The last 6 months has seen all sectors of the economy being hit. Barring some tech companies that have actually flourished during the pandemic like Amazon, Zoom, Apple etc its been a tough ride for the rest of the market. Gaming and Gambling in general, has traditionally been a resilient sector and although past performances are never a true predictor of future trajectory, it can prove to be an indicator of things to come.
Before Covid-19 hit the US and world economies in 2020, the commercial gaming sector in the US was one of the most resilient sectors of the market. It had seen 5 straight years of revenue growth with 2019 topping off at $43.6bn, an increase of 3.7% compared to 2018 according to the American Gaming Association.
This is in addition to tribal gaming revenue which generated revenues of $33.7bn in 2018 according to the National Indian Gaming Commission, another record high. This should come as no surprise to people closely associated with tribal gaming which has seen revenue growth every year since Congress passed the Indian Gaming Regulatory Act (IGRA) in 1988, and 2019 figures are expected to be no different when released – expect to see record highs once again.
Out of the 25 states which allow commercial casinos to operate, 14 reported record highs for 2019 and only 4 states showed an year-on-year drop in revenues compared to 2018. Nevada maintained its position at the top of the pyramid with over $12bn in revenues – the first time its crossed the mark since the economic crisis of 2007/08. The Las Vegas Strip, as expected, continued its dominance of the US casino market generating over $6.5bn in revenue in 2019 followed by Atlantic City with $2.7bn.
From the beginning of March this year however, things came to a standstill in the leisure market including casinos. Restrictions in international travel coupled with domestic lockdowns bought the gaming industry to a virtual stop for a few months. Although the economy has started to open up in the last few months, it could take a while before things get back to ‘normal’. Casinos have had to adapt to new operating models keeping social distancing guidelines in mind and for a lot of them, it has effectively taken 40%-50% of their slot machines (the lifeblood for most casinos) out of operation. Anecdotally, some of the casinos are already seeing better than expected revenues although footfall is lower. This is due to an increased focus on their player club programs and getting quality clients through the door, thereby achieving higher revenue per player.
It is still early days to say how much or how long the impact of Covid-19 will last but we at Gaming Year hope that it won’t be anywhere close to the slump seen on the Strip just after the financial crisis. People are eager to get out and feel normal again and gaming is one of those industries that provides exactly that feeling to the end customer. Casinos are increasingly looked at as entertainment venues than pure gambling operations. According to the American Gaming Association 105 million Americans visited a Casino in 2019 and 25% of them didn’t gamble at all, instead attracted to shows and restaurants and everything else Casinos have to offer.
It is anybody’s guess how long it would take the gaming industry to get back to 2019 revenue levels but the slump shouldn’t be long – at least that’s what we are hoping for!