Ignore the Las Vegas valley’s physical features, according to Fitch Ratings, the economic landscape of the city is flat and smooth.
The financial information services company released its 2017 Outlook for the U.S gaming industry Thursday. In its estimation, the Strip will continue to see solid, if unspectacular growth in the new year with steady visitation numbers and convention business making up for weakness in gaming, particularly baccarat play.
“We expect nongaming revenues, 65 percent of gross revenues on the Strip, to continue to offset pressure on gaming stemming from weak baccarat play into 2017,“ Fitch stated in the report.
While some industry observers are concerned about the decline in the popularity of gambling, the Strip’s focus on providing an overall resort experience with restaurants, shopping and nightclubs, has certainly paid off.
“That’s a long-term trend that should continue,” said Fitch’s Alex Bumazhny, a senior director at the firm who covers gaming, lodging and leisure. “What is reassuring is that, despite casinos like Wynn and Bellagio having a pretty sizable exposure to baccarat, they were still able to at least have pretty stable profitability compared to previous periods or even growing profitability.”
The weakness in baccarat play is something gambling destinations across the world are experiencing, Bumazhny said.
“Baccarat in the U.S. is a bit tricky to understand because it’s been inconsistent globally,” he said. “But Macau also has been under pressure in the past couple of years. And a lot of that has to do with the corruption crackdown in China and also the economic slowdown in China as the country switches to a service economy as opposed to infrastructure and manufacturing economy.
“So some other markets like Singapore have been weaker,” Bumazhny said. “And the U.S. is in a similar position. But things are stabilizing in Macau, and we expect the U.S. to stabilize as well when it comes to the same type of demographic, the high-end affluent players from China.”
Bumazhny said nonstop travel to Vegas from China and new resorts such as Genting Americas Resorts World, the large Asian-themed casino being developed on the the Strip, could also help.
“Yes, they’re going to try and get baccarat play,” Bumazhny said. “They are Chinese-centric, and they also have a meaningful presence in Southeast Asia and have quite a few Chinese players coming to their Singapore casino. So you would expect that some of that traffic and business to come to Genting’s Resorts World in Las Vegas.”
However, Resorts World is not scheduled to open for a few years, possibly 2019. In the meantime, Bumazhny said, the Strip will continue to rack up steady and reliable numbers from regular Las Vegas visitors and convention attendees.
“We’re still pretty confident that that’s going to continue,” he said. “As far as visitation goes, we feel there will be visitation growth because there’s more air capacity. But it doesn’t require much visitation growth to Las Vegas in order to drive profitability.”