Las Vegas Bounces Back, But US Markets Flounder Elsewhere
Posted on: August 4, 2014, 06:11h.
Last updated on: September 14, 2014, 12:53h.
Las Vegas is officially on the up, but that didn’t stop Moody’s Investors Service from downgrading its view of the US casino gaming market from “stable” to “negative” recently. Yes, while the Las Vegas Strip is about to experience its fifth annual gaming revenue gain since the economic downturn of 2008, regional markets elsewhere in America are failing to bounce back from the recession.
Currently 28 states host casinos, with several, such as New Hampshire and Kentucky, considering legalization, and others, notably New York and Massachusetts, going through some form of casino legalization or expansion process at present. And yet, according to analysts, it seems that outside of Las Vegas, Americans just aren’t gambling enough.
“The fact regional gaming revenues excluding Nevada remained flat, despite further improvement in the economy and additional regional casinos throughout the US, is a strong indication that US consumers will continue to limit their spending to items more essential than gaming, even as the US economy continues to improve,” Moody’s explained in a report published earlier this month.
Much has been made of the stagnation of Atlantic City’s casino market, where three casinos are currently facing closure, following the demise of the Atlantic Club at the beginning of the year. Atlantic City has failed to recover from the economic downturn and now finds itself with a saturated market due to increased competition from neighboring states, in particular Pennsylvania.
In 2006, New Jersey’s casino revenue was at an all-time high of $5.2 billion, but by 2013 had dropped to just $2.86 billion. It’s no coincidence that 2006 was the year that first casinos opened in Pennsylvania, and since then the Keystone State has supplanted its neighbor as America’s second-biggest casino market.
But elsewhere, it’s a similarly depressing story. Over the past three months, the casinos of Connecticut, Colorado, Delaware, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, New Jersey, New York, Missouri and, yes, even Pennsylvania, have reported sharp revenue declines.
And it’s not just Atlantic City facing closures. Caesars recently shut down Harrahs Tunica, the largest casino resort between Las Vegas and Atlantic City, leaving 1,300 jobless. And just recently, the Margaritaville Casino in Biloxi announced that it will close in mid-September after only two years in operation.
Lack of Interest in Gambling Culture
Fitch Ratings Service analyst Michael Paladino recently said that there are many reasons for the regional slump, including market saturation, stagnant wages among low-stakes players, and a possible lack of interest among the younger generation in gambling culture. The latter point is one of the reasons why Las Vegas has very successfully been diversifying its entertainment offerings beyond gambling, as it seeks to embrace this new demographic, and this is another area where regional casino markets are unable to compete.
“Compared to the US regional and local gaming markets, the Las Vegas Strip has a much broader, deeper and diversified pool of visitors,” says Moody’s senior gaming analyst Keith Foley. “It attracts people on a nationwide and global basis, along with a very large revenue and earnings component related to the midweek convention business.”
So while many states look to the legalization or expansion of casino gambling as convenient means to plus budget deficits, they should take heed: analysts don’t see the market getting better any time soon. In fact, it will likely get worse, at least in the short-term. Moody believes that US gaming revenue will continue to decline between 3 percent and 5 percent over the next 12 to 18 months.
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