Gaming Industry Faces both Losses and Gains

Fri, 06 Aug 2010 07:42
In  reports only released just recently, Moody's Investors Service painted a bleak outlook on the gaming industry in the United States, with a couple of hopeful patches.  In another report that seem to be a bit of a contrast though, Wynn Resorts, one of the biggest Las Vegas-based casino operators, claimed booming profits. Before anyone gets his or her hopes too high though, the Moody’s report must be given attention first.  Its report, entitled “U.S. Gaming: Proceed with Caution” gives reasons why people should still be a bit wary about the plight of the gaming industry: - The announcement of Las Vegas Sands Corp., one of the gaming industry’s major players, of its second quarter results revealed that even though occupancy and revenue per available room improved at two of its properties, the Venetian and the Palazzo on the Las Vegas Strip, the average daily room rates for both properties have been down since last year.  That would still equate to lower revenues for the company. - A key indicator of business in the country’s gaming capital (including spending and travel), consumer confidence levels have fallen to a five-month low in July.  This loss of confidence is triggered by the Americans’ worry about job security and continued loss of jobs. The company tasked to study this index, a New York-based research firm The Conference Board, reports that its sentiment index fell to 50.4, which is below the forecast of economists reported by Bloomberg News. - The reasons for job insecurity of Americans may now be anchored at public job losses.  As job growth in the private sector picks up, thanks to the government’s economic stimulus efforts, state and local government jobs are on the decrease.  Bleak forecasts claim that close to hundreds of thousands of public sector jobs are in danger.  Less public sector jobs would still resort to less spending on discretionary entertainment like casino gaming.  The 9.5% unemployment rate is not going anywhere, analysts predict. - Concerns that companies like Harrah's Entertainment Inc. and MGM Resorts International, giants in the gaming industry, remain debt-heavy especially in relation to the cash flow produced by their casino resorts continue to ail the industry as a whole. A glimmer of hope for international gaming companies Another major industry player, Wynn Resorts, also reported losses in their Las Vegas operations.  The overall picture for the company is a bit more positive though, as it posted more than twice its profits during the second quarter of 2010.  American business, anchored by Las Vegas operations may be at best, recovering, but Wynn’s business in China’s Special administrative Region of Macau is on the upswing.   Revenues in Wynn Macau are reported to have increased by 74 percent this quarter, as opposed to the second quarter of last year. Moody’s also considered reports of US gaming companies’ international operations, that it does acknowledge that international operations are compensating poor local performance, but by the end of the year, profits of gaming companies in their local operations will stabilize, and will continue increasing in the international front as companies like Wynn continue to expand their international investment portfolio.

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