Gaming Supply Saturated Many Markets, While Lodging Growth Limited Fitch Ratings Reports
While challenging economic conditions have cooled demand for gaming, a new Fitch Ratings analysis notes lodging demand has held up much better.
The ratings agency said 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.
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Following an 8% growth rate 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%.
Fitch said it expects RevPAR growth to continue to decelerate in the fourth quarter of this year and next year.
"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," Fitch noted.
However, Fitch said it remains concerned about slowing global growth as it relates to the gaming industry.
"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%," Fitch said. "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% gaming revenue decline in 2012 and flat-to-slow single-digit increase in 2013," the rating agency said.
"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," Fitch analyst said.
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