The casino market has generated a lot of popularity in Lake Charles, Louisiana, and this has made investors to think about the great investment opportunity available. According to financial analyst, Moody’s Investors Service, the gambling industry is expected to show a growth rate of four percent in the next one to one and half years. A year ago, the firm speculated that there would be a decline in the cash flow generated from this industry. This time the firm is optimistic that most casinos will have two percent growth in their cash flow throughout next year.
Investors were worried by the analyst’s predictions a year ago stating that new casinos that are established would poach away gamblers from old casinos due to competing markets. Lake Charles city was considered the best example to explain casino cannibalization. Most casinos in the western part of Louisiana get their customers from the vast area of Houston. These two cities are separated by a two and half car drive along the interstate 10. Last December, Landry, which is based in Houston, spent $700 million to start Golden Nugget Lake Charles.
Instead of siphoning customers from surrounding casinos, Golden Nugget expanded the market and shared the wealth with other competitors. In the initial month, the revenue generated from gambling in Lake Charles increased by 66 percent and this pace is still positive for the last six months. According to Moody’s, new gambling joints in Ohio and Maryland as well as Golden Nugget Lake Charles have contributed to the increase in the number of gamblers after they were opened, suggesting revenue from old casinos is not greatly affected by these new casinos.
Something else that enhanced the growth of gambling industry in Lake Charles is bordering with Houston which has a population of over 2.1 million people and the fourth largest city in U.S. The economy of this city in on the upward trend hence gamblers can manage to travel a few miles away in search of casinos. Also, Texas has not been licensing legal casinos thus sending casino lovers to its neighboring cities Louisiana and Indiana. Boyd Gaming Corp which is based in Las Vegas is planning to spend $45 million to expand its facility in Vinton, La which is close to Lake Charles. According to gaming analysts, Boyd would greatly benefit because more gamblers would be travelling that short distance from Houston into Louisiana.
Moody’s Investors Service said during the month of May, there was a 4.1 percent increase in revenue generated from gaming in 18 U.S. states. This follows a four percent that was witnessed in April. Apart from New Jersey, all other states recorded improvements. The advisory firm is confidence that this numbers are showing true reflection of what is going to happen in the near future. The firm changed its outlook on the gambling industry and now it’s predicting a positive rating.
Another factor that has helped casino industry regain its profitability in the U.S. is the cost cutting measures that were implemented during the global recession period. Many companies are enjoying the benefits of low cost structures and increased operating leverages. The forecast by the analyst incorporates the views that gamblers will remain under pressure because of slow growth in their disposable income, thus limiting their spending powers to other necessities other than gambling. The firm still expects cost cutting measures to continue but to a lesser rate. Indeed, other analysts have weighed their options on the success of the industry.
According to Carlo Santarelli, another analyst for Deutsche Bank thinks the stock price for Boyd, Pinnacle and Penn National Gaming would be on the rise because the regional gaming reported more than expected total revenues in May and June. The regional gaming results should start focusing on gross domestic product figures in order to give wider economic analysis of this industry. In fact, it’s worth noting there is a positive approach towards the growth of this industry in future.
Investors should not shy away from this investment opportunity available. The industry has lots of capabilities and potential that are not witnessed in other sectors. At the moment, this is the right industry where investors should be focusing on in order to reap high rate return on investment after a short period. This is an encouragement to those already in the industry as well as potential investors. Some investors who had turned away from the industry should now reconsider their move and return to the gaming industry.