Industry on even keel

December 18, 2001 8:35 AM
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Casino development remains strong as compared to 2000 despite the impact that Sept. 11 and the national recession have had on the nation’s travel and tourism industry.

As of Dec. 2001, roughly $3.9 billion in non-Native American casino development is currently under construction or slated for imminent development in the United States, a slight decline of 9 percent from last year’s survey.

Proposed highly-likely gaming projects currently total $4.5 billion, raising the overall valuation of projects to $8.4 billion.

Prior to the terrorist attacks, non-Native American casino development under construction or slated for imminent development was estimated to total $4.4 billion. The $500 million decline is due to the November openings of the Hyatt Casino in Black Hawk, Colorado and the Palms in Las Vegas, plus the cancellation of the $100 million Casino Magic Bossier City expansion project.

Other significant industry developments, according to the 2001 HREC Annual Casino Development Survey published by the Hospitality Real Estate Counselors, include:

Currently, 688,000 square feet of dedicated casino space is being actively developed in comparison to 870,000 square feet at this time last year, a decline of 21 percent. The decline is due to a higher mix of expansion versus new development projects. Potential estimated casino revenues to be generated from the total dollar amount of development are about $300 to $450 million less than typically generated due to the lower amounts of dedicated casino space.

An additional $4.5 billion of non-Native American casino development is classified as highly likely. These projects are in various stages of development and planning, but for a variety of reasons are considered more than just rumored. Five of the eight proposed projects are large-scale developments, with estimated costs over $500 million each.

Under construction or slated for imminent casino development outside of the Nevada and New Jersey markets has seen a sharp decline over the past year. In 2000, regional markets incurred $2.9 billion in development costs, or 69 percent of the total costs. Conversely, in 2001 regional markets only comprise $380 million in development costs, or less than 10 percent of the total costs.

Hotel development continues to grow with over 6,300 new hotel rooms under construction, a slight 4.8 percent decrease from last year. Atlantic City and Las Vegas account for 85 percent of the total under construction.

Indian gaming continues to grow nationally as a source of casino development. An aggregate of about $6 billion of Indian casino development is estimated to be developed, a decrease of $2.5 billion (29 percent) from last year.

The decrease is somewhat misleading, however, due to the opening of casinos in 2000 and 2001 after California passed Prop 1A, permitting Las Vegas-style gaming on Indian reservations. New York recently passed legislation permitting six Indian casinos, although the majority of development activity is expected in 2002. Potential gaming revenues from additional casino development on Indian reservations nationwide is estimated at $3 to $4.5 billion, as about 1.9 million square feet of casino space is added to the Indian casino market.

As money becomes tight, new markets may open to commercial gaming. Some of these states include New York, Kansas, Maryland, Kentucky, Florida, Massachusetts, New Hampshire, Ohio, Pennsylvania, Rhode Island and West Virginia. Racinos (casinos at race tracks) are one vehicle that is expected to increase activity over the coming years.