December 1, 2016 / 2:56 PM / in a year

Fitch: U.S. and Macau Gaming a Tale of Two Markets in 2017

(The following statement was released by the rating agency) NEW YORK, December 01 (Fitch) Gaming sectors in the U.S. and Macau are on two separate growth trajectories heading into 2017, says Fitch Ratings. While Fitch has assigned stable rating and sector outlooks to both markets, Macau appears poised for a long recovery, while the U.S. market muddles along with flat revenues. "Macau gaming, now firmly at the bottom of the cycle, has better long-term prospects given investments in new supply, improvements in mass market indicators and under-penetration of gaming throughout the rest of Asia," says Alex Bumazhny, Senior Director, U.S. Corporates. "In the U.S. the operating environment for regional casinos is benign at best, but a bit brighter on the Strip." Fitch forecasts Macau's gaming revenues will finish 2016 down 4% before rebounding to mid-single-digit growth in 2017. That assumes the revenue improvements seen recently stick and then increase slightly when the MGM Cotai opens. Macau's recent new supply has seen mixed results, with no evidence of cannibalization at Las Vegas Sands' (LVS) existing properties. The mass market segment appears to be responding well to new supply so far, with YoY gaming revenue for this segment increasing 4% in third-quarter 2016, a similar increase in hotel occupancy rates and longer hotel stays. Macau operators' commentary on their long beleaguered VIP segments started to turn positive this fall. "With Macau on an upswing, China's economic slowdown appears to be benign to tourism throughout APAC, spurring casino developments in South Korea, Vietnam, and the Philippines," said Vicky Melbourne, Senior Director, Head of APAC Industrials. "This will lead to increased competition among APAC's regional markets as new integrated resorts come online." In Singapore, gross gaming revenues will stall on weakness in its VIP segment. Poor returns make the prospects for additional casino licenses unlikely. Legalization of Japan's gaming market outside of its pachinko industry remains unknown as social concerns like problem gambling and organized crime present hurdles. However, if casino gaming becomes legal, Japan would likely have the largest gaming market in APAC outside of Macau. By contrast, Fitch expects the U.S. market to have flat same-store gaming revenues and only modest new gaming supply. "With several years of major capex in the rearview mirror, many U.S. gaming companies will look to optimize their capital structures. However robust growth just is not an available avenue for deleveraging," says Bumazhny. The traditional casino model faces a turning tide, partly cannibalized by video lottery terminals, social gaming and instant-ticket lottery, and constrained by secular demographic headwinds but buoyed by growing employment and median wages. Additionally, Fitch is negative on slots and believes suppliers will bifurcate by leverage in 2017. REITization of gaming assets will take a back seat in 2017 as IRS guidance makes spin-offs less likely and higher interest rates dampen financing. The Las Vegas Strip remains a bright spot in U.S. gaming, supported by non-gaming amenities, which account for 65% of its gross revenues. The full reports, "2017 Outlook: U.S. Gaming - Cyclical Gains to Offset Secular Pressures,", "2017 Outlook: Macau Gaming - Long Recovery Ahead," and "2017 Outlook: APAC Gaming - Operators Rush to Open Resorts; Macau's Long Term Prospects Brighten," are available at or by clicking on the links. Contact: Alex Bumazhny, CFA Senior Director - New York +1-212-908-9179 Fitch Ratings, Inc. 33 Whitehall St New York, NY 10004 Vicky Melbourne Senior Director - Sydney +61 2 8256 0325 Colin Mansfield, CFA Associate Director +1-212-908-0899 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email:; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available at '' Related Research 2017 Outlook: U.S. Gaming (Cyclical Gains to Offset Secular Pressures) here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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