Published on: October 1, 2024, 02:53h.
Last updated on: October 1, 2024, 03:09h.
Gaming industry leaders express optimism about current conditions, but show caution in their projections for the next few quarters, with some anticipating a decline in consumer spending.
In the latest American Gaming Association’s (AGA) Gaming Industry Outlook, 88% of respondents consider the current business state as “good” or “satisfactory.” However, their outlook for the next three to six months is only 3% net positive, compared to 28% net negative. This negative trend has risen from 4% in the previous quarter.
The share of conservative responses regarding future business conditions is higher this quarter, with 8.7% more negative responses than positive ones. This contrasts with the 6.3% net positive responses in Q1 2024. More gaming executives anticipate a slowdown in revenue growth over the next three to six months (16% net negative).
The AGA’s Future Conditions Index aligns with projections of a slowdown in US GDP growth in the coming quarters, but an expected recession is unlikely. The index for the third quarter was 98.9, indicating a moderate decline in gaming sector activity over the next six months (1.1% annualized rate) when adjusted for inflation.
Gaming Executives Expect Decreases in Hiring and Spending
Operating land-based casinos requires significant capital investment, which is expected to continue in the industry. However, with some companies nearing the end of major expenditures in 2024, a more cautious approach is anticipated.
AGA’s survey shows that 56% of executives have a negative outlook on hiring trends, while 15% are pessimistic about upcoming capital spending. Conversely, more operators are prioritizing balance sheet strength by exercising restraint in spending and hiring. 34% of executives have positive views on their firms’ financial positions.
Operators will focus on non-gaming areas for capital expenditures, with hotels (56%) and food and beverage facilities (56%) being the main areas of investment, followed by live entertainment (28%) and casino floor slots (22%).
Access to Credit is Crucial and Improving
Despite recent interest rate cuts by the Federal Reserve, gaming management remains cautious about inflation and interest rates. However, access to credit is seen as improving, with financial conditions being accommodative. More executives view access to credit as easy (19%) rather than restrictive (3%), marking a positive change after two years.
Some executives continue to cite inflation and interest rate concerns as limiting factors (28%). However, the majority report favorable financial conditions, with a positive shift towards easy access to credit for the first time in two years, as noted in the AGA study.
The gaming industry’s access to credit remains strong and is on the rise, as evidenced by successful debt offerings from companies like MGM Resorts International and Wynn Resorts.