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TEXT-Fitch: gaming demand softer, but lodging holding up better
September 26, 2012 / 3:06 PM / 5 years ago

TEXT-Fitch: gaming demand softer, but lodging holding up better

Sept 26 - While challenging economic conditions have cooled demand for
gaming, Fitch Ratings notes lodging demand has held up much better. Lodging
demand in the U.S. has benefited from minimal hotel supply growth, while
increased gaming supply has saturated many markets across the country. Lodging
has also benefited from greater exposure to the corporate sector than gaming.

Following 8% growth in 2011, U.S. revenue per available room (RevPAR) is up 
roughly 7% so far this year. RevPAR continues to be increasingly rate driven, 
which is more profitable for lodging companies, as the average daily rate has 
grown roughly 4.3% year-to-date with occupancy up 2.5%. RevPAR is a 
coincident-to-lagging economic indicator. Due to the maturing cycle and the 
broader economic deterioration in mid 2012, we expect RevPAR growth to continue 
to decelerate in 4Q12 and 2013. We are looking for 5.0% RevPAR growth for the 
balance of 2012 to result in full year growth of roughly 6.5%. Our preliminary 
forecast for 2013 calls for roughly 4.0% RevPAR growth in the U.S., largely 
driven by rate growth. 

Due to the attractive supply-demand picture, the operating outlook for lodging 
companies heading into next year remains positive absent further broad economic 
deterioration, given the highly cyclical nature of the industry. At this stage 
of the cycle with balance sheets at comfortable levels, most lodging C-Corps are
now using any excess debt capacity to fund shareholder friendly and growth 

We remain concerned about slowing global growth as it relates to the gaming 

We maintain our outlook for 2% visitation growth for the Las Vegas Strip this 
year, but are revising our Las Vegas strip gaming revenue outlook to more than 
3.5%. We expect visitation and revenue growth in 2013 will be similar to that of
2012. Atlantic City continues to struggle, and our current outlook incorporates 
a continued bottoming of the market, leading to a 3.0% gaming revenue decline in
2012 and flat-to-slow single-digit increase in 2013. The Midwestern/Southern 
regional markets have performed generally in line with our initial expectations,
and we expect significant cannibalization of existing properties in that market 
to continue.

Overseas, Macau gaming revenue growth has been hampered by the China broader 
economic deceleration. However, we believe the near-term VIP demand softening 
has been stabilizing and have tightened our 2012 growth forecast to 12%. Growth 
should continue to slow next year, as we are currently looking for an increase 
of 7%-8% in 2013. 

Additional information can be found in Fitch Ratings' Gaming, Lodging and 
Leisure (GLL) electronic newsletter including brief sector comments, 
recent/upcoming events, and links/summaries to rating actions and detailed 
reports. Links to GLL-related reports/comments from other Fitch groups including
Leveraged Finance, Credit Market Research, REITs, Public Finance, and Structured
Finance can be found there.  

Additional information is available on

The above article originally appeared as a post on the Fitch Wire credit market 
commentary page. The original article, which may include hyperlinks to companies
and current ratings, can be accessed at All opinions 
expressed are those of Fitch Ratings.

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