A Period of Adjustment
Oops! That giant hissing sound is 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 was the Racino sector that has tempered this drop, as 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 that stemmed from the Las Vegas Strip segment.
For probably the most part, casino operators were caught relatively flat-footed by the extent of the 2008 revenue downturn, because it wasn’t before the third and fourth quarters when it surely nosedived. Riding the crest of year over year market growth in the united states and the option of ample credit and equity funds, new construction and expansion proliferated in recent years. Today, confronted with the realities of declining, or at best stagnant demand, a number of these projects are now considered over-leveraged and/or over-sized. As a result many gaming companies are wanting to renegotiate their debt – made harder by lower valuations – while also paring down operational costs. The latter has become a very problematic conundrum when dealing with the competition, especially in those jurisdictions that 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.
As a result of these conditions the gaming industry landscape is now strewn with impending fatalities. One of 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 no body seems to be answering yet. What is clear however is that many gaming jurisdictions will need to learn how to handle an inferior 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 can be acquired on our web page.토토사이트
A vital aspect that appears to have arisen from the ashes of this current trend is that lots of casino projects were just too big to support themselves. The input, with regards to investment dollars, wasn’t proportional to the output, with regards to net profit after debt service, compared to previously achieved results. More and/or bigger is not always 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 number of other jurisdictions. The flaw in this strategy however is that the expenses connected with widening market penetration and occasioned-use, are significantly higher than those incurred to attract the beds base market.
As daytripper markets be much more competitive, casino venues will need to 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 wasn’t enough demand on the Strip to warrant the numerous other similar projects that followed that aimed at the exact same niche.
The secret would be to strike a happy medium in project configurations; which obviously require less of a ‘seat-of-pants’ approach, and one that is 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 generally seems to suggest that segment has been as hard hit as the Commercial sector. Both Connecticut Indian gaming installations report slot revenue of $1.6 billion in 2008, representing a shed around 7 percent, or almost $114 million, a lot 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 predicated on a gaming revenue formula from the state’s 23 Indian gaming casinos, have now been declining every quarter in 2008 compared to the previous year; decreasing .8 percent in the first quarter, 7.5 percent in the next quarter, 9.5 percent in the third 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 a nearly 2 percent growth rate in gaming revenues, there clearly was an 8.7 percent decline in the third quarter and a nearly 10 percent decline in the fourth quarter of 2008, compared with 2007. Gaming revenue trends at nearby Niagara Falls, Ontario were down 1.5% in 2008 compared with 2007.
It’s been a mixed-bag for state lotteries over 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 prior year; yet some jurisdictions reported decreases, most notably 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 information does not reflect the impact of third and/or fourth quarter results.
In accordance with 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’s been new gaming jurisdictions which have spawned much of the growth in annual casino/racino revenues over the years, and their impact is apt to continue to the near future.
Miami Dade voters approved a ballot issue that enables each of three pari-mutuels to have a casino facility as high as 2,000 slot machines. The Flagler Dog Track and Miami Jai-Alai are reportedly planning opening in late 2009 or early 2010, as the Calder installation in Miami Gardens has yet to announced its plans. You’ll find so many other proposals being considered that could 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 situated in Des Plaines just east of O’Hare. The newest facility is improbable to open until 2010. There has also been some discussion about allowing an increase in per location gaming positions and slots at racetracks, although neither initiative seemingly have any traction at this 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 only 1 facility is presently under construction, while three other proposals were rescinded. The only real bidder on the Cherokee County contract, claimed it could not compete with the newest Quapaw tribal casino in Oklahoma, which is located so near 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 the other three zones until April, 2009.