Gaming executives express cautious optimism about the current state of the industry but hold a more restrained outlook for the next few quarters, forecasting potential decreases in consumer spending and hiring.
In the latest edition of the American Gaming Association’s (AGA) Gaming Industry Outlook, a significant 88% of respondents described the current business environment as “good” or “satisfactory.” However, their optimism wanes when looking ahead three to six months, with only a 3% net positive outlook, a significant drop from the 28% net negative in the first quarter.
The survey highlighted a growing conservative sentiment, with net negative responses surpassing positive ones by 8.7 percentage points this quarter, compared to a net positive of 6.3% in Q1 2024. Slightly more executives now anticipate a slowdown rather than an acceleration in revenue growth over the next few months, indicating a 16% net negative forecast.
The AGA’s Future Conditions Index aligns with broader expectations of a slowdown in US GDP growth, although a recession seems unlikely. The third-quarter index reading of 98.9 signals a moderate expected decrease in gaming sector activity, adjusted for inflation, at an annualized rate of 1.1% over the next six months.
Running land-based casinos remains a capital-intensive effort, but with 2024 marking the end of some significant expenditures, a more frugal approach is anticipated. The net negative rate for hiring trends among executives, according to the AGA, stands at 56%, while 15% have negative views on upcoming capital spending. Nonetheless, 34% of executives hold a net positive outlook on their companies’ fiscal positions, reflecting a prioritization of strong balance sheets over aggressive expansion.
Capital expenditures will likely focus on non-gaming areas such as hotels and food and beverage facilities, both at 56%, with live entertainment and casino floor slots trailing at 28% and 22%, respectively.
The Federal Reserve’s recent decision to lower interest rates by 50 basis points, with expectations of further cuts, has not fully alleviated concerns about inflation and interest rates among gaming executives. Some (28%) still cite these factors as limiting operations. However, nearly all respondents report that financial conditions are becoming more favorable. For the first time in two years, more executives view access to credit as easy (19%) rather than restrictive (3%).
MGM Resorts International recently exemplified this positive credit environment by upsizing a debt offering to $850 million from an initial $675 million. Similarly, Wynn Resorts sold $800 million in corporate bonds, indicating robust demand and an improving financial landscape for the gaming industry.
