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March 28, 2024

THE ECONOMY:

Gaming analysts: Industry’s recovery could lag economy

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Justin M. Bowen / File photo

Analysts with Moody’s Investors Service said Wednesday that the gaming industry’s recovery could lag that of the economy as a whole.

A recovery for the gaming industry remains uncertain, even if the national economy improves, an international financial research company said Wednesday.

Moody’s Investors Service said its rating for the U.S. gaming industry remains negative as analysts have watched monthly gaming revenues slide.

“Unfortunately, our view is that the economic forecast would suggest that there is going to be a very slow recovery in the U.S. beginning next year, which would suggest that the worst could be over for the U.S. gaming industry,” Moody’s Vice President and Senior Credit Officer Peggy Holloway said. “However, we think there is the highest degree of uncertainty surrounding the timing and the pace of the overall economic recovery as well as any recovery in gaming.”

Holloway said Moody’s would closely watch monthly gaming revenues during the next two months for indications as to when the industry will recover. If revenue declines further in September and October versus previous months, Holloway said, it would be an indication that gaming revenues haven’t reached bottom.

“I don’t think anyone is in a position to make a strong call on a robust recovery given the severity of the decline in consumer spending,” Holloway said.

Moody’s Senior Vice President Keith Foley said the rating service’s definition of stabilization doesn’t mean an increase in revenues.

“Gaming revs in the sector will stabilize when we believe it isn’t getting any worse. Stable doesn’t necessarily mean recovery; it just means the gaming revenues hit bottom and stay there for a period of time,” Foley said.

During today’s conference call, Moody’s analysts outlined three scenarios for the gaming industry when the economy improves, which they called the good, the bad and the ugly.

The good, Holloway said, would be if gaming revenues snap back as the economy recovers, which Moody’s believes has a low probability of happening.

The bad is if the economy improves and gaming revenue trends stabilize at current levels, while the ugly is if gaming revenues continue to decline as the economy recovers.

Holloway said Moody’s believes “the bad” is the most likely scenario for several reasons, including a stall in the overall economic recovery and the continuing stress on consumers.

“Since gaming has proved to be an expenditure that consumers can live without, it speaks to our concern that the recovery in gaming will not take hold very robustly,” Holloway said.

Foley said Moody’s will have a better outlook on the gaming industry during its annual gaming conference call in November.

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