Moody’s Investors Service Upgrades the U.S. Casino Industry to “Stable” Designation
Moody’s Investors Service increased the US casino industry’s rating on Tuesday from “Negative” to “Stable”. Moody’s said that higher gaming revenues in most states in April and May 2015 convinced them to change the rating.
The service, which often sets the table for investors activity, said that casino finances are improving slightly across the nation, except in Connecticut and New Jersey. The industry’s better outlook is a combination of rising revenue, cost-cutting measures, and an easing of cannibalization of customer bases by various operators.
Keith Foley’s Perspective
Keith Foley, the chief analyst behind the latest decision, said that revenue is flattening out, rather than falling. That is an improvement over past months and years, though people should not misconstrue what is happening. Foley said, “We’re not saying they’re [revenues are] getting better.”
Revenues increased in all 18 states covered by Moody’s studies in April 2015. The next month, 16 of the 18 states showed slight improvement, though New Jersey and Connecticut had declining revenues. Both states have been hard hit by the saturation of the gaming market in the American northeast. In the region, the increase of gaming inside New York, Massachusetts, and Pennsylvania has hurt revenues in nearby states.
Earlier Received a Negative Rating
Moody’s had previously rated the casino industry as “negative”, citing slightly declining revenues, weak demand from the public, and a list of other smaller issues. Keith Foley wrote that the industry’s lingering concerns are likely to continue for the near-future, because of a weak growth in disposable income in the wider US economy. Given such a limitation, the demand for gaming opportunities is likely to remain limited.
Connecticut’s Casino Troubles
Connecticut’s lawmakers continue to fret over the long term outlook for their state’s gaming industry. At one time, Foxwoods Casino and Mohegan Sun were among the most lucrative casinos in the world. The two tribal casinos were equidistant between Boston and New York City, so they drew significant traffic from two of America’s richest and most populous cities.
Then New York state and Massachusetts began to build up their own native gaming industries, installing video lottery terminals or slot machines in local racetracks. This assured more gamblers stayed home to play locally. Combined with debt from renovations and the Global Recession, Foxwoods and Mohegan Sun began to have serious problems from 2008 onward.
Satellite Casino Plan
Now, Connecticut’s business and political leaders see the industry facing tougher times. New York licensed three new casinos in December 2014, while Massachusetts approved an MGM Resorts casino in Springfield and a Wynn Resorts casino in Everett in October 2014. Both developments have the Connecticut legislature considering the development of satellite casinos on the borders of the state, to keep the state’s own gamblers playing nearby. Those casinos would be co-owned by former rivals, Mohegan Sun and Foxwoods.
New Jersey’s Gaming Industry
In New Jersey, the picture continues to be cloudy. Atlantic City was rated as the US city in the worst financial shape in 2014, but certain factors point to recovery. Despite his heavy-handed tactics with the AC workers unions, Carl Icahn has a proven record of turning around Atlantic City casinos in tough times, so Trump Taj Mahal is in better hands than it was a year ago. Also, the Revel Casino is likely to reopen sometime this fall.
At the same time, Atlantic City had to take out a loan from the State of New Jersey, due to its low credit rating and its spiraling debt. Also, the city’s casinos are still wondering what future taxes will look like, as the PILOT bill has yet to be signed into law. Meanwhile, lawmakers around the state and gaming executives around the country continue to call for approval of North Jersey casinos. Steve Sweeney says no referendum on that issue is going to be on the ballet this November, so another year will pass without a plan for New Jersey’s future growth.
US Gaming Industry Solid as a Whole
Those are state issues, though. Moody’s Investors Service sees a better outlook for the casino industry as a whole in the United States. Stable is a lot better outlook than negative.
