A Period of time of Adjustment

Oops! That giant hissing audio is the gaming balloon that had been growing above the many years, gradually dropping air. But, it has not been a tide that decreased all ships nonetheless, as some emerging and increasing gaming jurisdictions confirmed strong progress in 2008.

General, the industrial and racetrack on line casino sectors (excluding Indian gaming), knowledgeable a three.5 p.c decline in gaming revenues for 2008, generating a total of $36.2 billion, down some $800 million from 2007. It was the Racino sector that has tempered this drop, as they confirmed a gain of nearly $one billion in 2008, thus bringing the Commercial sector marketplace decrease to $1.eight billion, or six.7 per cent. Nevada was the greatest loser in 2008, dropping virtually $one.3 billion, more than 50 percent of which stemmed from the Las Vegas Strip section.

Hunkering Down

For the most element, on line casino operators ended up caught comparatively flat-footed by the extent of the 2008 profits downturn, as it was not until the third and fourth quarters when it really nosedived. Driving the crest of 12 months more than calendar year marketplace growth throughout the country and the availability of ample credit and equity funds, new construction and expansion proliferated in current years. Today, confronted with the realities of declining, or at very best stagnant desire, many of these initiatives are now considered in excess of-leveraged and/or over-sized. As a end result many gaming organizations are trying to renegotiate their financial debt – manufactured more challenging by decrease valuations – while also paring down operational expenses. The latter has turn into a extremely problematic conundrum when dealing with the competitiveness, especially in those jurisdictions that are now vying for market shares with new emerging on line casino initiatives in neighboring locations. A subject matter we talk about much more fully in the State by State investigation part of this publication.

As a end result of these situations the gaming sector landscape is now strewn with impending fatalities. Amid the far more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming and the list grows each 7 days.

“How prolonged will these economic circumstances persist, and are we at the bottom however?” are questions no a single appears to be answering nevertheless. What is obvious even so is that most gaming jurisdictions will have to discover how to deal with a more compact pie.

Be aware:
This evaluation includes only gaming revenues of accredited casinos and pari-mutuel shops that offer casino games, and not Indian gaming functions, card rooms, or modest non-on line casino sort slot locations. The whole write-up, like earnings tables is available on our net webpage.

Input/Output Model

A key element that would seem to have arisen from the ashes of this current development is that numerous on line casino initiatives have been just way too large to support by themselves. The input, in terms of expense pounds, was not proportional to the output, in phrases of net income right after personal debt provider, in contrast to earlier accomplished results. More and/or greater is not constantly much better. Seeing the increase in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the growth of far more comprehensive features in numerous other jurisdictions. The flaw in this technique even so is that the expenses related with widening industry penetration and occasioned-use, are significantly greater than individuals incurred to attract the base market place.

As daytripper marketplaces grow to be a lot more competitive, on line casino venues will have to count far more and far more on their in-home lodge patrons, and size their properties (and anticipations) appropriately. Although Steve Wynn started out a significant craze in creating up-market mega-places, there just was not sufficient demand on the Strip to warrant the several other related assignments that followed that aimed at the exact same niche.

The trick is to strike a content medium in task configurations which of course need significantly less of a ‘seat-of-pants’ method, and one that is far more studied. A shameless plug for improvement consultants like ourselves.

Other Gaming Routines

Even though there are no printed detailed info of American Indian gaming revenues, anecdotal proof seems to propose that this phase has been as hard hit as the Industrial sector. The two Connecticut Indian gaming installations report slot profits of $1.six billion in 2008, representing a fall of about 7 p.c, or practically $114 million, more than doubling the three.5 p.c fall from the yr prior to. This industry is seemingly even now reeling from the ripple-effect of a on line casino enlargement in Rhode Island, and the opening of slot functions in New York and Pennsylvania.

The Arizona Section of Gaming reports that contributions based on a gaming revenue method from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 when compared to the earlier yr lowering .8 per cent in the initial quarter, seven.five per cent in the next quarter, nine.5 percent in the third quarter, and sixteen.one percent in the fourth quarter.

Some SEC reporting Indian gaming properties report comparable decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, stories that even though calendar 12 months 2008 confirmed an nearly two p.c expansion fee in gaming revenues, there was an 8.seven per cent decrease in the 3rd quarter and an virtually ten percent drop in the fourth quarter of 2008, compared with 2007. Gaming profits developments at close by Niagara Falls, Ontario had been down one.five% in 2008 when compared with 2007.

