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East Coast Gaming Congress

Earlier this week, we heard various mgmt teams (incl. PENN, BYD, GLPI, ISLE, and 888), regulators, politicians, and academics speak on regional and internet gaming trends at the East Coast Gaming Congress at the Borgata in Atlantic City, NJ. Operators noted that soft regional trends are likely here to stay and possibly more structural than just bad weather or the economy. Initial internet gaming results have been disappointing, but there’s still potential once early issues are addressed.

Regionals: downturn likely more structural than the economy

Operators believe the downturn in regional gaming could be more structural and profound than just bad weather and current macroeconomic trends. Market saturation was a key theme, but consumers appear to be changing their discretionary spending habits – which were already pressured from payroll and other tax increases. High tech entertainment and games (Apple, Facebook, Candy Crush, and Netflix were some examples cited) are capturing a larger wallet share while consumers are allocating less to traditional casinos.

Some pockets of opportunity, focus on ROI and margins

Growth opps exist in new markets like NY and MA, though cannibalization is a likely by-product. The need for appropriate project capex budgets and sufficient returns was highlighted. PNK dropped its bid for a NY casino yesterday – a positive in our view, and we think likely based on ROI concerns. Rational marketing spend remains a key theme. There may be opportunities for state regulatory/enforcement efficiencies, which could ultimately flow to operators’ margins.

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