A Period of time of Adjustment

Oops! That giant hissing seem is the gaming balloon that had been increasing more than the many years, little by little getting rid of air. But, it has not been a tide that decreased all ships however, as some rising and growing gaming jurisdictions confirmed robust growth in 2008.

Overall, the professional and racetrack on line casino sectors (excluding Indian gaming), skilled a three.five p.c decline in gaming revenues for 2008, making a total of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they showed a obtain of nearly $one billion in 2008, thus bringing the Industrial sector market place decline to $1.8 billion, or 6.7 per cent. Nevada was the greatest loser in 2008, dropping almost $one.three billion, more than 50 % of which stemmed from the Las Vegas Strip phase.

Hunkering Down

For the most element, casino operators were caught comparatively flat-footed by the extent of the 2008 income downturn, as it was not until finally the 3rd and fourth quarters when it actually nosedived. Driving the crest of yr above year market place growth across the place and the availability of sufficient credit history and fairness resources, new design and growth proliferated in latest several years. Nowadays, faced with the realities of declining, or at ideal stagnant demand, many of these assignments are now deemed more than-leveraged and/or in excess of-sized. As a result several gaming companies are trying to renegotiate their personal debt – produced far more challenging by decrease valuations – while also paring down operational costs. The latter has grow to be a extremely problematic conundrum when dealing with the opposition, specially in those jurisdictions that are now vying for industry shares with new emerging casino assignments in neighboring areas. A subject we discuss far more totally in the State by Point out evaluation area of this publication.

As a result of these problems the gaming industry landscape is now strewn with impending fatalities. Among the much more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the checklist grows each week.

“How extended will these financial problems persist, and are we at the bottom however?” are concerns no one appears to be answering however. What is very clear nevertheless is that most gaming jurisdictions will have to find out how to offer with a smaller pie.

Notice:
This examination includes only gaming revenues of certified casinos and pari-mutuel stores that provide casino online games, and not Indian gaming operations, card rooms, or small non-on line casino kind slot areas. The complete report, such as profits tables is available on our net page.

Enter/Output Model

A key element that would seem to have arisen from the ashes of this current development is that numerous casino initiatives had been just way too big to help them selves. The enter, in conditions of expense dollars, was not proportional to the output, in conditions of web profit after personal debt services, in comparison to previously attained results. Far more and/or even bigger is not constantly greater. Looking at the rise in non-gaming income at the Las Vegas Strip resorts, gave impetus to the development of a lot more complete amenities in many other jurisdictions. The flaw in this strategy nonetheless is that the charges associated with widening market place penetration and occasioned-use, are substantially higher than these incurred to draw in the foundation marketplace.

As daytripper markets grow to be more aggressive, casino venues will have to depend far more and much more on their in-property lodge patrons, and size their homes (and expectations) accordingly. Although Steve Wynn began a main trend in making up-marketplace mega-locations, there merely was not adequate demand on the Strip to warrant the a lot of other related tasks that followed that aimed at the identical niche.

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Other Gaming Activities

Despite the fact that there are no revealed comprehensive information of American Indian gaming revenues, anecdotal evidence seems to suggest that this segment has been as challenging strike as the Business sector. The two Connecticut Indian gaming installations report slot income of $1.6 billion in 2008, symbolizing a drop of about 7 %, or virtually $114 million, much more than doubling the three.five per cent drop from the yr ahead of. mega888 is evidently nonetheless reeling from the ripple-effect of a casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.

The Arizona Section of Gaming reviews that contributions dependent on a gaming profits formula from the state’s 23 Indian gaming casinos, have been declining each quarter in 2008 compared to the preceding yr decreasing .8 p.c in the initial quarter, 7.5 per cent in the next quarter, nine.five percent in the 3rd quarter, and 16.one % in the fourth quarter.

Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates three Course III casinos in upstate New York, reviews that although calendar 12 months 2008 confirmed an virtually two percent development price in gaming revenues, there was an 8.7 percent decline in the 3rd quarter and an practically 10 per cent drop in the fourth quarter of 2008, when compared with 2007. Gaming income tendencies at close by Niagara Falls, Ontario have been down one.five% in 2008 in contrast with 2007.

It’s been a blended-bag for condition lotteries across the place. The North American Affiliation of Point out & Provincial Lotteries stories that U.S. lotteries produced a complete of $sixty.six billion in income in fiscal 2008, up about 3 % from the prior year yet some jurisdictions documented decreases, most notably California, which showed an 8 % drop. Inasmuch as some of these states are on numerous fiscal yr finishes, it would seem that the data does not replicate the impact of third and/or fourth quarter results.

