Gambling's struggles projected to continue


Casino companies will continue to eliminate jobs and struggle with large debt loads as the industry deals with an "unprecedented economic downturn" in the coming year, an annual outlook by independent research firm Spectrum Gaming Group forecasts.

The Atlantic City-based firm released its fifth annual "Top 21 Trends in Gaming" on Monday, saying fallout from the flailing economy will dictate next year's gaming trends.

"It's no secret to anybody watching this industry that 2009 is going to be an extremely challenging year," Spectrum Senior Vice President Joseph Weinert said. "This is the first time the industry has really felt the impacts of the national economy. We don't see any catalyst for the industry to reverse its fortunes until the economy at large reverses its fortunes."

The list addresses continuing changes in development, operations, consumer behavior, markets, politics, technology and other aspects affecting the casino industry worldwide.

Although the list looks at the casino industry on a global scale, many of the issues raised could directly affect Las Vegas. Some of those issues include corporate and property debt restructuring in the wake of declining revenues; major gaming operators selling off properties to emerging operators; and the continued elimination of jobs, both through cuts and attrition.

With the fourth quarter ending Wednesday, some gaming operators and individual properties -- Station Casinos, Harrah's Entertainment, Herbst Gaming, Hooters Hotel and Black Gaming in Mesquite -- find themselves facing bank covenants that could force them into restructuring early next year.

Weinert said it would be in the banks' interests to work with these operators "to achieve the best solution possible" during the economic slowdown.

"In times like this, it's not like these are company-specific problems that can be attributed to some glaringly bad decision by the company," he said. "Any lender has to recognize the bigger picture rather than looking at specific companies. They're caught up in recessionary times that are out of their control."

Companies could try to raise quick cash next year by selling off assets, if any buyers can be found. That means this month's announcement that Kansas businessman and former New Frontier owner Phil Ruffin was buying the Treasure Island from MGM Mirage for $775 million could be a harbinger of future deals.

Gaming analysts believe MGM Mirage will use the cash from the sale, $500 million, to help with the costs of the $9.1 billion CityCenter project or to add liquidity to the gaming company's books.

Spectrum also believes the economy will lead to a continued moratorium on development of big-box gaming resorts and continued drops in prices for hotel rooms, shows and dining as gaming operators struggle to keep their properties filled with customers.

Furthermore, the research firm believes convenience-based gaming will continue to achieve better year-to-year results than destination-based gaming properties.

Weinert said it will be interesting to see whether gaming will recover before the overall economy -- something economic observers don't foresee happening before 2010 -- or whether it "goes lock-step with it" or even lags behind.

"There is not a precedent for this," he said. "So, we'll be watching it closely."

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

 

Rules for posting comments

Comments posted below are from readers. In no way do they represent the view of Stephens Media LLC or this newspaper. This is a public forum. Read our guidelines for posting. If you believe that a commenter has not followed these guidelines, please click the FLAG icon next to the comment.