It really is been a mixed-bag for state lotteries throughout the region. The North American Association of Condition & Provincial Lotteries reviews that U.S. lotteries created a complete of $60.six billion in product sales in fiscal 2008, up about three per cent from the preceding calendar year but some jurisdictions noted decreases, most notably California, which confirmed an eight percent fall. Inasmuch as some of these states are on different fiscal year ends, it would seem to be that the data does not reflect the affect of 3rd and/or fourth quarter final results.

According to information presented by Equibase, horse racing pari-mutuel revenues carry on their downward spiral, slipping seven % to $13.seven billion in 2008, compared to $14.7 billion in 2007.

Prepared & Proposed New Expansions

As earlier famous, it has been new gaming jurisdictions that have spawned significantly of the expansion in yearly casino/racino revenues in excess of the years, and their impact is apt to keep on into the around long term.

Florida
Miami Dade voters accepted a ballot concern that enables every single of 3 pari-mutuels to have a on line 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, although the Calder set up in Miami Gardens has but to introduced its strategies. There are several other proposals becoming considered that would further expand on line casino improvement through the condition.

Illinois
The point out lastly obtained around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Leisure, LLC for a 1,200+ game casino positioned in Des Plaines just east of O’Hare. The new facility is not most likely to open up until finally 2010. There has also been some dialogue about allowing an enhance in for every location gaming positions and slots at racetracks, though neither initiative seems to have any traction at this time.

Kansas
The state’s expanded lottery software that permits for the development of 4 on line casino gaming zones and slots at present horse and puppy tracks seems mired, as only one facility is presently below building, while a few other proposals had been rescinded. The only bidder on the Cherokee County agreement, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is positioned so near to the state line that its parking whole lot is in Kansas. The Boot Hill Casino Vacation resort in Dodge Metropolis is planing a December 2009 opening with 575 slots and 10 table video games, together with a second phase due to open in 2011 with 875 slots and 20 desk game titles. The state has extended the application approach for the other a few zones till April, 2009.

Kentucky
There is nevertheless a good deal of ‘jockeying’ likely on, but the prospect of as several as eight slot parlors and racinos appears to be back again on the entrance-burner, but likely not fixed for the duration of the existing legislative session.

Las Vegas
There are about 14,000 rooms scheduled to arrive on line in 2009, with the most recent being the 390 space M Resort in Henderson. There are expansions underway at each Caesars Palace and Hard Rock and new hotels incorporate two parts of the Metropolis Center task, and the Fountainebleau.

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

Maine
There is a bill underneath thought that could much more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would eliminate the restriction that slots be located inside five miles of the observe. Scarborough Downs, which has been unsuccessful in convincing neighborhood inhabitants to allow slots, may be contemplating transferring to a far more hospitable city.

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

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

New England
Massachusetts, a sleeping-huge in conditions of marketplace potential, is still maneuvering to open casinos/racinos, and/or a Class III Indian gaming facility, but cannot seem to be to muster the political assist. A current study completed by Dartmouth University estimates that Massachusetts resident put in a lot more than $920 million final yr at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature just lately declined an alternative to build casinos, however the subject is likely to be revisited, especially if Massachusetts decides to go forward. There are also attempts in Maine to reconsider its alternatives.

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 continue augmenting purses with an additional tax. The governor even so, has appointed a new panel to study the state’s sagging racing program which ironically, can only be preserved by allowing the tracks to have slot equipment specifically 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 finally be produced, the successful bidder indicated an inability to make the needed $370 million fee, citing the present lending climate, and throwing the undertaking again into the lap of the governor. Even though the market place desire in the area could be deemed quite sturdy, the prospect of additional competitors from close by Belmont could have an effect on Aqueduct’s underlining financial feasibility, especially considering that slightly significantly less than 30% of the internet acquire is retained by the operator.

Plans to relocate Monticello Raceway into a resort complex are getting reconsidered possibly owing to each the possible opening of at least 1 or probably two racino functions in the NY metro region, and the resurfacing of initiatives to improvement a Class III Indian gaming facility in the Catskills.

Ohio
Yet an additional gaming proposal is getting set forth in Ohio, after previous year’s model was turned down by the voters. This prepare calls for a single on line casino each and every in the state’s greatest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum investment needed of $250 million, as effectively as an preliminary licensing fee of $50 million, and a 33 p.c tax on gaming income.

