There are many reasons to believe the US gaming industry is booming. At least that’s what some of the latest figures indicate: according to the American Gaming Association, Q1 was the best start to a year yet, including a record $5.3 billion performance in March, the highest-grossing revenue in industry history. But even though visitation numbers and hotel occupation rates are returning to pre-pandemic figures -and in some cases, surpassing them- some casinos may still see trouble ahead, according to Hard Rock International’s CEO Jim Allen, who argues inflation could take a toll on the land-based industry.
“Prices for building materials have just exploded,” Allen told CNBC on Thursday, at the opening party of a new Hard Rock Hotel in Manhattan. The chairperson of Seminole Gaming showed concerns in regards to higher prices for construction as the company embarks on its next big project, a new resort hotel on the current site of The Mirage on the Las Vegas Strip. But the executive also said inflation could pose a problem not only to companies in the industry but also to their customers, who are seeing pressure on their wallets.
“We look at gasoline anywhere from $5 to $6 a gallon,” Allen further told the cited source, anticipating the cost crunch to last potentially through the first or second quarter of 2023. “There’s no doubt that in most regional gaming markets that customer is a day-tripper, utilizing gasoline to get to the facility. And when that’s up 30% to 40%, that’s going to be problematic.” According to the executive, results from April have already begun illustrating this issue, with a softening across the nation in a number of state markets.
A recent survey from AGA showed CEOs in the US gaming industry maintain a positive business outlook for 2022, and are optimistic about the industry’s continued growth and recovery from the Covid-19 pandemic. More respondents (67%) rated the current business situation as “good” than in a prior survey conducted near the end of 2021, while none described it as “poor.” However, while the general climate is positive, executives also reported macroeconomic impediments to business growth: the top concerns were supply chain issues (75%) and inflationary and interest rate concerns (67%), in line with Allen’s warning.
Some industry heavyweights, such as Caesars and MGM Resorts, have said on their earnings calls that the higher prices have not dampened customer demand, with momentum still continuing as we approach the end of H1. Additionally, certain industry players argue rising prices are only impacting customers who spend the least, while a large number of Americans are still seeking entertainment and traveling options as Covid restrictions ease, despite inflation levels not seen in four decades. But Allen warns Las Vegas -which posted gaming revenues 35% up from pre-pandemic 2019 in March- could be an exception in the countrywide industry: “You’re starting to see some signs,” he told CNBC. “We’re still doing very, very well in Florida, but softening.”
Casino and entertainment giant Hard Rock currently has a presence in several markets within the US. In addition to the aforementioned operations, the company has venues in other states, including Ohio, California and New Jersey. In regards to the latter market, the company has long warned that data does not always reflect the full picture. When in April a report from the New Jersey Division of Gaming Enforcement showed the calendar year 2021 was not only up from 2020 but also 2019, Joe Lupo, president of Hard Rock Atlantic City, warned the increase was mostly attributable to the performance of just two venues: his casino and the Ocean Casino Resort. “You take Hard Rock and Ocean out and the other seven properties are flat since 2019,” he said at the time. “That’s discouraging.”
Original article: https://www.yogonet.com/international/news/2022/05/16/62638-hard-rock-ceo-warns-inflation-could-take-its-toll-on-casinos-and-customers
