The experts at Fitch Ratings didn’t exactly phrase it this way, but their data indicates people still like American casinos. As long as they’re in Las Vegas.
Fitch, a global leader in credit ratings and research, recently held a conference call with updates on the worldwide market. They painted a future with flat U.S. regional markets – partially because of all kinds of increasing competition – but a continuing growth in Las Vegas.
“We’re seeing flat growth nationwide, but Las Vegas is doing exceptionally well,” said Alex Bumazhny, Fitch Ratings’ Senior Director of Gaming, Lodging and Leisure. “We expect regional gaming to drag behind total GDP growth.”
Total U.S. commercial gaming revenues have grown by just 7 percent since 2007, despite the widespread expansion. Bumazhny said that the pure demographics are causing a problem.
“Baby Boomers are retiring, leaving their prime earning years, and that’s issue No. 1,” Bumazhny said. “And you also have other forms of gambling or entertainment, like lottery scratch-off tickets becoming more gambling-like and with higher denominations.”
He also noted that the Midwest passed its saturation point and that low oil prices have slowed Southern markets.
Then there’s the increase of mobile devices, with casino themes, which companies such as Penn National Gaming are foraying into. “They mentioned there’s interest from a big part of their database,” Bumazhny said, adding that Caesar’s also has become a sizeable mobile-gaming developer. “It seems like companies are getting in there to hedge against consumers losing interest.”
Meanwhile, Las Vegas casinos have promise, because gambling is less than 35 percent of their total revenues, Bumazhny said. Specifically, MGM is adding convention capacity and there’s also expansion at Mandalay Bay, the Aria, the T-Mobile Arena, and the Monte Carlo Theater.
“There’s increasing occupancy, convention business and more airlift into the city,” he said. “It’s still a popular destination with leisure guests, including some who don’t even gamble. So you have a good outlook over the next couple of years. Then after that the next bundle of casinos will open.” The openings, expected to be around 2019, include Resorts World Las Vegas and Crown’s Alon Las Vegas, the first new casinos since the Cosmopolitan in 2010.
The China crackdown on corruption has brought a decrease in baccarat revenues in recent years, Bumazhny said, but, again, the lesser dependence overall on gambling means Las Vegas hasn’t been hurt badly by baccarat’s decline. “On aggregate, it’s not that relevant anymore,” Bumazhny said. “It was kind of a big deal during the earlier part of the recovery. When domestic gaming was still slow, in 2010, 2011, baccarat was lifting the whole market on its shoulders. But that’s not happening now.”
On the supplier side, Fitch is a fan of Aristocrat Leisure, noting that the company’s market share in slot sales increased from 14 percent to 17 percent from 2014 to the first half of 2016. Bumazhny said Aristocrat will continue to increase its market share, although at a slower pace.
