A recent pessimistic Fitch Ratings Report indicated “Long-term robust same-store growth in U.S. bricks-and-mortar regional gaming is unlikely.” The report said, “We estimate gaming revenues derived from slots in regional markets will decline to roughly 75 percent of total revenue by 2030 from the current mix of about 85 percent.” The causes are regional market saturation; stagnant wages among lower-tier players; other choices for disposable income; more online and social gaming options; younger generations’ declining interest in gambling; and less retirement readiness among baby boomers, the report stated.
The Fitch report said since most states have some form of casino gambling, regional supply has met demand. Kentucky, New Hampshire and a few other states may legalize casinos in the near future, with Texas a more long-term possibility. However, even if more states allow casinos, that could result in cannibalization, which the Fitch report said is what happened in Ohio, where one-third of revenues new casinos came from surrounding states.
The report also forecast that online gaming legislation on the federal level is unlikely to be passed in the “near- to medium term.” Also, it said casino-themed social games “are a net negative for the U.S. regional casino operators,” because spending on social games, lotteries and other low-cost and convenient options “eats into the customers’ casino and other recreational budgets.”
Generational issues also will impact casino gambling, the report said. Baby boomers, a significant segment of the existing gambler base, are losing income due to low interest rates and could be affected by changes in Social Security. In addition, younger generations seem to prefer table games over slots, so “suppliers’ slot sales and operations will likely continue to struggle,” the report said.
Fitch said of the four main U.S. regional operators, Pinnacle Entertainment “is best positioned due to its strong free cash flow.” Boyd Gaming “also benefits from the FCF at Peninsula Gaming LLC and its net operating losses,” the report noted. Isle of Capri Casino, however, “is the most vulnerable to long-term moderate same-store revenue decline scenario.” And Penn National Gaming “is more vulnerable in more severe scenarios given its fixed-cost structure,” the report indicated.
