Gaming, lodging and restaurant companies that are already struggling often find themselves on the road to bankruptcy during periods of weak consumer spending, according to a report by Fitch Ratings.
Thirteen of the 25 bankruptcies in the case study occurred during the 2008 to 2010 recession, when consumer discretionary spending slid along with the residential real estate market downturn. Meanwhile, corporate travel and entertainment budgets were slashed.
“Weak consumer or business spending, rising costs, excess capacity and changing consumer preferences present challenges to the gaming, lodging and restaurant sectors,” said Sharon Bonelli, senior director of leveraged finance at Fitch.
The report comes as some financial analysts forecast the economy could be headed toward another recession over the next couple years.
Caesars Entertainment Operating Co., which owns three properties in Atlantic City, is approaching bankruptcy reorganization that will mark the end of a long-running saga that started in 2008.
A settlement agreement includes substantial contributions from parent Caesars Entertainment Corp. to Caesars Entertainment Operating Co. However, the plan still needs creditor approval votes, court confirmation and is subject to other contingencies.
The company owns Bally’s Atlantic City, Harrah’s Resort and Caesar’s Atlantic City.