2008 National Commercial Casino & Racino Gaming Earnings Analysis
A Time period of Adjustment
Oops! That huge hissing audio is the gaming balloon that had been developing over the a long time, gradually getting rid of air. But, it has not been a tide that reduced all ships however, as some rising and increasing gaming jurisdictions showed powerful development in 2008.
General, the industrial and racetrack on line casino sectors (excluding Indian gaming), seasoned a 3.5 per cent drop in gaming revenues for 2008, producing a overall of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a obtain of virtually $one billion in 2008, therefore bringing the Industrial sector market decrease to $one.eight billion, or 6.7 percent. Nevada was the greatest loser in 2008, dropping practically $1.three billion, much more than 50 percent of which stemmed from the Las Vegas Strip section.
For the most component, casino operators were caught fairly flat-footed by the extent of the 2008 revenue downturn, as it was not till the third and fourth quarters when it really nosedived. Driving the crest of yr above calendar year industry progress throughout the country and the availability of enough credit score and fairness cash, new building and expansion proliferated in latest a long time. Right now, confronted with the realities of declining, or at best stagnant desire, numerous of these assignments are now deemed over-leveraged and/or above-sized. As a consequence numerous gaming organizations are trying to renegotiate their financial debt – produced much more challenging by decrease valuations – although also paring down operational expenses. The latter has become a very problematic conundrum when dealing with the opposition, specifically in those jurisdictions that are now vying for market shares with new rising casino initiatives in neighboring places. A matter we discuss far more entirely in the Condition by Condition analysis segment of this publication.
As a end result of these situations the gaming business landscape is now strewn with impending fatalities. Amid the a lot more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Leisure, Greektown Holdings, Legends Gaming, Tropicana Leisure, Herbst Gaming and the list grows every single 7 days.
“How extended will these economic conditions persist, and are we at the base yet?” are questions no one particular appears to be answering nevertheless. What is clear even so is that most gaming jurisdictions will have to find out how to deal with a smaller pie.
This analysis involves only gaming revenues of certified casinos and pari-mutuel stores that offer you on line casino online games, and not Indian gaming operations, card rooms, or little non-on line casino kind slot spots. The total post, including revenue tables is obtainable on our web web page.
A crucial factor that seems to have arisen from the ashes of this recent craze is that a lot of on line casino projects have been just also large to assist by themselves. The enter, in phrases of investment dollars, was not proportional to the output, in terms of net income after debt services, when compared to formerly accomplished results. Much more and/or larger is not constantly better. Observing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the growth of much more thorough facilities in many other jurisdictions. The flaw in this technique nevertheless is that the expenses linked with widening market penetration and occasioned-use, are considerably greater than individuals incurred to entice the base market place.
As daytripper markets turn out to be far more aggressive, casino venues will have to count more and a lot more on their in-house hotel patrons, and dimensions their qualities (and anticipations) appropriately. While Steve Wynn began a significant craze in generating up-marketplace mega-places, there basically was not adequate demand on the Strip to warrant the many other similar projects that adopted that aimed at the very same market.
The trick is to strike a content medium in undertaking configurations which of program call for considerably less of a ‘seat-of-pants’ method, and one particular that is more researched. A shameless plug for improvement consultants like ourselves.
Other Gaming Pursuits
Even though there are no revealed comprehensive information of American Indian gaming revenues, anecdotal evidence appears to recommend that this segment has been as challenging strike as the Business sector. The two Connecticut Indian gaming installations report slot revenue of $1.six billion in 2008, symbolizing a drop of about 7 %, or nearly $114 million, much more than doubling the 3.five % drop from the 12 months just before. This marketplace is evidently still reeling from the ripple-effect of a on line casino growth in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Division of Gaming stories that contributions based on a gaming income formulation from the state’s 23 Indian gaming casinos, have been declining every quarter in 2008 in contrast to the previous yr decreasing .eight per cent in the first quarter, seven.five p.c in the second quarter, 9.5 percent in the 3rd quarter, and 16.one % in the fourth quarter.
Some SEC reporting Indian gaming homes report equivalent decreases. Seneca Gaming, which operates a few Class III casinos in upstate New York, reports that even though calendar year 2008 showed an almost 2 percent growth rate in gaming revenues, there was an 8.seven percent decline in the third quarter and an practically 10 % decline in the fourth quarter of 2008, in comparison with 2007. Gaming milkcasino.com at close by Niagara Falls, Ontario had been down 1.5% in 2008 in comparison with 2007.
