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Jun. 14, 2009
Copyright © Las Vegas Review-Journal

INSIDE GAMING: Moody's sour on casino recovery

HOWARD STUTZ
INSIDE GAMING

Casino operators have told the investment community that business levels along the Strip have stabilized in recent months.

Visitation has picked up, especially on weekends, although hotel rooms are going for nightly rates not seen in almost two decades. Customer spending, however, is down from a year ago.

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    • Still, there have been expressions of optimism.

    But Moody's isn't buying it.

    In a report on the American gaming industry, the bond rating service told clients it had a negative outlook for the casino business over the next 12 to 18 months.

    Moody's Senior Vice President Keith Foley said trends that began in 2008 have not shown any "tangible signs" of stabilization.

    "Our outlook for the U.S. gaming industry remains negative amid uncertainty about the timing and degree of a recovery," Foley wrote in a report updating December's market research.

    The bonds from 72 percent of U.S. gaming companies have been given a negative outlook by Moody's or face a possible downgrade.

    Foley said gaming's biggest risk is the possibility consumers will further reduce discretionary spending over the next 18 months.

    He was especially harsh on casino companies operating on the Strip and Atlantic City. Both markets have seen double-digit gaming revenue declines in the first four months of 2009. Foley isn't predicting a quick recovery.

    "We do not assume that because gaming demand declined along with the economy, it will return to pre-recession levels once the economy improves," he said.

    Las Vegas was hit harder by the recession than any American gaming market. Atlantic City casinos have lost customers and cash flow because of the economy and competition from expanded gaming in Pennsylvania and at the Yonkers Raceway near New York City.

    Negative trends have put significant pressure on the major casino companies.

    Harrah's Entertainment is at risk because its eight Strip casinos (including the Rio) and its four casinos on the Atlantic City Boardwalk provide 20 percent of the company's operating income.

    "As a result, (Harrah's) remains highly vulnerable to the changing competitive landscape," Foley said.

    The report wasn't all bad. Foley said casino expansion in Indiana has helped the state grow gaming revenues. The elimination of a loss limit and liberalized gaming boosted Missouri casinos.

    Foley also praised cost-cutting steps taken by Las Vegas Sands Corp., Boyd Gaming Corp. and Ameristar Casinos. He cautioned against additional reductions.

    "There is a risk in some cases that cost-cutting might affect quality of the gambling proposition and customer experience," he said.

    Howard Stutz's Inside Gaming column appears Sundays. E-mail him at hstutz@reviewjournal.com or call 702-477-3871. He blogs at lvrj.com/blogs/stutz.

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    BiscuitMKE wrote on June 18, 2009 10:48 AM: I recently enjoyed 6 days in Vegas (May 3 - May 9) and had a wonderful time. Yes, some casinos had 'tight' slots but some were reasonable. I stayed at Gold Coast (comp) and Bally's (also comp) and was able to enjoy a won/loss ratio that allowed me to play for many hours. This was my 52nd trip to Vegas and although I miss The Stardust (my old favorite) and Westward Ho, I yet find Vegas a wonderful place to visit. No Indian or local casino can even come close to what Vegas offers. I cannot travel as much as I once did (due to personal economics) but Vegas still turns me on and can be a reasonable vacation spot. I cannot wait to return.


    Hard Times wrote on June 14, 2009 07:55 AM: "The new figures, released this month by the National Indian Gaming Commission, show that the nine-state area stretching from Michigan to Wyoming saw an increase of nearly $2 billion in gambling revenue between 2007 and 2008."

    http://www.startribune.com/local/south/47967156.html?elr=KArks:DCiUHc3E7_V_nDaycUiacyKUnciaec8O7EyUr

    Goes to show you "what happens in Vegas" doesn't always stay in Vegas. The Indians are scalping Strip casinos. People still have money to gamble. They're just doing it closer to home. Las Vegas, indeed, is in for a tough road to recovery.


    icantstandit wrote on June 14, 2009 05:38 AM: I agree with Dave...Casinos are driving away customers with lack of services and comps, and with tighter and tighter slots, and then whining that their business is down. Makes no sense. It's as if they thought everyone was addicted and HAD to gamble, and are now finding out that isn't true. And they haven't a clue what to do, because they have stockholders, who demand bigger and bigger profits. It's a dilemma!


    Dave wrote on June 14, 2009 04:36 AM: "There is a risk in some cases that cost-cutting might affect quality of the gambling proposition and customer experience," he said.

    A good example of that would be Station Casinos. Try and get a comp or beverage service in the slots.