Standard & Poor’s predicts another tough year for gaming industry

By Steve Green

Tuesday, Dec. 22, 2009 | 5:51 p.m.

Hurt by too much capacity, even as demand improves, the gaming industry faces another tough year in 2010, Standard & Poor’s Equity Research reported Tuesday.

“Gaming fundamentals continue to be poor,” S&P said. “Its largest markets, Las Vegas and Atlantic City, are more severely impacted by higher levels of supply in Las Vegas and increasing competition from gaming expansion in neighboring states.”

With the recession reducing visitation to Las Vegas, hurting Strip casino resort operators, and soaring unemployment hurting locals casinos, Nevada gaming revenue for the fiscal year ended June 30 fell 13.7 percent to $10.8 billion.

The July-October 2009 win fell 10.6 percent to $3.4 billion, making this the worst year for Las Vegas hotel-casinos in memory.

Standard & Poor’s analysts also commented Tuesday on the lodging industry, which worldwide has been hurt by a decline in travel — particularly high-end business and convention travel — tied to the recession.

“Our view for the hotel industry in 2010 is for a long period of continued tough operating conditions, with oversupply becoming more the story as demand somewhat recovers. We think this will likely lead to only a small uptick in industry occupancy rates from severely depressed levels,” S&P said. “The continued growth in supply, coupled with a continuing shift in hotel guests’ preference for cheaper rooms, will likely lead hotel operators to lower rates, pressuring revenue per available room.”

As for gaming, the analysts added: “We expect the industry’s performance in

2009 and 2010 to be notably worse than lodging’s because gaming is more sensitive to consumer discretionary spending.”

Today’s report from S&P follows one issued last week by Fitch Ratings.

Fitch forecast “industry trends will remain weak well into 2010. Gaming revenue growth will continue to be broadly pressured as unemployment is expected to remain at elevated levels at least through 2011, which will dampen consumer spending.”