It truly is been a combined-bag for point out lotteries throughout the region. The North American Association of Point out & Provincial Lotteries stories that U.S. lotteries generated a whole of $sixty.six billion in revenue in fiscal 2008, up about three % from the previous 12 months but some jurisdictions described decreases, most notably California, which confirmed an 8 per cent fall. Inasmuch as some of these states are on various fiscal calendar year finishes, it would look that the knowledge does not reflect the effect of 3rd and/or fourth quarter final results.
In accordance to data presented by Equibase, horse racing pari-mutuel revenues keep on their downward spiral, slipping 7 % to $13.seven billion in 2008, compared to $14.seven billion in 2007.
Prepared & Proposed New Expansions
As beforehand observed, it has been new gaming jurisdictions that have spawned considerably of the progress in annual casino/racino revenues more than the many years, and their effect is apt to proceed into the near future.
Miami Dade voters accepted a ballot issue that allows every single of three pari-mutuels to have a casino facility of up to 2,000 slot machines. The Flagler Pet Monitor and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, even though the Calder installation in Miami Gardens has nevertheless to announced its programs. There are several other proposals getting deemed that would more expand casino growth all through the state.
The condition finally got all around to reissuing its tenth license, late in December, 2008 awarding it to Midwest Gaming & Entertainment, LLC for a one,200+ game on line casino found in Des Plaines just east of O’Hare. The new facility is not probably to open up right up until 2010. There has also been some discussion about permitting an improve in for every location gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.
The state’s expanded lottery system that enables for the improvement of 4 on line casino gaming zones and slots at existing horse and dog tracks seems mired, as only 1 facility is presently under development, while a few other proposals ended up 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 found so near to the point out line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge Town is planing a December 2009 opening with 575 slots and ten desk game titles, alongside with a second period thanks to open in 2011 with 875 slots and twenty table game titles. The state has extended the software procedure for the other 3 zones till April, 2009.
There is nonetheless a great deal of ‘jockeying’ likely on, but the prospect of as several as eight slot parlors and racinos seems to be back on the front-burner, but probably not resolved during the current legislative session.
There are about fourteen,000 rooms scheduled to appear on line in 2009, with the most modern getting the 390 area M Resort in Henderson. There are expansions underway at the two Caesars Palace and Tough Rock and new accommodations include two elements of the City Heart project, and the Fountainebleau.
Pinnacle Entertainment’s new on line casino growth assignments in Baton Rouge and Lake Charles, although delayed, are documented to nevertheless be on-observe for opening this year and/or early 2010.
There is a bill below thing to consider that could more than double Penn National’s slot equipment to three,000, as effectively as a proposal that would take away the restriction that slots be located in five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing regional residents to enable slots, might be thinking about shifting to a more hospitable city.
A referendum was authorized in November, 2008 that makes it possible for for the development of 5 casinos with a overall of fifteen,000 slots, and now the bidding war is afoot although it is not as powerful as the condition experienced expected.
Grand Soleil Casino Vacation resort in Natchez experienced been slated to open in 2008, but has run into various funding concerns and while the lodge portion is open, the riverboat is reported to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, even though scaled again relatively, is still on monitor to open this year.
Massachusetts, a sleeping-giant in conditions of industry likely, is even now maneuvering to open casinos/racinos, and/or a Course III Indian gaming facility, but are not able to seem to be to muster the political support. A recent review concluded by Dartmouth College estimates that Massachusetts resident spent more than $920 million very last yr at Connecticut casinos and slot equipment parlors in Rhode Island and Maine. The New Hampshire legislature not too long ago declined an selection to produce casinos, however the topic is most likely to be revisited, specially if Massachusetts decides to go forward. There are also tries in Maine to rethink its alternatives.
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 added tax. The governor nonetheless, has appointed a new panel to examine the state’s sagging racing software which ironically, can only be preserved by permitting the tracks to have slot equipment specifically at the Meadowlands. (See The Nor’easter Squeeze area)
Just when it seemed as if Aqueduct’s 4,500 VLT facility would ultimately be designed, the successful bidder indicated an incapability to make the needed $370 million charge, citing the existing lending climate, and throwing the task back again into the lap of the governor. Though the marketplace demand in the location could be considered quite strong, the prospect of further competitiveness from close by Belmont could have an impact on Aqueduct’s underlining financial feasibility, particularly taking into consideration that a bit significantly less than 30% of the internet acquire is retained by the operator.
Programs to relocate Monticello Raceway into a vacation resort complex are getting reconsidered possibly owing to each the possible opening of at least one particular or maybe two racino functions in the NY metro area, and the resurfacing of initiatives to growth a Class III Indian gaming facility in the Catskills.
