Ratings agency Moody’s Investors Service Inc has lowered its outlook on the United States gaming industry to ‘negative’ from ‘stable’.
“The negative outlook reflects recent declines in comparable monthly gaming revenue for most jurisdictions, as well as the flat revenues that preceded them, outside Nevada, over the last year-and-a-half,” it said in a report published this week.
Total gaming revenue in the U.S. fell 1.8 percent in April and 0.8 percent in May for the 15 out of 18 jurisdictions that have released May results.
Moody’s had expected that the month-on-month comparisons would post small gains.
“The fact regional gaming revenues excluding Nevada remained flat, despite further improvement in the economy and additional regional casinos throughout the U.S., is a strong indication that U.S. consumers will continue to limit their spending to items more essential than gaming,” Moody’s senior vice president Keith Foley said in the report.
Casinos in some jurisdictions have seen revenues decline as competition increases in neighbouring states. Last week, Caesars Entertainment Corp, which says there are too many casinos in New Jersey, announced it would close its Showboat casino in Atlantic City on August 31.
Other closures may follow in Atlantic City. Casino win there fell from US$5.22 billion in 2006 to US$2.86 billion last year – a decline of 45 percent – according to data collected by the University of Nevada, Las Vegas, Center for Gaming Research.
In this week’s report, Moody’s estimates that total U.S. gaming revenues will decrease at a rate of between 3.0 percent and 5.0 percent over the next 12 to 18 months. That would translate to a decrease in overall industry earnings before interest and taxation (EBIT) of between 4.5 percent and 7.5 percent, it said.
The best performing market is the Las Vegas Strip, with gaming revenue of about US$6.4 billion in the 12 months to April 30, 2014, said Moody’s. Although a large market, it accounts for under 20 percent of total U.S. gaming revenue “and is not the primary driver” of the industry’s outlook, it added.
