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Uncertainty surrounding the Trump administration’s trade war has caused commercial and tribal gaming operators to pause projects due to higher costs, while suppliers begin to pass those increased costs on to customers, similar to how they operated during the coronavirus pandemic.
Nick Hogan, co-founder and CEO of the slot data analytics company ReelMetrics, expects tariffs to cause a material rise in the cost of slot machines that are near-certain to be passed on to gaming operators.
In a call hosted by Truist Securities, Hogan also noted “a potential increase in premium lease mix if we come to see an increase in pricing for sales”.
The issue of tariffs was front-and-center during global gaming supplier giant Light & Wonder’s first quarter conference call on Wednesday (May 7) with executives noting the additional duties on imports, impacted raw materials and components that are sourced from China and across Asia.
Chief financial officer Oliver Chow assured analysts that the company has contingency plans in place, including the resourcing of components used in the manufacturing of gaming machines.
Chow reminded analysts and investors that diversification of Light & Wonder's supply chain was something the company had already been working on over the last couple of years.
Light & Wonder's CEO Matt Wilson said bringing products through Mexico is an example of “reconfiguring the supply chain to circumvent the policies that are in place”.
“[It's a] dynamic situation to say the least,” said Wilson, and one that “changes by the day, the hour, or the tweet. I would say at the moment, tariffs are looking mitigable from where we’re standing.”
Despite the tariff headwinds, Wilson recommitted to the company’s $1.4bn cash-flow target for 2025.
“If you dial back three or four weeks when the policies first came out, it was a little bit scorched earth in terms of getting product into the U.S. out of many of the Asian supply bases,” Wilson said. “But over time, we found ways to mitigate that through reconfiguring the supply chain and also … with some of the pauses we’ve seen on tariffs coming through.”
When asked about buyer sentiment among casinos and other gaming operators, Wilson said some casinos are moving up their equipment orders to receive new machines before tariffs are applied, while others are pausing their purchases, waiting to see what happens.
Tariffs Pause Wynn Resorts, Churchill Downs Projects
Meanwhile, both Wynn Resorts and Churchill Downs have postponed redevelopment projects because of the potentially costly impacts of tariffs, according to comments made by company executives during earnings calls with analysts.
Craig Billings, CEO of Wynn Resorts, said Tuesday that $375m in projects would be delayed, but the operational expenses affected by tariffs would be “low and entirely manageable”.
Most of the operational expenses involved food and beverage and the Las Vegas-based company was “actively working through alternative sourcing for the most impacted items”.
On the other hand, capital expenses (capex) have been negatively impacted.
“We have a number of (capex) projects ... in the U.S., and while we have sourced for those projects presuming some tariff impact, the current tariff rates have driven up to delay about $375m of capex projects, including the Encore Tower remodel,” Billings said, referring to a refurbishing of one wing of its signature casino-resort in Las Vegas.
“Once tariff rates have settled, we will thoroughly re-spec and resource the most severely affected items,” he said.
Billings shared with analysts that the company was staying nimble, but he stressed that the pace of change at the moment was just too significant to commit to revised timing on that capex spending.
Noting rising construction costs related to tariffs, Churchill Downs Incorporated (CDI) has paused a multi-year $900m renovation and expansion of the company’s historic racetrack in Louisville, Kentucky.
“After careful consideration, CDI has decided to pause the multi-year projects to develop The Skye, Conservatory and Infield areas,” the company said in a statement. “The decision to delay these construction projects is due to the increasing uncertainty surrounding construction costs related to tariff and trade disputes, as well as current macroeconomic conditions.”
In the coming months, the company said it would “assess the evolving economic landscape and evaluate any changes to the timing and sequencing of these multi-year projects”.
Trump Tariffs Worry Tribal Gaming
Kristi Jackson, chairman of TFA Capital Partners, a firm that advises tribes on finance-related matters, believes the Trump administration’s reciprocal tariffs have created a “massive amount of uncertainty”.
Trump has levied 10 percent tariffs on most imports and 145 percent customs fees on anything imported from China. A broad range of additional tariffs on goods from dozens of countries have been paused until July.
“That kind of uncertainty has caused ripple effects throughout the economy, and the gaming industry has its own stories,” Jackson said during a webinar hosted on Wednesday by the Indian Gaming Association.
Jackson explained that half of a typical tribal casino’s expenses are labor costs that are not impacted by tariffs, with the biggest impact being on capital expenditures for expansion plans, including buying new slot machines.
She also expressed concerns about their impact on customers who visit tribal casinos.
“You hear Wynn (Resorts) talk about how they’re not expecting to see that much revenue decline, because they’re dealing with a more affluent crowd,” Jackson said. “Some of the tribal properties in rural areas … may not have the same demographic.”
Tariffs, Jackson said, are going to affect disposable income for consumers at the lower end of the economic sector.
“The potential impact here for gaming revenues for tribes with a less-affluent customer base is significant,” she added.
