2008 Nationwide Professional On line casino & Racino Gaming Revenue Examination
A Period of time of Adjustment
Oops! That big hissing sound is the gaming balloon that experienced been developing in excess of the years, slowly losing air. But, it has not been a tide that reduced all ships even so, as some emerging and growing gaming jurisdictions showed robust expansion in 2008.
Total, the commercial and racetrack on line casino sectors (excluding Indian gaming), skilled a three.five per cent decline in gaming revenues for 2008, producing a complete of $36.two billion, down some $800 million from 2007. It was the Racino sector that has tempered this fall, as they confirmed a achieve of almost $one billion in 2008, therefore bringing the Professional sector marketplace decrease to $one.eight billion, or six.seven p.c. Nevada was the largest loser in 2008, dropping nearly $1.three billion, far more than 50 % of which stemmed from the Las Vegas Strip section.
For the most element, on line casino operators have 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 truly nosedived. Riding the crest of yr over calendar year industry progress throughout the region and the availability of sufficient credit history and fairness funds, new development and enlargement proliferated in modern many years. These days, confronted with the realities of declining, or at very best stagnant demand from customers, many of these initiatives are now considered in excess of-leveraged and/or in excess of-sized. As a result numerous gaming organizations are making an attempt to renegotiate their credit card debt – produced far more tough by lower valuations – even though also paring down operational expenses. The latter has grow to be a quite problematic conundrum when working with the opposition, especially in people jurisdictions that are now vying for market shares with new rising casino initiatives in neighboring regions. A matter we go over much more totally in the Point out by Condition examination part of this publication.
As a consequence of these circumstances the gaming industry landscape is now strewn with impending fatalities. Amongst the far more notable troubled corporations are Station Casinos, Empire Resorts, Harrah’s Amusement, Greektown Holdings, Legends Gaming, Tropicana Enjoyment, Herbst Gaming and the record grows each week.
“How lengthy will these financial problems persist, and are we at the base however?” are queries no 1 appears to be answering yet. What is distinct even so is that most gaming jurisdictions will have to discover how to deal with a more compact pie.
This analysis contains only gaming revenues of accredited casinos and pari-mutuel outlets that offer you on line casino game titles, and not Indian gaming operations, card rooms, or little non-casino type slot locations. The complete report, which includes earnings tables is available on our world wide web webpage.
A important element that would seem to have arisen from the ashes of this existing craze is that many casino assignments had been just way too big to support on their own. The input, in terms of expenditure bucks, was not proportional to the output, in terms of internet income soon after credit card debt support, in comparison to formerly accomplished benefits. A lot more and/or larger is not often far better. Looking at the rise in non-gaming profits at the Las Vegas Strip resorts, gave impetus to the advancement of far more extensive facilities in a lot of other jurisdictions. The flaw in this approach nevertheless is that the costs associated with widening market penetration and occasioned-use, are significantly greater than those incurred to entice the base industry.
As daytripper marketplaces grow to be a lot more aggressive, on line casino venues will have to depend more and much more on their in-residence hotel patrons, and dimensions their houses (and expectations) appropriately. Even though Steve Wynn began a significant development in producing up-industry mega-locations, there basically was not adequate demand on the Strip to warrant the several other related projects that followed that aimed at the same niche.
The trick is to strike a satisfied medium in task configurations which of training course demand less of a ‘seat-of-pants’ method, and 1 that is much more examined. A shameless plug for improvement consultants like ourselves.
Other Gaming Activities
Despite the fact that there are no published detailed info of American Indian gaming revenues, anecdotal evidence appears to suggest that this phase has been as difficult hit as the Commercial sector. The two Connecticut Indian gaming installations report slot income of $1.six billion in 2008, symbolizing a drop of about 7 percent, or almost $114 million, much more than doubling the three.five p.c drop from the calendar year just before. This industry is evidently nevertheless reeling from the ripple-result of a casino growth in Rhode Island, and the opening of slot functions in New York and Pennsylvania.
The Arizona Office 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 comparison to the preceding yr reducing .eight per cent in the very first quarter, 7.5 percent in the second quarter, 9.five percent in the third quarter, and 16.one per cent in the fourth quarter.
Some SEC reporting Indian gaming homes report similar decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reports that although calendar yr 2008 showed an practically two p.c growth charge in gaming revenues, there was an eight.seven percent decline in the third quarter and an nearly ten percent drop in the fourth quarter of 2008, in contrast with 2007. Gaming income tendencies at nearby Niagara Falls, Ontario ended up down 1.5% in 2008 in contrast with 2007.
It truly is been a blended-bag for state lotteries across the place. The North American Affiliation of Condition & Provincial Lotteries studies that U.S. lotteries produced a whole of $sixty.6 billion in product sales in fiscal 2008, up about 3 p.c from the previous yr however some jurisdictions documented decreases, most notably California, which showed an 8 % fall. Inasmuch as some of these states are on a variety of fiscal calendar year ends, it would appear that the data does not reflect the influence 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 7 per cent to $13.7 billion in 2008, versus $fourteen.seven billion in 2007.
