2013 Gaming Industry Forecast

Hope springs eternal and everyone is hoping that 2013 will begin to build on the past year’s success with even stronger growth. While it appears most gaming markets have stopped declining and are actually trending up, gaming companies and the vendor communities are looking for a bigger jump in revenue this year. There are a number of factors that may actually help make this happen—the election is behind us, and while people may still argue whether the results are good or bad, the most important thing is that the uncertainty is gone. This will allow both private and public companies to understand the impact on their operations from a regulatory, financial and tax perspective. I expect to see many of these companies finally start to move faster with expansion plans, acquisitions and other large-ticket spending projects. This should be welcome news to vendors that have been surviving on the crumbs of small projects these last few years.

Other factors include a reluctantly improving economy, and more importantly, improving consumer confidence. This will help to increase the number of visits and the amount of customer spend at individual properties, assisting in the casino companies’ desire to trend revenues up. Additionally, the relative quiet in regard to domestic terrorism and the nation’s diligence in preventing incidents that would affect travel, hospitality and gaming continues to stabilize visitation. Unfortunately, this can always change in a terrible moment.

The expansion of gaming to new jurisdictions, and to some degree in existing jurisdictions, continues, forcing us to address the question of saturation again. For decades, opening new casinos in both existing and new markets typically meant expanding the pie instead of slicing it up smaller. But in recent years, it has served more to change existing market share than grow the customer base. This is forcing gaming properties to be more competitive, not just with their marketing promotions, but with the offerings of amenities in their properties. Older properties are being forced to invest capital to refurbish rooms and restaurants, or face living with less market share and lower revenues. Newer properties are enjoying easier customer acquisition, but properties that are poorly designed and miss the mark with customers are facing the same or worse problems than older casinos with an established customer base. A brand-new billion dollar property that doesn’t resonate with customers can’t very easily spend another $200 million to “fix” things.

Lastly, we continue to anticipate the legalization and regulation of online gaming in one or more forms, and in one or more states. The impact this will have on individual brick-and-mortar casinos, gaming companies and the overall market continues to be hotly debated. It’s clear that larger well-known gaming brands will benefit most, but the impact, either positive or negative, on smaller regional casinos remains contested.