Fitch: Gaming sector facing up to 60% ‘revenue destruction’ due to pandemic Howard Stutz, CDC Gaming Reports · June 10, 2020 at 7:31 am Fitch Ratings said Tuesday that the nation’s leisure business sector – which includes gaming, tourism, lodging, and restaurants – is expected to suffer between 40% to 60% “revenue destruction” this year, the highest by percentage among the 87 different sectors covered in the agency’s report on the coronavirus pandemic’s economic impact. Fitch analysts said the shutdown of businesses throughout the country could lead to a revenue decline of some $5 trillion by the end of the year. The casino industry is only a few weeks into its comeback after nearly 1,000 commercial and tribal casinos closed in 43 states during March in an effort to slow the spread of COVID-19. As of Tuesday, some 569 casinos had reopened in more than two dozen states, according to the American Gaming Association. Alex Bumazhny and Colin Mansfield, who follow the nation’s gaming industry for Fitch, said the report – The Road Back: Post-Lockdown Assumptions for Global Corporates – encapsulates what the analysts have told investors from the start of the COVID-19 pandemic: there will be a slower recovery in Las Vegas, given the market’s cyclical nature, longer hotel booking windows and reliance on air capacity and conventions. Mansfield said Las Vegas revenues will be down 50% by the end of the year, while regional markets will decline by 20%. The Las Vegas casino industry reopened last week under stringent health, safety, cleaning, sanitation, and social distancing protocols. Less than half of the Strip’s resorts are open, and those that are are under guidelines calling for 50% occupancy, a reduced number of slot machines and table game seats, and a handful of reduced capacity restaurant options. The High Roller overlooks the Linq Promenade on Thursday, June 4. “We’ve been pounding a negative downbeat view of the recovery,” Mansfield said. “The air capacity issue (for flights coming into Las Vegas) is the x-factor. People may want to come, but do they want to get on a flight with all the uncertainty?” Mansfield expects that much of the nation’s casino industry will reopen by the end of June and into the beginning of July, with all markets following similar guidelines for reduced capacity and fewer gaming opportunities. “When you first hear a 20% decline in the regional markets, you might think, ‘that’s not so bad,’” Mansfield said. “Then you realize that none of the regional markets had that large of a decline during the recession. The short answer is that the drive-in markets are not as painful as Las Vegas.” Bumazhny said a 50% capacity on customers should not hurt casino operators too much, but the 15% capacity being proposed by Michigan regulators for the reopening of Detroit’s three casinos makes break-even operating impossible. “I’m not even sure they would reopen at those levels,” Bumazhny said. “At 50%, the operators can squeeze out a lot. I’ll be watching for Illinois to see how the slot operators in that market operate under capacity restrictions.” The Fitch report looked at 87 different sectors. Analysts anticipated a continued pattern of slow economic recovery following a “traumatic” first half of 2020. “The oil and gas sector accounts for the most revenue destruction in dollar terms, representing 40% of the aggregate revenue fall,” the firm said in the report. “While the oil price has recovered from historic lows, pricing is still well inside our price-deck estimates, and we expect economic sentiment to remain subdued after the initial post-lockdown euphoria dissipates.” In the report, Bumazhny and Mansfield said major sporting events could resume in the second half of the year. It’s unclear if fans will be allowed into the contests. In Las Vegas, there has been anticipation for the first season of the NFL’s relocated Las Vegas Raiders, who will play in the $2 billion Allegiant Stadium, which is expected to complete construction in August. The move of the NFL to Las Vegas was viewed as a large tourism boost. Meanwhile, the National Hockey League is considering Las Vegas as one of the hubs for its planned 2020 playoff format, possibly in the fall. In May, Fitch analyst Chad Lewis told investors in a research note the leagues were “exploring how to allow fans at events, including six-foot seating configurations, staging entry, and limiting movement. This could allow for 20-25% of capacity, according to facility operators.” Bumazhny and Mansfield said gaming operators would see increased revenues from legal sports betting if and when the leagues resume, even if fans weren’t able to attend the contests. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.