Fascinating Insights into the Global Casino Industry
Strategists in the casino industry are particularly interested in revenue growth projections and future trends on a global scale. Gambling activity is centered in two key regions: Las Vegas, Nevada and Macau, Admin Region of China. Billions of dollars in earnings and revenues are generated every year, and multiple new markets are emerging. We are seeing the casino gaming market morphing into a globalized operation.
Individual state regulations are giving way to geographic blocs where uniformity in gaming laws is taking shape. However, significant changes are afoot at a local level and people’s attitudes towards gaming and specifically the future of online gaming are changing. For the most part, physical (land-based casino operations) gambling enclaves dominate in terms of revenue. Within this broad sector are the purported bricks-and-mortar casinos, tribal casinos, riverboats, cruise ships and dockside casinos. Online casino gambling remains in its infancy stages in many parts of the world, but its dominance in Europe and specifically the United Kingdom remains unchallenged.
Legal Issues, Gambling Arenas, and Diversity of Casino Regulation
There are many aspects to consider when forecasting the future trends and growth patterns in the casino industry. Foremost among them are the key growth drivers for GGR (gross gaming revenue). In Asia, we have witnessed a slowdown in Macau, owing to China’s crackdown on that gambling enclave as an epicenter for money laundering and illicit activity. Nonetheless, Macau remains a powerhouse in generating casino revenues. Asia is the fastest-growing region for casino tourism, and it is without doubt one of the biggest contributors to economic and social upliftment programs in the region. This is particularly true in countries like Singapore.
Governments are also working hard in key gambling regions to entice investors to set up shop in their territories. There is a move towards widespread legalization of online gaming operators, while carefully assessing the licensing for the land-based operators without cannibalizing the industry. Some of the key concerns for the casino industry include the moral issues that society and governments tackle in specific regions where religion is a dominant part of the culture. There are also legitimate concerns among land-based operators around the world about that negative effects of regulating online casinos.
Trends Are Changing and the Global Economy Is Warming up
The election of Donald Trump as president of the United States may be perceived as a boon to the casino industry. Trump was a casino tycoon, much like Sheldon Adelson and Steve Wynn. That he has vacated that industry is secondary to the fact that he understands it and has a close affiliation to it. Trump’s views on online casino gaming may well have an impact on current US gaming regulation. As it stands, New Jersey, Delaware and Nevada have authorized and regulated online casino and/or online poker gaming. A more pressing concern is the overall level of personal disposable income available to households around the world.
Casino gaming is an entertainment activity that requires a budget allocation. As such, the better the economy the better the prospects for casino operators. In 2010 there was a significant surge in global gaming spend – up 9.6%. What is even more significant about that statistic is that at the time, there was a 7.2% downturn in Europe, the Middle East and Africa. The world’s largest casino market between 2010 – 2013 was the US. However, Asia has rapidly outstripped the US as the most lucrative casino gaming destination. This pattern is going to continue in 2017. The major drivers of Asian casino growth are Singapore and Macau.
Future projection is easy to forecast when we look at past trends. For example, global gaming market revenues in 2010 indicated the following patterns:
- US – 48.9% of GGR
- Asia Pacific – 29.2% of GGR
- EMEA (Europe, Middle East and Africa) – 13.9% of GGR
Now, let’s look at 2015 and how each country/region measures up in terms of global gaming revenues:
- US – 40.1% of GGR
- Asia Pacific – 43.4% of GGR
- EMEA (Europe, Middle East and Africa) – 10% of GGR
Of equal importance is the emergence of Singapore. Back in 2009 gaming revenues in Singapore amounted to $0, but barely 3 years later that figure was up at $4 billion and it spiked to $7 billion in 2015. Japan remains an interesting prospect for the casino industry, and if regulatory approval is won, it will be a mega-center for Asian gaming. In the United States, we are seeing the rapid demise of Atlantic City and the slow recovery of Las Vegas. The introduction of online gaming to the US was met with significant enthusiasm, but buried in bureaucratic gobbledygook. There has been little progress at state level with online casinos in the US despite intense lobbying efforts by key players in the industry.
Price Waterhouse Coopers (PWC) estimates that by 2020 the tight restrictions in online gaming will be eroded. This is particularly true of online poker gaming which has near unanimous support from players and powerful lobby groups across the US. In the United States, Nevada, Atlantic City, tribal casinos and regional casinos make up the casino gaming market. In total in 2015, that amounted to $73.32 billion. That figure was just $57.47 billion in 2006. The casino annual growth rate in Nevada was 4.5% between 2011 and 2015. Overall, regional casinos performed best during that period at 7.3% market growth.
What Trends Characterize the Casino Industry?
Atlantic City continues to report declining revenues and earnings. This will likely continue in 2017, despite the inflated nature of US stock markets and the excitement around the election of Donald Trump. Regional casinos in the US, particularly the Northeast are likely to continue their expansion. This is due to the convenience factor, and strong demand-driven growth. Atlantic City has fared poorly, and is now marred by a decade of successive declines. Failing a massive overhaul of New Jersey’s erstwhile gaming hub, declines will likely continue.
We could see a spike in the number of EG devices (electronic gaming) across the US. This is already evident in Illinois and its popularity is increasing. A shift in focus is underway. Casino operators are now allocating bigger budgets towards targeting key segments such as millennials. This consumer group is tech savvy, mobile and interested in different types of casino games. Games include smart slots (with sensory and strategy-based gaming) and AI systems that understand your preferences and reward you accordingly.
Amazing Facts & Figures from Asia and Las Vegas
Macau is in the process of complying with regulations on the Chinese mainland. Once it does this, it will be able to expand its operations and stabilize around $26 billion – $30 billion in revenues. Asia is a popular destination for games like Baccarat and Mahjong. Las Vegas will attempt to attract high rollers from Asia and increase its Baccarat spend to boost gaming revenues. As a case in point, Macau gaming revenue spiked dramatically between 2006 and 2013, but fell dramatically since then. At the same time, Las Vegas gaming revenue has held firm with little or no growth. Macau’s pullback was precipitated by a campaign which sent revenues plunging in Q3 2015.
This pullback marks the worst performance of Macau’s casino industry in 5 years. For Las Vegas, revenues have been stable at approximately $6.5 billion since 2010. Even though real GDP declined in China between 2014 and 2016 (now less than 7%), tourism spiked by 30% + in 2014. The growth of China’s middle class and the increase in real wages is helping to fuel the casino industry in the region. This will likely have a spillover effect on surrounding territories like Singapore, Australia, New Zealand and others. Macau had some 93.5% of total revenue generated by casinos in 2013, but this is expected to decline to 90% of total revenues brought in by 2020. In terms of the legality of online gaming, very few countries are approving this type of technology and regulation.
In 2015, the UK generated some $4.3 billion in gambling receipts for domestic online gaming. In 2013, Delaware and New Jersey generated annual revenue of approximately $125 million. It is unknown how much online gaming revenue has been generated in Nevada, since the data is included with land-based operators. In Macau, slots games only make up 5% of gaming revenue, as opposed to 50% at casinos in Nevada. This data was provided by Scotia Bank economics expert, Neil Tisdall. 2017 is likely to see many of these issues being brought to the fore. Games like Baccarat will continue to be the dominant games in Asia’s burgeoning casino industry, and Las Vegas growth remains anemic. Everyone will be watching California and its state legislature with regards to what can be done to further online gaming in the Golden State. Many bills have been presented, but none have passed.