A Period of Adjustment Oops! That giant hissing noise is the sound of the gaming balloon that has grown throughout the years, gradually disappearing. It hasn't been a flood that has brought down all ships however, as several emerging and expanding gaming jurisdictions saw a significant increase in the year 2008. Overall, the commercial and racetrack sector of casinos (excluding Indian gaming), had the 3.5 percent drop in gaming revenue for 2008, generating a total in the region of $36.2 billion, down some 800 million from 2007. This was due to the Racino segment that tempered the decline, as they saw a rise of around one billion dollars during 2008 making the commercial sector's market decrease to $1.8 billion and 6.7 percent. Nevada was the largest loser in 2008, dropping almost $1.3 billion, with more than half which was derived in part of the Las Vegas Strip segment. Hunkering Down In the majority of cases, casinos were flat-footed by the extent of the 2008 revenue downturn, as it was only the third and fourth quarters of 2008 that it really nosedived. The year was a roaring success due to year over year market growth across the nation and the availability of a wealth of capital and equity the construction of new projects and expansions exploded in recent years. Now, with the reality that demand is decreasing or, at the very least, low demand, many of these projects are now being deemed to be over-leveraged or over-sized. As a result many gaming companies are trying to renegotiate their debt that is made more difficult by lower valuations while cutting operational costs. The latter has become an extremely difficult problem when dealing with market competition, particularly in jurisdictions that are now vying เล่นสล็อต for market shares with new casino developments in the neighboring areas. We will explore this issue more extensively in the State by state analysis section of this publication. In the wake of these conditions the gaming industry landscape is now strewn with impending fatalities. Among the more notable troubled firms include Station Casinos, Empire Resorts, Harrah's Entertainment, Greektown Holdings, Legends Gaming, Tropicana Entertainment, Herbst Gaming; and the list continues to grow each day. "How long will these economic conditions persist, and are we at the bottom yet?" Are questions that nobody seems to have the answers to. However, it is evident that gaming jurisdictions in general must figure out how to handle the smaller portion of the pie. Note: This analysis only covers gaming revenues from licensed casinos and pari-mutuel establishments which offer casino games in contrast to Indian gambling operations or card rooms or small non-casino type slot locations. The entire article, which includes tables of revenue, is on our website. Input/Output Model One of the main reasons that appears to have arisen from the ashes of this recent trend is that a lot of casino projects were just too big to sustain their own. The input, in terms of investment dollars, did not correspond to the output, as measured by net profit after debt service, compared to previously achieved results. The bigger or more extensive isn't always more effective. Recognizing the growth in non-gaming revenue at resorts like the Las Vegas Strip resorts, led to the establishment of more extensive services in many other states. The problem with this approach however is that the cost associated with widening market penetration and occasioned-use, are significantly greater than those required in order to draw the base market. As daytripper markets become more competitive, casinos will have to rely more and more on their hotel guests who are in their hotels, and size their properties (and expectations) accordingly. Even though Steve Wynn started a major trend to create up-market mega-destinations in Las Vegas, there was never enough demand for the Strip enough to justify the many similar projects that aimed at the same segment. The trick is to achieve the perfect balance between the configuration of projects. This will of course require less of a'seat-ofpants approach, but one that is more considered. A shameless plug for development consultants like ourselves. Other Gaming Activities While there isn't any published complete statistics on American Indian gaming revenues, there is evidence that this section is as hard-hit as the Commercial sector. Two Connecticut Indian gaming installations report slot revenue at $1.6 billion in 2008, the loss of around 7 percent, or almost $114 million, nearly twice the 3.5 percent drop from the year prior. This market is in shock from the ripple-effects of a casino expansion Rhode Island, and the introduction of slot machines in New York and Pennsylvania. The Arizona Department of Gaming reports that the contributions, based on a formula that calculates gaming revenue from all 23 Indian gaming casinos have been decreasing each quarter of 2008 in comparison to the previous year. declining .8 percent during the initial quarter. 7.5 percent in the second quarter, 9.5 percent during the third quarter, as well as 16.1 percent during the final quarter. Certain SEC reporting Indian gaming properties have reported similar declines. Seneca Gaming, which operates three Class III casinos in upstate New York, reports that while calendar year 2008 showed an almost 2-percent growth in gaming revenue but there was an 8.7 percent decline in the third quarter of 2008 and an increase of almost 10 percent in the fourth quarter of 2008 in comparison to 2007. Gaming revenues at close by Niagara Falls, Ontario were lower by 1.5 percent in 2008, against 2007. It's been a mixed bag of state lotteries across the nation. The North American Association of State & Provincial Lotteries reports the U.S. lotteries generated a total of $60.6 billion in sales during fiscal 2008, up about 3 percent from the previous year. However, some states reported declines especially California where there was an 8 percent decline. Because certain states are in different fiscal years at end dates, it is possible that the figures do not reflect the impact of third or Fourth quarter numbers. According to data supplied by Equibase, the horse racing pari mutuel revenues continue their downward spiral down seven percent, to $13.7 billion for 2008, against $14.7 billion for 2007. Planned & Proposed New Expansions As we've mentioned in the past, it's the new gaming jurisdictions that have brought about large portions of the increase in the annual revenue of racinos and casinos through the years and their influence is likely to continue in the in the near future. Florida Miami Dade voters approved a ballot question that allows three pari-mutuels to include a casino of up to 220 slot machines. In addition, the Flagler Dog Track and Miami Jai-Alai are reportedly planning opening in the latter half of 2009 or early 2010 while there is a Calder construction located in Miami Gardens has yet to reveal its plans. There are numerous other proposals being considered that would further expand casino development throughout the state.