Fitch: U.S. Gaming Recovery Still Tepid; Macau Stabilizes
Recovery in U.S. regional gaming revenues continues to be tepid. Longer-term secular headwinds such as slower wage growth, less certain retirement prospects for baby boomers, and alternative avenues for gambling will continue to weigh on the sector, despite tailwinds like more affordable gas and improved economic conditions in 2015. In addition, REIT spinoffs remain risky for regional gaming operators.
"Asset sales or spinoffs that are then leased back may backfire if regional markets soften as they did in 2013 and 2014, given the operating leverage that comes with the leases," says Alex Bumazhny, Senior Director.
Revenues on the Las Vegas strip continue to improve, bolstered by growth in convention attendance, airline capacity and domestic gaming.
"The Las Vegas Strip is really beginning to hit its stride as it continues its post-recession recovery," says Bumazhny. "Baccarat has shown some weakness, which is pressuring operators with large exposure to Asia, but overall the Strip is looking up."
On the suppliers' side, leverage will remain high in light of tepid revenue growth opportunities. Slot floors are shrinking and there are no catalysts in sight for a more rapid replacement cycle or new casino openings past 2018.
In Macau, 2016 should be relatively stable in terms of the top line, but we expect to see some cannibalization from new Cotai openings.
"Softness in the VIP market and further depreciation of the yuan may challenge Macau's year-over-year comparisons but we do not expect the broader economic slowdown in China to have a material impact on visitation," says Bumazhny.
The "All In: Global Gaming Handbook" is a convenient, timely and comprehensive reference for gaming investors. All In's readers will find Fitch's outlooks supplemented with tables and charts for U.S. regional markets, the Las Vegas Strip, Macau and gaming suppliers (new section). All In also contains issuer-specific sections for 17 major gaming issuers (Everi Holdings and Eldorado Resorts are new).
The current edition also provides Fitch's view on the New Jersey gaming expansion and the recent softness in Louisiana. The report will evolve alongside the dynamic, ever-changing gaming industry in an effort to meet the demands of the investment community. To that end, we welcome content-related suggestions.