Casino industry won’t recover until 2010 says Fitch

Fitch Ratings expects that the gaming industry, slammed by the credit crunch and consumers cutting back on discretionary spending, will not recover until 2010.

“The gaming industry experienced a greater impact from the difficult financial conditions for consumers in 2008 than many investors expected,” the credit rating agency said in a report.

Last week, statistics published by Missouri and Illinois gaming regulators showed that area casinos remained in a slump during November with some reducing hours as consumers spent less on gambling, dining and shows.  November marked the third month in a row that total revenue from the casinos, excluding Lumiere Place which opened in December 2007, declined. The weak conditions already spurred Ameristar to lay off 6.5 percent of its St. Charles work force.  

Fitch believes a prolonged recession that extends into 2010 coupled with an extremely tight credit environment will put significant additional pressure on the balance sheets of already stressed casino operators. There was a significant rise in high yield gaming defaults in 2008 with other issuers, including Harrah’s, “on the cusp” of defaulting on debt obligations, it said. Harrah’s owns a casino in Maryland Heights.

With the credit crisis worsening, many casinos have pulled back on expansion projects, reducing expected capital expenditures to improve their cash flow, the report said.

Among them is Isle of Capri Casinos, which is based in Creve Coeur but has no casinos in the St. Louis area. It said earlier this month that it will not undertake any new significant capital projects, including expansion work on a Biloxi casino, until the economy improves.

On a positive note, Fitch said that regional and local casinos will fare better in this economy rather than destination markets like Las Vegas due to  the decline in gas prices, reduction in airline capacity and international demand.