A report by Fitch outlines a difficult recovery for the US casino industry. The report marks 2023 as the year when the operators will have recovered from the COVID-19 impact.
Credit Company Fitch Draws a U-Shaped Recovery Forecast for US Casino Operators
Fitch Ratings, the leading provider of credit ratings, released a report entitled “US Gaming Will Experience a U-Shaped Recovery Post-Reopening” earlier this week. Alex Bumazhny, Colin Mansfield, Connor Park, and Carla Norfleet Taylor were the analysts from Fitch who shared their insights in the report. According to the paper, casinos in the US are likely to take some three years to achieve full recovery in terms of revenue.
The report outlines expected decline in revenue for the remainder of 2020. Then, in 2021, the industry will begin to recover. According to the report, the recovery will be U-shaped and is expected to end by 2023. The paper suggests that in 2023, the gaming industry revenues will reach earnings before interest, taxes, depreciation and amortization (EBITDA) levels which were observed prior to the COVID-19 period. The report outlines an expected drop of revenue with 30% until the end of 2020 for the regional casino operators in the US. The forecast for the Las Vegas Strip predicts even sharper decline, around 45%. Macau’s properties by Las Vegas Sands, MGM Resorts, and Wynn Resorts can expect a 50% drop in the revenue, says the report. Additionally, the company also noted in its report:
Fitch reviewed its US gaming universe in the span of four weeks, as the coronavirus outbreak intensified. Credit implications have been negative, with higher leverage forecasts resulting in the widespread revision of Rating Outlooks to Negative.“
Undoubtedly, the Recovery of the Gaming Industry Will Be Difficult
Despite that many states are now restarting their gaming industry; a part of the venues remains closed. Some 621 tribal and commercial casinos have opened so far, but 368 remain closed, says the American Gaming Association’s (AGA).
According to Fitch, the recovery of the industry for US operators properties in Macau will be very difficult. The researchers point out that the visitation of those properties still depends on the visa issuance and resuming of normal travelling conditions. With that being said, a mandatory quarantine is still valid upon re-entry in China which poses difficulties towards the casino visitors, regardless that the venues are open.
Las Vegas Strip will also go through a painful recovery. According to Fitch, the regional operators will shake off the post-COVID-19 recovery faster than Las Vegas. The researchers say that regional operators depend on “mostly local, drive-in visitation“. However, this is not the case with the Las Vegas Strip. According to Fitch: “Recovery will be the slowest on the Strip, given its greater reliance on inbound visitation, air capacity, and conventions. Regionals are less cyclical than Las Vegas and should recover quicker, as they have mostly local, drive-in visitation.“
Keeping a Close Eye on Reopening
With that being said, it’s important to mention that Nevada Governor Steve Sisolak is still keeping in an eye on the unraveling situation. Earlier this week, Sisolak posted on Twitter saying:
We are watching increases in cases, both in-State and across the nation, including bordering states. We have taken deliberate steps to help protect Nevadans and visitors, including limiting capacity.”
Looking at the data provided by AGA, so far nearly one-third of the US casinos remain closed. On the other hand, the casinos which have already opened now operate under limited capacity of 50% per venue. In other words, the projection drawn by Fitch might become reality in the next few years. But looking at the bright side, the resuming of operations will bring hundreds of thousands of employees back to work. With that, both employees and guests will be able to shake off the novel coronavirus (COVID-19) once and for all.