Pennsylvania
The Sands in Bethlehem is because of to open in the Spring of ’09, and the new Rivers task in Pittsburgh is predicted to be operational in August, ’09 although Philadelphia’s two slot services still wallow in a political mire, but are anticipated to start off construction this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Fall of 2009, and incorporate three hundred video games, one hundred forty rooms and a vast assortment of features.

Texas
Legislators are proposing a voter referendum that would amend the point out structure to enable on line casino gambling in designated areas, as effectively 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 Resorts, who have reportedly tendered an offer. State federal government has proffered the idea of allowing the vacation resort to provide on line casino games, but this work is in way too early a stage to have any traction one way or yet another.

Indian Gaming
A latest Supreme Courtroom ruling that restricts the using of lands into have confidence in on behalf of federally regarded American Indian tribes has additional stymied some new Course III gaming assignments throughout the country. Additionally, there have been eleven Indian casino tasks rejected by the DOI final yr due to the fact of its new rule that casinos should be close to enough to a reservation that tribal associates can work at them. UFABET has been proposed that the new Obama administration may well be more sympathetic to the development of Indian gaming projects, but this issue has yet to be resolved.

Meanwhile, there are other Class III initiatives in the various phases of advancement. The Seneca on line casino venture in Buffalo, NY, while running a little short term facility, has delayed an presently beneath development long lasting facility till the market place rebounds. They have also expressed an fascination in creating a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is being challenged, and could effect their plans for more substantial projects. There are new Indian gaming initiatives set to open in Michigan and Oklahoma this calendar year, and other individuals are in the preparing phase. Texas may possibly allow the reopening of Indian gaming facilities and let other venue and there are ideas afoot by the Navajos in Arizona to build further casinos. California is poised to open two to a few new Course III casinos in 2009/10.

The Nor’easter Squeeze

Complete gaming profits in Atlantic Town has declined seven.6 p.c, from $4.9 billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the city is obtaining itself in an extreme comp-war with the Pennsylvania venues. At one time the only casinos in the Northeast were positioned in Atlantic City, where it seemed as if it may well in fact even eclipse the Las Vegas Strip’s annual gaming revenues.

Slowly nevertheless its market place share was becoming encroached upon, initial by the advancement of a huge Class III gaming operation in Connecticut, and then another slots functions in Rhode Island, and then movie lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most lately Pennsylvania.

Now, with the planned opening of slot functions in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and ultimately two functions in Philadelphia, the noose is tightening about Atlantic City’s future potential clients. It is reliance on working day-trippers lulled it into a fake feeling of security, and it now finds by itself obtaining to redefine its mission assertion to “destination vacation resort.”

The only problem with this strategy nevertheless is that it is ill-geared up to pull it off. For all intents and purposes, Atlantic City is below-roomed and/or more than-gamed. There is basically not enough working day-tripper marketplace to go close to, and their effective trading location is tightening, as the peripheral populations northward now/will have a lot more all set obtain to a widened source in New York (Yonkers, and quickly at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.

Other than the ocean obtain, the city’s only true competitive positive aspects are its resort capacity and the availability of desk video games, though the latter is probably to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately compete as a destination vacation resort the city demands to build extra visitor rooms and not necessarily gaming ability. By comparison, the Las Vegas Strip homes – accurate gaming destinations, in that they do not have considerably of a day-trip market place, besides for the ‘locals’ – have an average of .87 gaming positions for each visitor area whilst Atlantic City’s regular is two.74 positions for every guest area.

It is not a coincidence that Atlantic City’s two largest accommodations, the Borgata and Harrah’s Marina, both of which additional new rooms in 2008, have been the the very least impacted by the most current downturn. The Borgata experienced a gaming profits fall of one.six %, whilst Harrah’s Marina documented a four.nine % improve when compared to 2007. Furthermore, 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, which includes the the Trump properties and Resorts with the hoped for sale of the Tropicana has been additional delayed, and losing valuation.

With a constant rise in gaming revenues via 2006, the town appeared primary for more advancement, which precipitated arranging for four new vacation resort projects, each and every of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion project stays an iron skeleton, Pinnacle Amusement has introduced it may possibly find to market its razed Sands internet site, MGM Mirage has shelved its casino ideas, and Penn Countrywide seems to have stopped its pursuit of the Bader Field airport internet site.

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