OREANDA-NEWS. Future gaming growth for U.S. casinos outside Las Vegas will be increasingly correlated with macroeconomic activity and secular factors, said Alex Bumazhny, Fitch Ratings' Director of Gaming, Lodging and Leisure. Speaking at the Global Gaming Expo in Las Vegas on Tuesday, Mr. Bumazhny said while the industry is moving toward a post-recession recovery, the exponential growth seen from the early 1990s through mid-2000s is unlikely to return.

'Given tailwinds this year including U.S. economic improvement and low gas prices, it's tempting to think a major recovery in the gaming sector is inevitable. While those factors are encouraging, they have the potential to mask the secular shifts that pose longer-term challenges,' said Mr. Bumazhny. 'We can't forget that it was only a year ago that Atlantic City, America's largest regional gaming destination, shuttered one-third of its casinos.'

Fitch believes long-term growth in regional gaming will be largely flat and possibly slightly negative. Factors that may constrain the industry include the already-broad prevalence of gaming throughout the U.S., the expansion of gaming alternatives, an incomplete consumer recovery and less gambling by millennials.

Forty-one U.S. states currently allow gambling; Fitch considers nearly 40% (16) of those to be over penetrated. With few states having limited or no gaming, new casinos in established markets and casino alternatives make cannibalization of existing casinos a real possibility, particularly in the Northeast.

Among alternatives to traditional gambling, social casino games could be the largest near-term threat. Approximately 58% of social casino gamers also play slots, according to Southern Cross University, so Zynga's move into that space, for example, could create competition for players. Other alternatives that may encroach on traditional casinos include online gaming--a longer-term threat--and growth in lotteries, video lottery terminals (VLTs) and daily fantasy sports.

When combined with a shift in gambling habits among millennials, casinos are facing a significant shift. In addition to budgeting less per casino trip, the 18-34 demographic prefers table games over slots by a margin of more than 2:1, according to a University of North Iowa study. As a result, the major operators have decreased the total slot count by nearly 16% between 2008 -2014 on a same-store basis.

Without a full consumer recovery, the baby boomer population is heading into retirement facing economic uncertainty. For younger cohorts, restrained consumer borrowing hasn't fully offset anemic wage growth as this has skewed toward higher earners.

'A continued economic upswing would benefit regional casino operators, but at this stage it's a bit too early to tell exactly how far it will go,' said Bumazhny.