Posted on: October 1, 2024, 02:53h.
Last updated on: October 1, 2024, 03:09h.
Gaming executives are constructive on current conditions in the industry, but more subdued in their outlooks for the next couple of quarters with some forecasting retrenchment in consumer spending.
In the latest edition of the American Gaming Association’s (AGA) Gaming Industry Outlook, 88% of respondents said they view the current state of the business as “good” or “satisfactory”, but their three-to-six-month outlook is just 3% net positive compared to 28% net negative. That net negative figure is up from just 4% in the first quarter.
The share of more conservative responses on measures such as future business conditions outweighed more positive responses by 8.7 percentage points this quarter (8.7% net negative), compared to 6.3% net positive in Q1 2024,” according to the trade group. “For example, in this quarter’s survey, slightly more gaming executives anticipate the pace of revenue growth to decelerate rather than accelerate over the next three to six months (16% net negative).”
The AGA’s Future Conditions Index jibes with expectations that US GDP growth is likely to slow in the coming quarters, but that the world’s largest economy is likely to avert a recession. The third quarter reading of the index was 98.9, indicating a climate in which gaming sector activity “is expected to moderately decrease over the next six months (1.1% annualized rate)” when adjusted for inflation.
Gaming Execs Sees Declines in Hiring, Spending
Operating land-based casinos is a capital-intensive endeavor and that’s not going to change, but with 2024 marking the end of significant near-term expenditures for some companies in the space, a more tight-fisted approach is expected going forward.
The net negative rate among executives polled by AGA regarding hiring trends is 56%, while 15% have net negative views on upcoming capital spending. On the upside, restrained spending, including more prudence in terms of adding staff, indicates more operators are prioritizing the strength of their balance sheets. Thirty-four percent of executives polled by the AGA have net positive views about their firms’ fiscal positions.
When it comes to capital expenditures, nongaming areas will be points of emphasis for operators.
“Hotel (56%) and food and beverage facilities (56%) continue to be the main and growing focus of capital investment among operators, followed by live entertainment (28%) and casino floor slots (22%),” according to the AGA survey.
Access to Credit Important, Improving
Last week, the Federal Reserve lowered interest rates by 50 basis points and Fed funds futures imply another 100 basis points worth of cuts by the second quarter of 2025, but gaming management teams are still concerned about inflation and interest rates.
Inflationary or interest rate concerns continue to be cited by some as a key factor limiting operations (28%). However, nearly all gaming executives report that financial conditions are accommodative, with more viewing access to credit as easy (19%) than restrictive (3%) for the first time in two years,” noted the AGA study.
The good news for the industry is access to credit remains strong and is improving. As just two examples, MGM Resorts International (NYSE: MGM) recently sold $850 million in debt, upsizing that offering from $675 million amid strong demand, and Wynn Resorts (NASDAQ: WYNN) sold $800 million in corporate bonds.