But an additional gaming proposal is currently being place forth in Ohio, after last year’s variation was turned down by the voters. This strategy phone calls for a single on line casino each and every in the state’s biggest cities: Cleveland, Columbus, Cincinnati and Toledo. There would be a bare minimum expense necessary of $250 million, as well as an first licensing charge of $fifty million, and a 33 p.c tax on gaming revenue.
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 while Philadelphia’s two slot amenities nevertheless wallow in a political mire, but are anticipated to start off building this year.
The Lodge at Deadwood is slated to open up in the Drop of 2009, and contain 300 game titles, 140 rooms and a wide assortment of amenities.
Legislators are proposing a voter referendum that would amend the state structure to enable casino gambling in specified places, as well as let gambling on American Indian lands in Texas and at existing racetracks.
The Greenbriar, the state’s venerable resort facility has submitted for bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer. Condition govt has proffered the idea of permitting the vacation resort to provide casino video games, but this effort is in too early a phase to have any traction a single way or another.
A latest Supreme Court ruling that restricts the taking of lands into have faith in on behalf of federally regarded American Indian tribes has further stymied some new Class III gaming tasks across the country. In addition, there ended up eleven Indian casino tasks turned down by the DOI last calendar year because of its new rule that casinos must be close to sufficient to a reservation that tribal users can function at them. It has been recommended that the new Obama administration may well be much more sympathetic to the advancement of Indian gaming assignments, but this problem has however to be resolved.
Meanwhile, there are other Course III projects in the a variety of phases of advancement. The Seneca on line casino project in Buffalo, NY, while running a modest temporary facility, has delayed an previously below development long lasting facility until finally the market rebounds. They have also expressed an interest in establishing a on line casino in the Catskills. The point out gaming compact with Seminoles in Florida is currently being challenged, and could affect their ideas for bigger initiatives. There are new Indian gaming projects set to open up in Michigan and Oklahoma this calendar year, and others are in the arranging phase. Texas may enable the reopening of Indian gaming services and enable other location and there are ideas afoot by the Navajos in Arizona to assemble added casinos. California is poised to open two to 3 new Course III casinos in 2009/10.
The Nor’easter Squeeze
Complete gaming income in Atlantic Metropolis has declined seven.6 %, from $4.nine billion in 2007 to $four.5 billion in 2008 with decreases continuing into 2009, as the town is obtaining itself in an intense comp-war with the Pennsylvania venues. At one particular time the only casinos in the Northeast have been positioned in Atlantic Metropolis, where it seemed as if it may actually even eclipse the Las Vegas Strip’s yearly gaming revenues.
Little by little nonetheless its marketplace share was getting encroached on, very first by the improvement of a large Class 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 operations in Maryland, the impending opening of a new on line casino in Bethlehem, PA, and eventually two functions in Philadelphia, the noose is tightening close to Atlantic City’s foreseeable future potential customers. It is reliance on day-trippers lulled it into a false sense of protection, and it now finds itself having to redefine its mission assertion to “vacation spot resort.”
The only issue with this technique nonetheless is that it is sick-outfitted to pull it off. For all intents and functions, Atlantic City is underneath-roomed and/or over-gamed. There is basically not ample day-tripper market place to go about, and their powerful buying and selling region is tightening, as the peripheral populations northward now/will have far more ready obtain to a widened supply in New York (Yonkers, and before long at Aqueduct and potentially Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean access, the city’s only actual aggressive advantages are its hotel capability and the availability of desk online games, despite the fact that the latter is very likely to eventuate in Pennsylvania, and probably Delaware. In purchase to sufficiently compete as a location vacation resort the city requirements to build extra guest rooms and not automatically gaming ability. By comparison, the Las Vegas Strip homes – correct gaming locations, in that they do not have much of a day-vacation market place, except for the ‘locals’ – have an average of .87 gaming positions for every guest space although Atlantic City’s typical is two.74 positions for every guest room.
It is not a coincidence that Atlantic City’s two largest accommodations, the Borgata and Harrah’s Marina, each of which additional new rooms in 2008, have been the least impacted by the most current downturn. The Borgata skilled a gaming revenue drop of one.6 p.c, although Harrah’s Marina described a 4.nine per cent improve in contrast to 2007. Moreover, the most difficult hit venues, namely 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 houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and getting rid of valuation.
With a steady rise in gaming revenues via 2006, the metropolis seemed primary for more improvement, which precipitated preparing for four new vacation resort projects, every of which have now been indefinitely delayed. Revel Leisure Group’s $2.five billion undertaking stays an iron skeleton, Pinnacle Amusement has announced it may possibly seek out to market its razed Sands internet site, MGM Mirage has shelved its on line casino ideas, and Penn Nationwide appears to have stopped its pursuit of the Bader Subject airport internet site.