Analyst: Casino industry financial outlook for 2016 looks stable

Count the analysts at Fitch Ratings Service as predicting 2016 to be a stable environment for most U.S. gaming operators.

Few casino openings are planned that could tip the scales in saturated gaming markets. Discretionary spending by consumers remains on an upswing. Companies saddled with a hefty long-term debt — this doesn’t include Caesars Entertainment Corp. — have taken necessary steps to address near-term maturities through refinancing efforts and other means.

That’s not to say, however, the casino business is back to the halcyon days of monthly double-digit gaming revenue increases.

“We maintain that the long-term growth prospects for the industry remain lackluster,” Alex Bumazhny, Fitch’s director of gaming, lodging and leisure, wrote in the ratings service’s 2016 outlook for U.S. gaming.

Bumazhny said “secular headwinds” loom on the horizon after a year that saw casino revenue benefit from low gasoline prices to increased employment numbers.

Younger casino customers aren’t as interested in casino-based gambling as baby boomers, Bumazhny wrote. Other gaming-oriented alternatives and entertainment options, such as social casinos, online gaming and instant lottery tickets, are grabbing the attention of consumers and their wallets.

“These headwinds will impact slot-oriented regional operators and slot suppliers more than amenity-rich, resort-style casinos,” he said.

The gaming industry — especially Nevada — is addressing this issue through the development of new games that appeal to younger customers. Skill-based slot machines, which include elements of video-style arcade games geared toward a younger patron, were displayed at October’s Global Gaming Expo in Las Vegas. Most aren’t expected to reach the market until later this year.

In a separate report on the U.S-based gaming suppliers, Bumazhny warned investors that the major companies — International Game Technology and Scientific Games Corp. — aren’t providing any “game-changing slot innovations that will motivate wholesale slot floor replacements.” He said mobile gaming technology — games played on smartphones or tablets — are becoming more prominent.

“Positively, the larger suppliers have good exposure to mobile gaming,” he said.

Two major casino openings are scheduled for the United States in 2016. MGM Resorts International will open the $1.2 billion National Harbor project in Maryland — 10 miles from Washington, D.C. — in the second half of the year. In California, Penn National Gaming’s $390 million Hollywood Casino Jamul near San Diego opens in the summer.

Bumazhny included in the mix December’s opening of the $300 million Scarlet Pearl in D’Iberville, Mississippi, near Biloxi.

All three, he said, will have “competitive impacts” on their respective markets.

MGM National Harbor will take business from Penn’s racetrack casino in West Virginia and two Baltimore-area casinos operated by Cordish Cos. and Caesars. The privately owned Scarlet Pearl could peel business from the Biloxi market.

Bumazhny and Credit Suisse gaming analyst Joel Simkins — who toured the Hollywood Jamul construction site last month — said San Diego’s saturated Indian gaming market will face stiff competition from the Penn property.

Simkins said the drive time between Jamul and downtown San Diego is just 25 minutes, which makes the casino more accessible than the majority of the San Diego-area Indian gaming resorts, some of which have “overly difficult or treacherous” drives.

“In our view, Jamul should benefit from its convenience, appeal as the newest generation casino in the market, and (offer) strong California-centric food outlets that have considerable appeal,” Simkins said.

The early part of the year will be dominated by real estate investment trust news.

Pinnacle Entertainment and Gaming and Leisure Properties are expected to complete their $4.75 billion merger. Pinnacle’s 14 casinos will be acquired by Gaming and Leisure, which will lease the casinos back to the Las Vegas-based company.

MGM Resorts is creating a publicly traded REIT — 70 percent owned by the casino company — in which 10 properties, including seven on the Strip, will form the real estate business. MGM has said its REIT provides the company with “strategic and financial benefits.”

Bumazhny said casinos are “not well-suited” to be REIT tenants.

“Many proposed operating companies will have little margin for error after all of their fixed costs are accounted for,” he said.