Prepared & Proposed New Expansions
As beforehand noted, it has been new gaming jurisdictions that have spawned considerably of the growth in once-a-year casino/racino revenues above the years, and their influence is apt to continue into the in close proximity to potential.
Miami Dade voters authorized a ballot concern that makes it possible for each of 3 pari-mutuels to have a casino facility of up to 2,000 slot equipment. The Flagler Dog Observe and Miami Jai-Alai are reportedly arranging opening in late 2009 or early 2010, even though the Calder set up in Miami Gardens has but to declared its programs. There are several other proposals being regarded that would additional broaden casino development throughout the condition.
The point out last but not least received all around 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 likely to open until finally 2010. There has also been some discussion about making it possible for an increase in for each spot gaming positions and slots at racetracks, although neither initiative appears to have any traction at this time.
The state’s expanded lottery program that permits for the development of 4 on line casino gaming zones and slots at present horse and puppy tracks seems mired, as only a single facility is presently underneath development, whilst a few other proposals ended up rescinded. The only bidder on the Cherokee County contract, claimed it could not compete with the new Quapaw tribal casino in Oklahoma, which is situated so near to the condition 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 desk video games, alongside with a second stage owing to open in 2011 with 875 slots and 20 desk video games. The condition has extended the application method for the other three zones right up until April, 2009.
There is nonetheless a whole lot of ‘jockeying’ likely on, but the prospect of as several as 8 slot parlors and racinos seems to be back on the entrance-burner, but probably not solved in the course of the present legislative session.
There are about 14,000 rooms scheduled to occur on line in 2009, with the most recent being the 390 space M Vacation resort in Henderson. There are expansions underway at equally Caesars Palace and Difficult Rock and new lodges contain two parts of the City Centre project, and the Fountainebleau.
Pinnacle Entertainment’s new on line casino growth tasks in Baton Rouge and Lake Charles, while delayed, are reported to nevertheless be on-keep track of for opening this calendar year and/or early 2010.
There is a bill beneath thought that could far more than double Penn National’s slot devices to 3,000, as nicely as a proposal that would take away the restriction that slots be found inside five miles of the keep track of. Scarborough Downs, which has been unsuccessful in convincing neighborhood citizens to permit slots, could be contemplating relocating to a a lot more hospitable city.
A referendum was accepted in November, 2008 that enables for the development of 5 casinos with a total of fifteen,000 slots, and now the bidding war is afoot though it is not as extreme as the point out had predicted.
Grand Soleil Casino Vacation resort in Natchez had been slated to open in 2008, but has run into numerous funding issues and whilst the resort part is open up, the riverboat is noted to open up in the Spring of ’09. Harrah’s Margaritaville Casino in Biloxi, while scaled again fairly, is nevertheless on track to open up this yr.
Massachusetts, a sleeping-giant in phrases of market place potential, is still maneuvering to open up casinos/racinos, and/or a Course III Indian gaming facility, but are not able to look to muster the political support. A latest study finished by Dartmouth University estimates that Massachusetts resident expended a lot more than $920 million last calendar year at Connecticut casinos and slot machine parlors in Rhode Island and Maine. The New Hampshire legislature recently declined an selection to create casinos, nevertheless the subject is likely to be revisited, specifically if Massachusetts decides to go ahead. There are also attempts in Maine to rethink its options.
Atlantic City’s casinos have imposed their political will on staving off the addition of slot equipment at racetracks by just lately agreeing to proceed augmenting purses with an extra tax. The governor however, has appointed a new panel to study the state’s sagging racing plan which ironically, can only be preserved by enabling the tracks to have slot machines especially at the Meadowlands. (See The Nor’easter Squeeze section)
Just when it appeared as if Aqueduct’s 4,500 VLT facility would last but not least be created, the successful bidder indicated an lack of ability to make the needed $370 million charge, citing the existing lending local weather, and throwing the undertaking again into the lap of the governor. Although the industry need in the spot could be deemed fairly sturdy, the prospect of added competitiveness from nearby Belmont could have an effect on Aqueduct’s underlining economic feasibility, especially contemplating that a bit less than 30% of the net get is retained by the operator.
Strategies to relocate Monticello Raceway into a resort complex are currently being reconsidered possibly owing to the two the probable opening of at the very least a single or probably two racino operations in the NY metro region, and the resurfacing of initiatives to improvement a Course III Indian gaming facility in the Catskills.
But an additional gaming proposal is becoming set forth in Ohio, after final year’s edition was turned down by the voters. This plan phone calls for a single on line casino every in the state’s largest towns: Cleveland, Columbus, Cincinnati and Toledo. There would be a least expenditure essential of $250 million, as nicely as an preliminary licensing charge of $fifty million, and a 33 percent tax on gaming income.
