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Casino Development Flourishes Despite 9/11 and Recession

19 December 2001

DENVER, Colorado -- (Press Release) -- Casino development remains strong as compared to 2000 despite the impact that September 11th and the national recession have had on the nation's tourism industry. As of December 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% from last year's survey. Proposed/highly likely gaming projects currently total $4.5 billion raising the pipeline 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 Casino in Las Vegas plus the cancellation of the $100 million Casino Magic Bossier City expansion project.

Currently, Native American gaming development is estimated at $6.0 billion. Inclusion of Indian gaming development raises the total domestic casino development pipeline to $14.4 billion.

Additional highlights of the 2001 HREC Annual Casino Development Survey, the third in a series completed by Hospitality Real Estate Counselors, Inc. ("HREC"), are as follows:

  • 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%. 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 approximately $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/proposed. 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/highly likely projects are large-scale developments, with estimated costs over $500 million each.

  • Under construction/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 related to non-Native American casinos continues to grow, with over 6,300 new hotel rooms under construction/imminent development in concurrence with casino projects, a slight decrease of 4.8 percent from last year's survey. Atlantic City and Las Vegas continue to increase hotel room inventories, accounting for 85 percent of the total under construction/imminent hotel development associated with casinos.

    In addition, nearly 3,600 hotel rooms were in various stages of development at casinos without the addition of casino gaming space. However, after the events of September 11, three of the six hotel-only projects have been delayed, although none have been cancelled. An aggregate of over 15,000 hotel rooms are being developed or have been proposed for the non-Native American gaming market.

  • Indian gaming continues to grow nationally as a source of casino development. An aggregate of approximately $6.0 billion of Indian casino development is estimated to be developed, a decrease of $2.5 billion (29%) from last year. The decrease is somewhat misleading, however, due to the opening of casinos in 2000 and 2001 after California passed Proposition 1A permitting "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 $3.0 to $4.5 billion, as approximately 1.9 million square feet of gaming space is added to the Indian casino market.

  • Due to the recession, we anticipate that many states will aggressively pursue legalizing additional forms of casino gaming as a source of tax revenues. Some of these states include New York, Kansas, Maryland, Kentucky, Florida, Massachusetts, New Hampshire, Ohio, Pennsylvania, Rhode Island and West Virginia. Racinos (casino gaming at race tracks) are one vehicle that is expected to increase in activity over the coming years.

    • For a complete copy of the 2001 HREC Annual Casino Development Survey with detailed supporting information and data, please contact: Michael Cahill, MAI, CHA, president (mcahill@hrec.com), or Chris Stein, associate (cstein@hrec.com); Hospitality Real Estate Counselors, Inc. (HREC), phone (303) 267-0057.

    Hospitality Real Estate Counselors, Inc. (HREC) is a national casino and hotel consulting practice based in Denver, Colorado. HREC provides specialized consulting services exclusively to the gaming and lodging industries including real estate and business valuations, market, feasibility studies, litigation support, and investment analysis.

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