International edition
September 26, 2020

Sustained increases in gaming revenue would signal a turnaround for the industry

Moody’s predicts slight increase in US gaming industry for 2011

(US).- Analysts at Moody's Investors Service are a bit more optimistic about the US gaming industry, issuing a report last week projecting gaming revenue will grow 1-2 % and casino operator profits will increase 2-4 % in 2011.

T

his is an upward revision from Moody's previous estimate for 2011 gaming revenue to come in flat — between a decline of 1 % and increase of 1 %. The previous estimate for industry operating profits was that they would decline by as much as 2 % or grow by as much as 2 %.

Sustained increases in gaming revenue would signal a turnaround for the industry, which endured declines in 2008, 2009 and most of 2010. Moody's made headlines in June by upgrading its gaming industry outlook to stable from negative, signaling the casino industry decline may have bottomed out.

Moody's recently updated the outlook, maintaining the stable outlook but saying "our outlook has a positive bias.'' With the stable industry outlook, fundamental credit conditions in the gaming industry should neither erode significantly nor improve materially over the next 12 to 18 months, Moody's said.

Most gaming operators should benefit from cost-cutting moves taken during the recession, though a few companies that have been struggling may have difficulty absorbing another year of flat profits, Moody's added.

Industry's outlook from Moody's included the usual warnings: "Our expectations for growth are tempered by the fact that unemployment remains stubbornly high, which we believe will keep pressure on consumers’ gambling budgets and casino company profitability throughout all gaming regions in the United States,'' Moody's said.

The firm also stated the following: "The recovery in the gaming sector will be uneven. Pockets of strength will come from new gambling jurisdictions like New York and Pennsylvania, while more mature markets like Las Vegas and Atlantic City will continue to struggle.''.

With the openings last year of CityCenter and this month of the Cosmopolitan, Moody's said the national reduction in consumer spending continues to hamper revenue growth on the Las Vegas Strip. This reduction in spending has affected all U.S. markets.

"However, the Las Vegas Strip has the added challenge of an oversupply of gaming and room capacity. The Las Vegas Strip will continue to struggle to absorb new supply that has entered the market — specifically the opening of MGM Resorts International’s CityCenter in late 2009 and the recently opened Cosmopolitan resort next to CityCenter. Even if general U.S. economic conditions continue to improve, this oversupply is likely to slow the prospects of a recovery in Las Vegas because it will keep considerable pressure on hotel room rates,'' Moody's said.

While Strip gaming revenue of $495 million in October was up 16.1 percent from October 2009, Moody's noted much of the increase was due to lucky play by casinos at baccarat tables and that, discounting this factor, the monthly increase would have been in the low single-digit range.

The opening of the nearly 3,000-room Cosmopolitan is expected to lift the number of Las Vegas hotel rooms to about 151,000. While Las Vegas visitor volume grew 5.7 % in October from a year earlier, the hotel room occupancy rate of 84.9 % that month was well off the 92.3 % rate in October 2007.

Another point in Moody's report: "There will be further gaming proliferation. This will likely result in more companies competing for the same customers within a particular market rather than the expansion of the overall industry or an improvement in industry operating profits.''

What is your opinion about this article?
  • I like it
    %
    0 votos
  • I don't like it
    %
    0 votos
  • I have not thought about it
    %
    0 votos
Leave your comment
Newsletter Subscription
Subscribe to receive the latest news and updates
Enter a valid email
Complete the captcha
Thank you for registering to our newsletter.
Follow us on Facebook