Canadian casino operators are checking their bets on expansion projects and acquisitions until the struggling North American economy improves.

Some previously announced major expansion projects have been postponed, while long-range plans are being put off further.

The slow play comes as operators in both Canada and the United States grapple with reduced revenues and financial analysts are forecasting a recession that will be the worst in recent memory because of the credit crunch, asset-backed commercial paper crisis, lower commodity prices and other global factors.

Bill Rutsey, president and CEO of the Toronto-based Canadian Gaming Association, which represents casino operators and industry suppliers, says more companies are likely to hold off on expansions because of tightening credit markets.

File photo by Bayne Stanley, Business Edge
Great Canadian Gaming Corp. vice-president of communications Howard Blank says the company is 'being prudent.'

The delays will occur primarily from lack of access to debt and equity markets rather than revenue reductions, he adds.

"It's probably that (tight credit) rather than an overall lack of market," he says. "People like entertainment whether it's in good times or bad times. People go to the movies, they watch television and they'll go to baseball games and/or they'll go to a casino if that's their preferred form of entertainment. It's not as if the business is going to disappear."

Rutsey notes Las Vegas-based operators have suffered more than their Canadian counterparts, because 60 percent of their revenues are non-gaming related - "hotel, food and beverage, retail and things of that nature."

"Revenues in Canada are substantially gaming-related, so properties stand to be less affected from the overall consumer-spending downturn," says Rutsey.

Great Canadian Gaming Corp., the country's largest gaming company, has put off $53 million worth of capital projects at its flagship property, the River Rock Hotel in Richmond, and the View Royal casino on Vancouver Island.

"I'm certain that the industry as a whole is going to look and see (how to proceed)," says Howard Blank, vice-president of communications for the Richmond, B.C.-based company. "Obviously, (personal entertainment spending) is something that everybody is going to look closely at."

Blank says the expansions will not resume for at least a year, but no layoffs are anticipated.

"We are being prudent as a company not to rely on debt and we felt it was best to extend our construction times over a long period of time, as opposed to putting all of our eggs in one basket in one year," he says.

While it postpones stand-alone casino upgrades in B.C., the company is still proceeding with the expansion of its racino at the Georgian Downs harness racing track in Ontario.

Some casino operators, including Caesars Windsor in Ontario, outraced the credit crisis by securing funds in previous years and completing expansions earlier this year.

"We just got over a major one, so I don't see any in the foreseeable future, but there is room to develop what we have," says Holly Ward, communications director for Caesars Windsor, adding the recent expansion was planned back in 2001.

Caesars Windsor completed a $439-million expansion last June. It renovated its entire existing site and opened a new hotel tower, bringing room capacity to 758, as well as a 5,000-seat Colosseum and 100,000-sq.-ft. convention centre.

The casino - rebranded from Casino Windsor in conjunction with the summer expansion - is owned by the Ontario government and operated by Las Vegas-based Harrah's Entertainment, which controls the popular Caesars brand. The province funded the improvements.

No new casinos are planned in Ontario. In 2005, amidst concerns about problem gambling and increased U.S. competition, the province adopted a gaming strategy whereby it would only expand existing venues, rather than construct more.

While postponing expansion plans, Great Canadian Gaming Corp. and other casino operators north and south of the border are grappling with revenue reductions.

"We're located just across from Detroit and the majority of our customers are Americans," says Ward. "People are a little bit more, I guess, reserved with their disposable income at the moment, which is understandable."

Meanwhile, Darcy Will, president of Calgary West Hospitality Inc., which, together with Will family-controlled Gamehost Income Fund, owns four casinos in Alberta, says Great Canadian's postponements are likely to have a trickle-down effect throughout the industry.

"The industry in Canada is flat," says Will. "I don't see any growth for '09."

When it comes to expansion, casino operators across the country are "going slower" because of the economy and looking to curb costs, Will adds. "Nobody (in the industry) knows where we're going," he says. "We're living history here in our lifetime."

Will and his brother David own and operate two casinos in Calgary and one each in Grande Prairie and Fort McMurray. Calgary West purchased the Stampede Casino from the Calgary Stampede board for about $60 million in June.

Darcy Will says he is holding off on plans to expand both the downtown Stampede facility, which moved into a new building in recent months, and his company's Deerfoot casino in the city's northeast.

"We probably wouldn't do anything for a year or so," says Will. "We think there might be an opportunity for acquisitions in the next year or two years, given the economy."

But his companies are building a new 145-unit motel across from Deerfoot, and the new facility will be used as an overflow site for Deerfoot convention-goers and boost food and beverage revenues at the casino property.

"Alberta is still one of the great places to be in this business," he says. "Even in bad times, our personal income here is pretty high."

He adds his firm had opportunities to invest in Ontario in the past two years, but declined because of unfamiliarity with the market and concerns about heavy U.S. competition in the Buffalo area.

Both Will and Great Canadian's Blank say casinos in Canada will fare better than their American counterparts because they cater primarily to local residents, not tourists. "Canada as a whole has a good casino industry," says Will. "I'd be very surprised to see anybody bite the dust here."

Statistics Canada figures show Albertans gamble more than other Canadians.

Although oilsands operators are also postponing their expansion projects, Will says his firm's Fort McMurray casino is expected to do well because of massive infrastructure spending that is now underway, the large number of people required to provide maintenance and care on existing sites, and higher-than-average salaries in Northern Alberta.

"Tough times in Alberta are good times in other places," he says.

In B.C., Gateway Casinos, a Burnaby-based company that operates nine casinos in B.C. and Alberta, has also said it will re-examine its options due to the weakening economy.

The firm had planned $50 million worth of capital-spending increases at its Okanagan facilities after opening the Grand Villa casino in Burnaby and Starlight casino in New Westminster earlier this year. The Grande Villa casino is part of a $180-million hotel project that is due for completion next spring.

(Monte Stewart can be reached at monte@businessedge.ca)