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Moody's upgrades gaming industry outlook

22 June 2010

LAS VEGAS, Nevada -- Moody's Investors Service upgraded its view of the American gaming industry this morning, saying the overall credit conditions for the casino market will neither erode nor improve materially during over the next 12 to 18 months.

New York-based Moody's revised its Industry Sector Outlook for the U.S. Gaming Industry to stable from negative.

Moody's Senior Vice President Keith Foley said recently reported gaming revenues seemingly leveled off somewhat in the past few months.

"Although monthly gaming revenue by jurisdiction varies considerably, overall, U.S. gaming revenue was flat year-over-year in March and April 2010, and it appears the trend will hold for May," Foley said. "While not a stellar performance, it's a marked improvement over the consistent, and often substantial, declines of 2008 and 2009. It also has favorable implications for gaming company operating profits, a majority of which comes directly from slot machine and table game revenue."

Moody's anticipated that some American gaming companies would continue to experience operating profit declines.

However, Foley said the trend would flatten during the second half of the year. He said monthly state gaming revenues could show continued stability when based on year-over-year comparisons. The industry also benefited from aggressive cost-cutting actions undertaken in the second half of 2009.

Moody's said the change in the overall gaming outlook might not filter down to the outlook for individual casino operators.

Foley said discretionary consumer spending on gaming would remain under pressure.

"This will make it challenging for U.S. gaming sector conditions to materially improve from their very weak levels, and for many U.S. gaming companies to reduce their significant debt burdens," Foley said.