Industries to Watch: Eastern U.S. Gaming Not A Long-Shot But No Sure Thing for Creditors

The appetite for gambling in the United States is one of those things that never seems to fall out of fashion. And, while there has been quite a boom in the Eastern U.S. for legalization of gaming operations in recent years, the surge could cause some operators to eventually go bust to the surprise of some flat-footed creditors.

Maryland is just the latest state to allow, by voter referendum in this case, expanded gaming operations at several sites throughout the state, which will include table games as well as “slot-parlor” offerings. Ohio is a recent player in the market, too, with several operations. This adds to relative newcomers in recent years like Pennsylvania (there are at least three casinos running within the borders of Philadelphia alone), West Virginia and Delaware, not to mention the many longtime operators of Atlantic City, NJ and a couple on Native America land in Connecticut.  What does that mean to suppliers of everything from gaming machines to carpeting to food services to cups for beverages that end up in these casinos? It means there is plenty of competition and real potential for market saturation, according to Patrick Spargur, ICCE, credit & collections manager with Bally Technologies Inc.

Large appetite for gaming or not, some operators likely will face the reality that there is not enough demand for everyone to thrive or even survive without solvency issues. Spargur, who will moderate the May 22 FCIB-designed educational session “Working Capital Management & Cash Forecasting” during Credit Congress in Las Vegas, told NACM some that he believes some companies will indeed face danger because of the high number of operators.

“There’s just a lot more competition in the surrounding region, and it’s major competition,” Spargur said. “Analysts I follow say, in Atlantic City alone, three to five properties need to be either shut down or converted into boutique hotels. There are too many players: Ohio is pulling [customers] from Pennsylvania; Pennsylvania is pulling from Atlantic City; West Virginia is pulling from Pennsylvania.”

In short: the spreads for various legal casino operations are going to be different from place to place and need to be monitored like a hawk by credit departments of direct suppliers to them and those upstream alike. It serves as a reminder that is critical to know an industry well, beyond overall numbers for a large region.

-Brian Shappell, CBA, NACM staff writer

Industries to Watch is a new feature of NACM’s blog (first run) and eNews. It will be a semi-regular look at areas where business credit professionals need to be focusing on for potential solvency issues because of a bevy of reasons (supply glut, government regulations or policy changes, dropping demand, etc.).

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