Fitch Ratings Warns Of The State Of US Gaming

Fitch Ratings, one of the major credit rating agencies, released a warning last Thursday about the state of U.S. gaming, “U.S. Gaming Will Experience A U-Shaped Recovery Post-Reopening.”

In the report, analysts Alex Bumazhny, Colin Mansfield, Connor Park, and Carla Norfleet Taylor anticipate casino operators reporting significant losses by 2020 as they begin slowly climbing out of their hole next year. A “full recovery” to pre-coronavirus levels of revenue will not be possible until 2023, after that.

The report further noted: “Fitch reviewed its U.S. 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.”

Those negative outlook reflects a 30 percent decline in national gaming revenue for the year, with Vegas casino operators like Las Vegas Sands (LVS) and MGM Resorts International predicting drops of as much as 50 percent.  Since the first month of the year, LVS has seen its stock fall by around 15 percent and MGM ‘s stock is nearly half of what it was at the end of January.

The Vegas Strip, which Fitch expects to see a year-on-year drop in revenue of about 45 percent, may need the most time for COVID-19 to bounce back. The analysts explained: “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.”

To make matters worse for companies such as LVS and MGM is the fact that they do have a large presence in Asia – Macau in particular. Because of the coronavirus, the gambling town was permanently shut down, leading all local casino operators to take big financial hits. Given that LVS and MGM, along with Wynn Resorts, rely heavily on the city for their revenue, the Macau shutdown compounds the losses.

How soon the gambling scene of the town can begin to help the casino operators depends on how quickly travel restrictions are lifted. Fitch explained: “The timing of Macau’s rebound will be partially dependent on resumption of visa issuance and lifting of mandatory quarantine requirements upon re-entry to China, both of which are significantly weighing on visitation despite the properties being open.”