Caesars marks the one-year anniversary Friday of the bankruptcy filing for Caesars Entertainment Operating Co. The operating division seeks court approval to eliminate almost $10 billion of debt by placing its two dozen casinos, including Caesars Palace and Harrah’s Reno, into a REIT. Caesars Entertainment will keep ownership in the operator and property companies.

The REIT matters weigh down Fitch’s gaming outlook going into the year.

“We would also be more positive should the pending REIT plans be canceled or if the REIT leases are underwritten more favorably with respect to the operating companies,” he said.

— Howard Stutz’s Inside Gaming column appears Wednesdays and Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. Find on Twitter: @howardstutz.

ad-high_impact_4
Business
Primm’s outlet mall has fallen on hard times
The mall, attached to Primm Valley Resort, opened in 1998. Back then, it was a “textbook, perfect outlet-center location." But now, Primm’s outlet mall has fallen on hard times. Las Vegas Boulevard has endless shopping spots. And there are other outlet malls that don’t require a hefty drive to the state line. Its mortgage-holder foreclosed on the mall in late September.
Las Vegas residents discuss avoiding holiday scams
Las Vegas residents discuss their donation habits and how they avoid giving money to scam charities during the holiday season. (Bailey Schulz/Las Vegas Review-Journal)
Tesla’s Nevada Gigafactory ahead of economic impact expectations
The Tesla Gigafactory’s economic impact on Nevada has exceeded projections, bringing in more than 7,000 jobs. In 2014, Nevada agreed to give the automotive and energy company $1.3 billion in tax abatements. In return, Tesla promised to meet certain requirements in areas like employment and capital investment. As of June, Tesla has brought in a total of $6.05 billion in capital investment, surpassing the $4.95 billion projection. The original contract gave the company until 2024 to make $3.5 billion in capital investments in Nevada. Derek Armstrong, deputy director of the Governor’s Office of Economic Development.
Land sales near the Las Vegas Raiders stadium
Land around the Las Vegas stadium site has been selling for high prices. A few months before the stadium’s groundbreaking, Global Trust Group acquired a 2.5-acre parcel just north of the stadium site. The property sold for $7.25 million, or $2.9 million an acre. Osprey Real Estate Capital and Huntington Hotel Group acquired a 2-acre industrial site just west of the stadium site in late November. The property sold for $6.5 million, or $3.15 million per acre. That's roughly 12 times the average price of land in the valley this year as tracked by Colliers International.
T-Mobile Tech Experience Truck parks in Toshiba Plaza at T-Mobile Arena
The Tech Experience Truck is a state-of-the-art showroom on wheels, with demonstrations that put connected drones, smart cities, augmented/virtual reality and smart tracking. The exhibit shows new wireless technology – including 5G and the Internet of Things (IoT). (K.M. Cannon/Las Vegas Review-Journal)
Steve Siegel, CEO of the Siegel Group, speaks about helping families and other needy residents
Steve Siegel, CEO of the Siegel Group, speaks about helping families and other needy residents to keep them from teetering off into homelessness. Bizuayehu Tesfaye/Las Vrgas Review-Journal @bizutesfaye
Crowds camp out for Chick-fil-A opening
Dozens of customers camped out 24 hours ahead of the 6 a.m. Thursday opening of the new Chick-fil-A on Rainbow Blvd.
Cheapest listings for sale in Las Vegas
Listed for $39,990, 585 S. Royal Crest Circle, Unit #9 is one of the cheapest homes currently listed for sale in Las Vegas. (Caroline Brehman/Las Vegas Review-Journal)
MGM's sports betting deals
MGM Resorts International signed a sports betting sponsorship agreement with the NBA in July It was the first professional sports league to have official ties with a legal sports betting house. The deal came just two months after the U.S. Supreme Court overturned a law prohibiting sports betting in most states. In October, MGM became the first gaming company to sign a sports betting partnership with the NHL. In November, MGM became the first gaming company to sign a sports betting partnership with the MLB. Financial terms of Tuesday’s deal and earlier partnerships have not been announced.
