atlantic City’s two largest hotels, the Borgata and Harrah’s Marina, equally of which extra new rooms in 2008, were the minimum impacted by the latest downturn. The Borgata experienced a gaming revenue fall of one.six p.c, whilst Harrah’s Marina reported a 4.9 % boost compared to 2007. In addition, the toughest strike venues, specifically 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, which includes the the Trump properties and Resorts with the hoped for sale of the Tropicana has been further delayed, and dropping valuation.

With a regular increase in gaming revenues by way of 2006, the metropolis seemed key for more improvement, which precipitated arranging for four new resort initiatives, each and every of which have now been indefinitely delayed. Revel Amusement Group’s $2.five billion venture remains an iron skeleton, Pinnacle Leisure has announced it may well seek out to market its razed Sands website, MGM Mirage has shelved its casino strategies, and Penn Nationwide seems to have stopped its pursuit of the Bader Subject airport site.

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