Slot machine manufacturers are navigating significant challenges as they adapt to the shifting landscape shaped by ongoing tariff disputes and past lessons learned during the pandemic. As various countries, including Canada, impose tariffs ranging from 10 to 25 percent on U.S. goods, industry leaders are exploring strategic solutions to mitigate the impact on their operations.
Matt Wilson, CEO of Light & Wonder, pointed out that the situation is exceedingly fluid, indicating that fluctuations can occur rapidly due to political discourse. He noted, “The dynamic situation changes by the day or by the hour, or by the tweet,” highlighting the unpredictable nature of trade negotiations. This complexity has led to increased costs throughout the supply chain, including for essential electronic components.
In the wake of these challenges, Light & Wonder has announced that while some increased costs will likely impact casino operators—potentially reflected in higher prices for slot machines or altered lease agreements—efforts to manage these costs are ongoing. Scott Kreeger, President of Red Rock Resorts, emphasised during a recent earnings call the importance of alternative sourcing and negotiations with vendors to avert passing costs onto consumers. However, he also acknowledged that it might become a last-resort strategy if all other avenues fail.
Wilson also addressed the supply chain disruptions that have hindered the timely delivery of gaming products. He emphasised the need for both manufacturers and suppliers to collaborate and effectively manage cost increases resulting from tariffs. On a more positive note, Trevor Crocker, CEO of Aristocrat Leisure, illustrated a successful strategy to mitigate risks by diversifying and decentralising their supply chains, now relying on multiple countries for essential components. “Only 14 percent of our supply chain is coming from China,” he stated, showcasing the company’s preparedness for current political nuances.
The emergence of tariff-related bans, particularly from Canada, has propelled these dynamics further. Following the U.S. government’s instigation of a trade war, certain provinces in Canada have prohibited purchases of U.S.-made gaming equipment. While Wilson asserted that tariffs are still manageable for the moment, he acknowledged the evolving nature of these issues could pose more significant challenges in the future.
Financially, Light & Wonder managed to report a modest increase in first-quarter earnings by 4%, primarily due to robust equipment sales in Australia, where the company has a formidable presence. Analysts have noted that the company has become more efficient in its operations as a result of its efforts to adapt to supply chain disruptions. Truist Securities gaming analyst Barry Jonas commented on this, expressing confidence that the company would navigate the incoming cost pressures effectively over time.
On the operational front, casino operators are also feeling the strain of rising costs associated with development projects. Recently, Wynn Resorts announced a postponement of a $375 million expansion plan, which includes a significant renovation of the Encore Las Vegas hotel tower. Wynn CEO Craig Billings clarified that the company is not shelving the project altogether but is instead reassessing material procurement strategies in anticipation of more stable tariff rates.
Other casino operators, including Boyd Gaming, are proactively exploring alternative sources for materials in advance of their upcoming projects. Boyd’s CEO, Keith Smith, stated that although increased costs are anticipated, they’re confident in their capacity to manage these pressures without derailing their expansion plans.
The landscape remains uncertain, particularly as operators undergo significant projects amidst fluctuating costs. Red Rock Resorts is currently expanding its Durango Casino Resort and refurbishing its Green Valley Ranch Hotel, with executives like Vice Chairman Lorenzo Fertitta remaining optimistic. Fertitta affirmed, “We’re going to figure it out,” indicating an intention to absorb tariff-related costs wherever possible.
As the casino industry grapples with evolving tariff challenges, the future trajectory will hinge on how well manufacturers and operators can adapt their supply chains and procurement strategies in the face of external pressures. The complexities of international trade will undoubtedly continue to complicate operations, making innovative responses from industry leaders pivotal in managing these tumultuous times.
Reference Map:
- Paragraph 1 – [1]
- Paragraph 2 – [1], [2]
- Paragraph 3 – [3], [5]
- Paragraph 4 – [1], [6]
- Paragraph 5 – [1], [6]
- Paragraph 6 – [1], [4]
- Paragraph 7 – [1], [2]
- Paragraph 8 – [4], [3]
- Paragraph 9 – [5], [7]
Source: Noah Wire Services
Subscribe to Industry Updates
