Moody’s: Rebound in gaming industry likely to stall
Moody’s Investors Service today warned that the stagnant U.S. economy could hurt the casino industry and that some newly opened casinos appear to be taking market share from competitors as opposed to growing the market.
In a “special comment” called “A More Cautious Consumer Steps Away from the Casino,” the debt-rating company said companies that could be hurt by these trends include Caesars Entertainment Corp., Cannery Casino Resorts LLC and CityCenter Holdings, all in Las Vegas.
These are among the companies that are highly leveraged or facing significant near-term debt maturities that will have to be paid off or refinanced.
“Improving U.S. gaming revenue trends in place since the middle of last year appear to be stalling,” Moody’s said in its report. “Momentum began to slow in March, and then in May most jurisdictions reported outright declines in gaming revenue. That, along with weakness in consumer confidence, employment and retail sales, indicates the rebound in gaming has a high probability of stalling.”
Moody’s said it’s troubling that newer casinos such as Resorts World in Queens in the New York market, Revel in Atlantic City and the Rivers Casino in Des Plaines, Ill., near Chicago, “do not appear to be expanding gaming demand in their markets.”
“In Atlantic City, gaming revenue including Revel fell 9.5 percent in May, the first month of operations for the new casino. In New York, results have been tepid since the Resorts World opening at Aqueduct Racetrack in New York City last fall,” Moody’s analysts said in their report.
Ironically, the largest U.S. gambling market and one of the hardest-hit markets during the recession, the Las Vegas Strip, “is holding up,” Moody’s said.
“The solid convention and event calendar, limited supply expansion, and lower gasoline prices are expected to provide support for continued modest growth in this market. However, weakening consumer data remains a concern,” Moody’s said.
May gaming revenue numbers for Nevada have not yet been reported, but in April the Strip produced solid numbers. Strip gaming win rose 7.4 percent from April 2011 to $459.4 million. That was the sixth month in the last seven that Strip casinos posted improved win numbers.