Executives have their say
A recent American Gaming Association (AGA) survey revealed that while the US gambling sector may be going through an unparalleled period of growth, executives are deeply skeptical that the good times will continue to improve.
Only 20% expect conditions to improve in the future
In a survey of US gaming executives compiled in partnership with Fitch Ratings, 62% of respondents said they considered the current business climate to be a good one. Even more telling, however, was the fact that only 20% expected conditions to improve in the near future. About two-thirds of respondents believe that conditions will remain the same.
Commenting last year, Jefferies gaming analyst David Katz said an earnings meeting with casino management teams in Las Vegas provided “evidence of a divide between current operating strength and markets’ expectation of a recession.” He noted that major casino operators are considering the possibility of reconsidering costs in anticipation of a slowdown in demand.
To assess whether these concerns are justified, it is important to look at the current situation and past examples of similar conditions.
growth challenges
Of course, the pessimism of US gaming executives is unfounded. there A number of challenges facing the industry now.
The first issue is rising interest rates and inflation, which 69% of respondents cited as the biggest challenge facing the industry. Falling into the same category, this concern was followed by economic uncertainty at 38%. This has pushed up the cost of living for the American public, including the cost of basic necessities like food and gas.
This is a very real problem in the United States right now. In fact, last year TD Securities predicted that the chance of a recession in 2023 in the country would be as high as 50%. The latest US economic data suggests that a recession is on the way CNBC Informing that investors need to prepare for a difficult period in the stock market.
Also making a list of the top concerns of the US gaming industry is geopolitical risk. Right now, this is mainly related to the war in Ukraine, which if not has certainly exacerbated the cost of living crisis for many countries around the world. With more than a year into the war and no sign of abating, the peaceful course of international relations is still in the air.
The fact that 2024 is an election year in the US only destabilizes the situation even more. The competition for the highest office in the country will take place in November, and the winner’s policy on the issues already mentioned will have a significant impact on the performance of all American companies.
Warning signs
First things first when considering the validity of the above concerns, are there currently any signs that these challenges are having a detrimental effect on US gaming? After all, each of these issues is indeed a very real factor.
We have more millennials in business than ever before.”
MGM Resorts International CEO Bill Hornbuckle gave us some insight into his view on the current situation at the end of last year. Speaking during CNBC’s Evolve Global Summit, the CEO said that while he expects it will eventually have an impact on gaming revenue, the rise in the cost of living “hasn’t happened yet.” Indeed, Hornbuckle has already expressed optimism about the growing number of younger gamblers. “We have 20% more millennial business than ever before,” the CEO emphasized.
The AGA data certainly supports Hornbuckle’s claims so far. In 2022, US gaming hit new heights, reporting $60 billion in revenue for the full year, up 34% from 2021. This has continued into 2023 as well, with US gaming economic activity growing more than 8% over the past three quarters. . “Simply put, American adults are choosing casino games for entertainment in record numbers,” AGA CEO Bill Miller said this year.
This growth can be seen on a country-by-country level as well. Just this week, Nevada reported a new quarterly high for gaming revenue, coming in at $3.82 billion in the first quarter. March 25 witnessedy Consecutive Month $1 Billion+ Revenue at Gambling Center. In the same month, Penn State surpassed $500 million in gaming revenue for the first time ever, while revenue grew 15% year-over-year in New Jersey.
Obviously, according to these data, the challenges facing the gaming industry have not yet prevented its current growth.
Learning from the past
The sector seems to be building in the right direction, but with experts speculating that a recession may be on the way, what can we learn from the past to inform us of how the sector will handle this?
The last real recession occurred between 2007 and 2009, which saw Nevada’s gaming revenue stunt its growth. In 2007, gaming revenue was $12.8 billion, up about 2% from the previous year. However, 2008 led to a sharp drop in gaming revenue by 10%, down to $11.6 billion. Then, 2009 saw the worst decline in Nevada’s pre-COVID history of just over 10%.
Likewise, on a national level, casinos experienced a decline in business during the most recent recession, though not as dramatically as Nevada specifically. According to data from the University of Nevada, total casino revenue in the United States fell about 3% in 2008 before falling another 5% the following year. After that, the US gaming revenue gradually increased until the epidemic.
The industry is not immune to economic downturns
There has also been a lot of research on the effects of a recession on casino gambling, with most studies confirming that the industry is not immune from an economic downturn, despite what was once thought.
For example, file Gambling Studies Journal Data on per capita gambling consumption in the United States was evaluated between 1959 and 2010. It found that the industry grows during economic booms and experiences no growth during recessions. However, the lottery seems to be an exception, which has increased gambling levels already in times of financial hardship.
Pessimism is justified
For US gaming officials, there seem to be reasons to be cautious about what might be on the horizon. Many of the challenges currently facing the industry have not had a negative impact on its growth so far. However, recession is a whole new level of problem, one that we have learned the sector cannot escape from.
The global gaming industry is a strong and adaptable sector
Notwithstanding, it is also important to note that the global gaming industry is a strong and adaptable sector. It has survived, and even thrived, during a period of complete global chaos during the COVID pandemic. Now, in the face of a new challenge, its CEOs can take heart from this evidence of their resilience.