In accordance to info offered by Equibase, horse racing pari-mutuel revenues proceed their downward spiral, falling 7 p.c to $thirteen.seven billion in 2008, as opposed to $fourteen.7 billion in 2007.

Planned & Proposed New Expansions

As earlier mentioned, it has been new gaming jurisdictions that have spawned considerably of the progress in once-a-year on line casino/racino revenues over the a long time, and their influence is apt to continue into the in close proximity to long term.

Florida
Miami Dade voters authorized a ballot issue that enables each of a few pari-mutuels to have a casino facility of up to two,000 slot equipment. The Flagler Puppy Keep track of and Miami Jai-Alai are reportedly organizing opening in late 2009 or early 2010, while the Calder set up in Miami Gardens has yet to declared its programs. There are quite a few other proposals getting regarded as that would further increase casino growth through the condition.

Illinois
The state lastly got about to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a 1,200+ game casino located in Des Plaines just east of O’Hare. The new facility is not most likely to open up until 2010. There has also been some dialogue about enabling an enhance in for every spot gaming positions and slots at racetracks, even though neither initiative appears to have any traction at this time.

Kansas
The state’s expanded lottery program that enables for the development of 4 on line casino gaming zones and slots at existing horse and canine tracks seems mired, as only a single facility is presently below development, although 3 other proposals have been rescinded. The only bidder on the Cherokee County deal, claimed it could not contend with the new Quapaw tribal casino in Oklahoma, which is located so shut to the condition line that its parking great deal is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten table online games, alongside with a next stage due to open up in 2011 with 875 slots and twenty table online games. The condition has extended the application method for the other a few zones till April, 2009.

Kentucky
There is nevertheless a whole lot of ‘jockeying’ going on, but the prospect of as numerous as eight slot parlors and racinos seems to be back on the entrance-burner, but probably not fixed during the recent legislative session.

Las Vegas
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most latest getting the 390 room M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Tough Rock and new accommodations incorporate two components of the Town Centre venture, and the Fountainebleau.

Louisiana
Pinnacle Entertainment’s new on line casino development assignments in Baton Rouge and Lake Charles, whilst delayed, are described to nonetheless be on-track for opening this calendar year and/or early 2010.

Maine
There is a monthly bill beneath consideration that could much more than double Penn National’s slot equipment to three,000, as nicely as a proposal that would eliminate the restriction that slots be found inside five miles of the monitor. Scarborough Downs, which has been unsuccessful in convincing local inhabitants to let slots, might be thinking about transferring to a much more hospitable town.

Maryland
A referendum was accepted in November, 2008 that enables for the improvement of 5 casinos with a whole of fifteen,000 slots, and now the bidding war is afoot although it is not as intensive as the condition experienced expected.

Mississippi
Grand Soleil Casino Resort in Natchez experienced been slated to open up in 2008, but has operate into numerous financing concerns and whilst the hotel portion is open, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, although scaled back considerably, is even now on track to open up this year.

New England
Massachusetts, a sleeping-large in phrases of industry potential, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but can’t appear to muster the political assistance. A current study completed by Dartmouth University estimates that Massachusetts resident put in more than $920 million very last calendar year at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature lately declined an option to develop casinos, nevertheless the matter is probably to be revisited, particularly if Massachusetts decides to go forward. There are also tries in Maine to reconsider its alternatives.

New Jersey
Atlantic City’s casinos have imposed their political will on staving off the addition of slot machines at racetracks by not too long ago agreeing to keep on augmenting purses with an additional tax. The governor however, has appointed a new panel to research the state’s sagging racing system which ironically, can only be preserved by permitting the tracks to have slot machines specially at the Meadowlands. (See The Nor’easter Squeeze section)

New York
Just when it appeared as if Aqueduct’s 4,500 VLT facility would lastly be produced, the winning bidder indicated an lack of ability to make the required $370 million fee, citing the current lending climate, and throwing the undertaking back into the lap of the governor. Though the marketplace demand in the location could be regarded as quite powerful, the prospect of extra opposition from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, especially considering that somewhat significantly less than 30% of the net acquire is retained by the operator.

Strategies to relocate Monticello Raceway into a vacation resort sophisticated are currently being reconsidered maybe owing to each the possible opening of at minimum one particular or perhaps two racino functions in the NY metro region, and the resurfacing of initiatives to development a Course III Indian gaming facility in the Catskills.

