Moody’s Maps ‘Painful’ Recovery for US Gaming Industry Post-Pandemic
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Moody’s Investor Services said Thursday that once the US casino industry reopens, it will take a year to begin generating just 30 percent of its 2019 levels. After just over 16 months, the industry will be back to around 60 percent, the ratings agency believes. It will be a “long and painful recovery,” Moody’s added.
The Las Vegas Strip is eerily deserted, but analysts don’t expect the tourists to return in droves once the casinos reopen. (Image: Glenn Puit/LVRJ)
The grim forecast came as Moody’s revised its outlook for the US casino market, suggesting EBITDA would plunge 60 to 70 percent through to March 2021 — figures based on the assumption casinos would begin reopening around the beginning of Q3 in July.
Naturally, decline in EBITDA is expected to be most severe in calendar 2020, particularly in Q2, when industry EBITDA will likely be negative.
Moody’s Blues
Moody’s analysts acknowledged there was a “lack of clarity regarding when casinos will reopen, and the likely limitations on casino utilization that will occur once these facilities reopen.”
“The highly discretionary and nonessential nature of consumer spending on casino gaming makes the sector extremely vulnerable to changes in regional, local and nationwide economic conditions, as well as travel, which will all be hurt by coronavirus containment efforts,” said Keith Foley, Moody’s senior vice president.
Recovery will take time because, when casinos do open, customers are expected to be slow to return, still fearful of the virus.
Casino resorts will also probably be operating at a limited capacity, with some elements of social distancing still in place in order to prevent a second surge of COVID-19.
Worse for Las Vegas
Moody’s thinks this means regional casinos, which rely more on locals than tourists, may bounce back more quickly from the coronavirus than the Las Vegas Strip.
“When casino doors eventually reopen, customers will likely take time before they have the confidence to travel far, especially by air for leisure purposes,” its analysts suggested.
That’s bad news for Nevada, which was named the US state second-most vulnerable — after Maine — to the socioeconomic fallout from the coronavirus pandemic in a recent study by Oxford Economics.
Nevada derives more than four times as much of its gross domestic product from tourism as the rest of the country, and Las Vegas Mayor Carolyn Goodman has been railing against lockdown measures.
In a memorable interview with CNN’s Anderson Cooper on Wednesday, she even suggested that Las Vegas could become a “control group” so that health officials could study the consequences of a city reopening its non-essential businesses.
But even if Goodman got her way, it’s likely the tourists would stay away for some time.
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