MGM President Foresees Casino Difficulties Due to Economy
As the economy falters under the pressure of the downturn in housing and the credit crunch, casinos and the gambling industry prepare to see the monstrous growth of recent years slow. Earnings estimates are dropping across the board, and stocks have slid in value as investors anticipate tough times.The overall economy inevitably will affect destination casinos, as business travelers and conventioneers travel less frequently, and on smaller budgets. Jim Murren, president of MGM Mirage, said, "I think the industry is certainly going to be down when you add it all up in '08. There's no doubt that at the lower end of our business, we've seen some softening in occupancy, some reduction in spending. That's clearly a result of the economy."
Tim Behle, manager for Ernst and Young's transaction services, stated, "As the economy slows down, there is going to be slowing of activity by business travelers. There is definitely going to be a noticeable impact on hotels in the U.S."
Financing for improvements and expansions has become difficult, if not impossible, to obtain. Both Las Vegas Sands and Harrah's entertainment have had recent trouble securing loans to develop or purchase new properties.
Smith Travel Research predicts the lowest growth of revenue per available room in hotels since 2003. The prediction of 4.4% would be almost half of the 8.5% accomplished in 2005.
Still, the weak American dollar should aid by keeping Americans in the country while drawing many foreign tourists eager to take advantage of the exchange rate.
Casino and hotel business may have hit a bump in the road, but the problem sgould not be a major one. The gambling craze worldwide shows no signs of disappating, and casinos are still near the top of the list for vacation planners. While there may be a slowing, growth should continue, and perhaps casino giants will be more attentive to the desires of all gamblers, rather than just high rollers.