Terry Miller discusses Convention Center
Project Manager Terry Miller explains the phases of Convention Center construction.
Zappos treats their team members on Cyber Monday
Zappos rolls out a variety of food, drinks and special activities for all team members at their downtown Las Vegas headquarters for Cyber Monday. (K.M. Cannon/Las Vegas Review-Journal)
Team Hybrid at the 2019-Model Motor Trend International Auto Show
Among the companies showing off the 2019 model cars, Team Hybrid shows off its modified cars. Las Vegas resident David David talks about the team, which is in its ninth year exhibiting at the show, and his show car.
Black Friday Shoppers at downtown Summerlin and at the Arsenal
Black Friday shoppers at downtown Summerlin and at the Arsenal. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfYe
Black Friday shopping in Las Vegas
Black Friday sale shopers express their shopping experience. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Las Vegas Livestock recycling Strip food waste
Las Vegas Livestock collects and recycles food from many Las Vegas Strip companies. (Nicole Raz/Las Vegas Review-Journal)
Black Friday at Fry's
Shoppers line up for deals early on Black Friday at Fry's Electronics on Las Vegas Boulevard South. (Mat Luschek/Las Vegas Review-Journal)
Black Friday shoppers at Best Buy at 5 am
Black Friday shoppers at Best Buy at 5 am on Nov. 23. (Mat Luschek/Las Vegas Review-Journal
Black Friday - 1am Closing Time
Quiet night.
Black Friday - 12:30am - Best Buy Arroyo Crossing
Sam's Town Holiday Lighting Ceremony
On Wednesday, Nov. 21, 2018, Mystic Falls Park opened with its annual tree lighting ceremony, hosted by Boyd Gaming Executive Chairman Bill Boyd. The attraction features a Winter Wonderland theme and holiday-inspired laser light show, available daily Nov. 23 to Jan. 1. (Mat Luschek/Las Vegas Review-Journal)
What Is A Smart City?
George Karayannis, vice president of CityNow, Panasonic’s smart-city arm, explains. (Nicole Raz/Las Vegas Review-Journal)
Walmart uses virtual reality to train employees
Walmart Academy Facilitator demonstrates the VR training program being used by Walmart stores across the country.
With holidays around the corner, department stores hiring extra staff
J.C. Penny hired 72 seasonal workers this year at the Galleria at Sunset mall in Henderson in order to handle the heavy traffic of the holiday shopping season. (Rachel Aston/Las Vegas Review-Journal)
Startup Weekend fosters new businesses
With the help of entrepreneurial peers and an expert panel of mentors, Techstars Startup Weekend fosters the ideas of attendees into marketable business plans. (Rachel Aston/Las Vegas Review-Journal)
Mecum Car Auction in Las Vegas
The Mecum Auctions is held at the Las Vegas Convention Center. Bizuayehu Tesfaye/ Las Vegas Review-Journal @bizutesfaye
Construction underway for new Google Data Center
Henderson is slated to be home to a new Google data center in December 2020. The Governor’s Office of Economic Development approved $25.2 million in tax abatements for Design LLC, a wholly-owned subsidiary of Google. The company plans to build the data center on 64 acres of land on Warm Springs Road west of Boulder Highway.
Anthony Rufo talks about his new product, an in-home digital companion and monitor.
Anthony Rufo talks about his new product, HAPPIE Home technology, an in-home digital companion and monitor designed for unpaid family caregivers that gives personalized alerts, messages and reminders. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Holiday parades help bring shoppers to Downtown Summerlin
Sports Town USA floor manager Angela Gardonio talks about the work that goes into the Downtown Summerlin holiday parades and how they benefit her and other businesses there.
Final vote on CG Technology
Final commission vote on the $2 million settlement for CG Technology.
Happie Home Startup Establishing Headquarters In Las Vegas
Digital companion startup company Happie Home is establishing its headquarters in Las Vegas after receiving tax abatements from the Governor's Office of Economic Development on Nov. 15. (Bailey Schulz/Las Vegas Review-Journal)
TOP NEWS
News Headlines
Add Event
Home Front Page Footer Listing
Circular
You May Like

You May Like