A Amount of Adjustment
Oops! That giant hissing sound could be the gaming balloon that were growing over the years, slowly losing air. But, it has not been a tide that lowered all ships however, as some emerging and expanding gaming jurisdictions showed strong growth in 2008.
Overall, the commercial and racetrack casino sectors (excluding Indian gaming), experienced a 3.5 percent decline in gaming revenues for 2008, generating a complete of $36.2 billion, down some $800 million from 2007. It had been the Racino sector that has tempered this drop, while they showed a gain of almost $1 billion in 2008, thereby bringing the Commercial sector market decline to $1.8 billion, or 6.7 percent. Nevada was the greatest loser in 2008, dropping almost $1.3 billion, more than half of which stemmed from the Las Vegas Strip segment.
For the most part, casino operators were caught relatively flat-footed by the extent of the 2008 revenue downturn, since it was not before third and fourth quarters when it certainly nosedived. Riding the crest of year over year market growth around the world and the option of ample credit and equity funds, new construction and expansion proliferated in recent years. Today, up against the realities of declining, or at best stagnant demand, many of these projects are now actually considered over-leveraged and/or over-sized. Consequently many gaming companies are attempting to renegotiate their debt – made more challenging by lower valuations – while also paring down operational costs. The latter has turned into a very problematic conundrum when coping with your competitors, especially in those jurisdictions which are now vying for market shares with new emerging casino projects in neighboring areas. A topic we discuss more fully in the State by State analysis section of this publication.
Consequently of the conditions the gaming industry landscape is now strewn with impending fatalities. Among the more notable troubled firms are Station Casinos, Empire Resorts, Harrah’s Entertainment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming; and the list grows each week.
“How long will these economic conditions persist, and are we in the bottom yet?” are questions nobody is apparently answering yet. What is clear however is that a lot of gaming jurisdictions must learn how to deal with a smaller pie.
This analysis includes only gaming revenues of licensed casinos and pari-mutuel outlets that provide casino games, and not Indian gaming operations, card rooms, or small non-casino type slot locations. The complete article, including revenue tables is available on our web page.토토사이트
A key aspect that appears to have arisen from the ashes of this current trend is that numerous casino projects were just too large to support themselves. The input, with regards to investment dollars, was not proportional to the output, with regards to net profit after debt service, compared to previously achieved results. More and/or bigger is not necessarily better. Seeing the rise in non-gaming revenue at the Las Vegas Strip resorts, gave impetus to the development of more comprehensive amenities in a great many other jurisdictions. The flaw in this strategy however is that the expense related to widening market penetration and occasioned-use, are significantly higher than those incurred to attract the base market.
As daytripper markets become more competitive, casino venues must rely more and more on the in-house hotel patrons, and size their properties (and expectations) accordingly. While Steve Wynn started a significant trend in creating up-market mega-destinations, there simply was not enough demand on the Strip to warrant the countless other similar projects that followed that directed at the exact same niche.
The secret is always to strike a happy medium in project configurations; which of course require less of a ‘seat-of-pants’ approach, and one that’s more studied. A shameless plug for development consultants like ourselves.
Other Gaming Activities
Although you will find no published detailed data of American Indian gaming revenues, anecdotal evidence appears to suggest that this segment has been as hard hit while the Commercial sector. Both Connecticut Indian gaming installations report slot revenue of $1.6 billion in 2008, representing a drop of about 7 percent, or almost $114 million, more than doubling the 3.5 percent drop from the season before. This market is apparently still reeling from the ripple-effect of a casino expansion in Rhode Island, and the opening of slot operations in New York and Pennsylvania.
The Arizona Department of Gaming reports that contributions based on a gambling revenue formula from the state’s 23 Indian gaming casinos, have already been declining every quarter in 2008 set alongside the previous year; decreasing .8 percent in the initial quarter, 7.5 percent in the second quarter, 9.5 percent in the 3rd quarter, and 16.1 percent in the fourth quarter.
Some SEC reporting Indian gaming properties report similar decreases. Seneca Gaming, which operates three Class III casinos in upstate New York, reports that while calendar year 2008 showed an almost 2 percent growth rate in gaming revenues, there was an 8.7 percent decline in the 3rd quarter and an almost 10 percent decline in the fourth quarter of 2008, weighed against 2007. Gaming revenue trends at nearby Niagara Falls, Ontario were down 1.5% in 2008 weighed against 2007.
It’s been a mixed-bag for state lotteries across the country. The North American Association of State & Provincial Lotteries reports that U.S. lotteries generated a complete of $60.6 billion in sales in fiscal 2008, up about 3 percent from the previous year; yet some jurisdictions reported decreases, such as California, which showed an 8 percent drop. Inasmuch as a few of these states are on various fiscal year ends, it would seem that the info does not reflect the impact of third and/or fourth quarter results.
Based on data given by Equibase, horse racing pari-mutuel revenues continue their downward spiral, falling 7 percent to $13.7 billion in 2008, versus $14.7 billion in 2007.
Planned & Proposed New Expansions
As previously noted, it has been new gaming jurisdictions which have spawned a lot of the growth in annual casino/racino revenues over the years, and their impact is apt to keep to the near future.
Miami Dade voters approved a ballot issue that enables each of three pari-mutuels to have a casino facility all the way to 2,000 slot machines. The Flagler Dog Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, whilst the Calder installation in Miami Gardens has yet to announced its plans. There are numerous other proposals being considered that will further expand casino development through the entire state.
Their state finally got around to reissuing its tenth license, late in December, 2008; awarding it to Midwest Gaming & Entertainment, LLC for a 1,200+ game casino positioned in Des Plaines just east of O’Hare. The newest facility is improbable to open until 2010. There has already been some discussion about allowing a rise in per location gaming positions and slots at racetracks, although neither initiative appears to have any traction only at that time.
The state’s expanded lottery program that enables for the development of four casino gaming zones and slots at existing horse and dog tracks appears mired, as just one facility is presently under construction, while three other proposals were rescinded. The only real bidder on the Cherokee County contract, claimed it may not contend with the new Quapaw tribal casino in Oklahoma, which will be located so close to the state line that its parking lot is in Kansas. The Boot Hill Casino Resort in Dodge City is planing a December 2009 opening with 575 slots and 10 table games, and also a second phase because of open in 2011 with 875 slots and 20 table games. Their state has extended the application process for one other three zones until April, 2009.