The Sands in Bethlehem is due to open up in the Spring of ’09, and the new Rivers undertaking in Pittsburgh is anticipated to be operational in August, ’09 whilst Philadelphia’s two slot services nonetheless wallow in a political mire, but are anticipated to begin building this year.
The Lodge at Deadwood is slated to open in the Fall of 2009, and contain 300 games, a hundred and forty rooms and a broad selection of facilities.
Legislators are proposing a voter referendum that would amend the condition constitution to let on line casino gambling in designated places, as properly as permit gambling on American Indian lands in Texas and at present racetracks.
The Greenbriar, the state’s venerable vacation resort facility has filed for individual bankruptcy, but has a new suitor in Marriott Hotels, who have reportedly tendered an offer. State govt has proffered the notion of allowing the vacation resort to offer on line casino game titles, but this effort is in also early a phase to have any traction 1 way or another.
A latest Supreme Courtroom ruling that restricts the using of lands into have confidence in on behalf of federally identified American Indian tribes has additional stymied some new Class III gaming initiatives throughout the nation. Moreover, there were eleven Indian casino tasks turned down by the DOI final year due to the fact of its new rule that casinos need to be near ample to a reservation that tribal members can perform at them. It has been proposed that the new Obama administration may possibly be far more sympathetic to the improvement of Indian gaming assignments, but this issue has nevertheless to be resolved.
Meanwhile, there are other Course III tasks in the a variety of phases of advancement. The Seneca casino task in Buffalo, NY, whilst operating a modest temporary facility, has delayed an already underneath development everlasting facility until finally the market place rebounds. They have also expressed an desire in building a casino in the Catskills. The point out gaming compact with Seminoles in Florida is becoming challenged, and could effect their plans for more substantial projects. There are new Indian gaming initiatives set to open up in Michigan and Oklahoma this year, and other folks are in the planning phase. Texas might enable the reopening of Indian gaming services and enable other location and there are programs afoot by the Navajos in Arizona to construct additional casinos. California is poised to open two to 3 new Class III casinos in 2009/ten.
The Nor’easter Squeeze
Whole gaming earnings in Atlantic City has declined seven.six percent, from $4.9 billion in 2007 to $4.5 billion in 2008 with decreases continuing into 2009, as the town is obtaining by itself in an extreme comp-war with the Pennsylvania venues. At a single time the only casinos in the Northeast ended up located in Atlantic Metropolis, exactly where it appeared as if it might truly even eclipse the Las Vegas Strip’s yearly gaming revenues.
Slowly nonetheless its marketplace share was being encroached on, initial by the advancement 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 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 eventually two operations in Philadelphia, the noose is tightening close to Atlantic City’s potential potential clients. It really is reliance on working day-trippers lulled it into a bogus perception of safety, and it now finds by itself obtaining to redefine its mission assertion to “vacation spot resort.”
The only problem with this technique even so is that it is ill-outfitted to pull it off. For all intents and purposes, Atlantic City is under-roomed and/or in excess of-gamed. There is just not ample working day-tripper industry to go close to, and their powerful trading area is tightening, as the peripheral populations northward now/will have far more prepared obtain to a widened provide in New York (Yonkers, and quickly at Aqueduct and possibly Belmont), westward in Pennsylvania and southward in Delaware, West Virginia and Maryland.
Other than the ocean entry, the city’s only real competitive benefits are its hotel ability and the availability of desk game titles, despite the fact that the latter is very likely to eventuate in Pennsylvania, and perhaps Delaware. In buy to adequately compete as a destination vacation resort the city needs to build added visitor rooms and not essentially gaming ability. By comparison, the Las Vegas Strip houses – accurate gaming places, in that they do not have significantly of a working day-trip market, besides for the ‘locals’ – have an typical of .87 gaming positions for each guest place although Atlantic City’s typical is two.74 positions per guest room.
It is not a coincidence that Atlantic City’s two biggest resorts, the Borgata and Harrah’s Marina, equally of which extra new rooms in 2008, had been the minimum impacted by the newest downturn. The Borgata seasoned a gaming income fall of 1.6 %, although Harrah’s Marina documented a four.9 p.c enhance when compared to 2007. Additionally, the hardest hit 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, including the the Trump houses and Resorts with the hoped for sale of the Tropicana has been further delayed, and shedding valuation.
With a constant rise in gaming revenues by way of 2006, the metropolis appeared primary for additional growth, which precipitated arranging for 4 new vacation resort initiatives, every single of which have now been indefinitely delayed. Revel Enjoyment Group’s $2.five billion venture stays an iron skeleton, Pinnacle Entertainment has introduced it may look for to promote its razed Sands website, MGM Mirage has shelved its casino ideas, and Penn Countrywide seems to have stopped its pursuit of the Bader Area airport internet site.