Ohio
Yet yet another gaming proposal is being place forth in Ohio, right after last year’s edition was turned down by the voters. This plan phone calls for one on line casino every single in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a minimum investment decision essential of $250 million, as nicely as an preliminary licensing payment of $50 million, and a 33 p.c tax on gaming profits.

Pennsylvania
The Sands in Bethlehem is owing to open in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 although Philadelphia’s two slot facilities still wallow in a political mire, but are predicted to begin building this 12 months.

South Dakota
The Lodge at Deadwood is slated to open up in the Fall of 2009, and incorporate 300 video games, one hundred forty rooms and a vast assortment of features.

Texas
Legislators are proposing a voter referendum that would amend the condition constitution to allow casino gambling in designated locations, as effectively as permit gambling on American Indian lands in Texas and at present racetracks.

West Virginia
The Greenbriar, the state’s venerable vacation resort facility has filed for bankruptcy, but has a new suitor in Marriott Lodges, who have reportedly tendered an offer. Point out federal government has proffered the idea of allowing the resort to offer you casino online games, but this hard work is in way too early a phase to have any traction 1 way or another.

Indian Gaming
A recent Supreme Court ruling that restricts the using of lands into believe in on behalf of federally identified American Indian tribes has additional stymied some new Class III gaming projects across the country. Furthermore, there were eleven Indian on line casino tasks rejected by the DOI final year simply because of its new rule that casinos have to be around ample to a reservation that tribal users can perform at them. It has been proposed that the new Obama administration may be much more sympathetic to the development of Indian gaming tasks, but this concern has but to be addressed.

In the meantime, there are other Class III initiatives in the various phases of improvement. The Seneca casino project in Buffalo, NY, although working a small short term facility, has delayed an presently under construction long lasting facility right up until the market rebounds. They have also expressed an fascination in establishing a on line casino in the Catskills. The condition gaming compact with Seminoles in Florida is currently being challenged, and could effect their plans for bigger projects. There are new Indian gaming initiatives established to open up in Michigan and Oklahoma this yr, and other individuals are in the arranging phase. Texas could allow the reopening of Indian gaming amenities and enable other location and there are programs afoot by the Navajos in Arizona to assemble extra casinos. California is poised to open up two to a few new Course III casinos in 2009/ten.

The Nor’easter Squeeze

Whole gaming profits in Atlantic Metropolis has declined seven.6 per cent, from $4.nine billion in 2007 to $four.five billion in 2008 with decreases continuing into 2009, as the town is finding alone in an intensive comp-war with the Pennsylvania venues. At 1 time the only casinos in the Northeast had been found in Atlantic City, exactly where it appeared as if it may possibly really even eclipse the Las Vegas Strip’s once-a-year gaming revenues.

Little by little nevertheless its marketplace share was currently being encroached upon, 1st by the growth of a large Course III gaming procedure in Connecticut, and then another slots functions in Rhode Island, and then video lottery terminals at New York racetracks, racinos in West Virginia and Delaware, and most recently Pennsylvania.

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

The only dilemma with this method nevertheless 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 simply not enough day-tripper market to go around, and their effective investing area is tightening, as the peripheral populations northward now/will have far more ready access 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 actual aggressive positive aspects are its hotel potential and the availability of desk video games, even though the latter is most likely to eventuate in Pennsylvania, and perhaps Delaware. In get to adequately compete as a destination vacation resort the metropolis demands to create additional visitor rooms and not essentially gaming capacity. By comparison, the Las Vegas Strip qualities – correct gaming locations, in that they do not have significantly of a working day-excursion market place, besides for the ‘locals’ – have an common of .87 gaming positions per guest room whilst Atlantic City’s typical is 2.seventy four positions for every guest place.

It is not a coincidence that Atlantic City’s two premier lodges, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, had been the the very least impacted by the latest downturn. The Borgata seasoned a gaming revenue drop of one.six p.c, while Harrah’s Marina reported a four.nine p.c increase compared to 2007. Furthermore, the hardest hit 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, like the the Trump qualities and Resorts with the hoped for sale of the Tropicana has been additional delayed, and shedding valuation.

With a steady rise in gaming revenues via 2006, the metropolis appeared prime for even more improvement, which precipitated preparing for 4 new resort tasks, each and every of which have now been indefinitely delayed. Revel Entertainment Group’s $two.5 billion undertaking continues to be an iron skeleton, Pinnacle Leisure has announced it may seek out to market its razed Sands site, MGM Mirage has shelved its casino strategies, and Penn National seems to have stopped its pursuit of the Bader Field airport site.