The U.S. casino industry, which includes land-based commercial casinos, riverboat casinos, tribal-run casinos, racetrack casinos (racinos), and card rooms, generated approximately $45.9 billion in revenue in 2003, a 5.7% increase compared with 2002 revenues. In 2004, industry revenue is projected to grow 5.1%, to reach $48.3 billion. Forty-eight U.S. states (except Hawaii and Utah) have some form of legal gambling. Casino gambling was legalized in Nevada in 1931 and the state did not experience any competition until 1976 when New Jersey legalized gambling. The swift spread of casinos started in the late 1980s and early 1990s when a number of states including Iowa, Illinois, Colorado, Connecticut and Indiana, began legislative initiatives to allow commercial and/or tribal casinos to open. Between 1989 and 1998 nine states legalized casino gambling. In 2004, casino gambling (including commercial casinos, tribal casinos, racetrack casinos and card rooms) was legal in 34 states and around 200 counties. Once associated with vice and sin, gambling has become more of a mainstream form of entertainment and attracts a wide cross-section of visitors. However, most casino gaming markets are not yet saturated and there appears to be considerable unmet demand in the gaming industry. If the casino industry can continue to legitimize itself and bolster its reputation as a total entertainment experience with a focus on building gaming attractions that boost entire communities, economically and otherwise, the U.S. casino industry will experience further widespread public acceptance, popularity and future growth. The casino industry includes commercial casinos, tribal casinos, card rooms and racetrack casinos, sometimes referred to as racinos. This includes table games like black jack, poker, roulette and craps as well as electronic gaming devices (EGDs) like slot machines, poker machines and video keno. The report does not include online gambling.
If you want more details about this particular report, please contact the Mintel information team on +44 (0)20 7606 6000 or email them at firstname.lastname@example.org. Casino Gambling - US - November 2004
FUTURE & FORECAST
Casino industry growth is promising through 2010. In the early 1990s when there was a mass legalization of casino gambling, the industry was marked by growth that reached upwards of 10% or more. The industry will likely experience single-digit growth unless new markets open up bigger opportunities.
The future of casino gambling on a national level Based on data from the Bureau of Labor Statistics (BLS), employment in the gaming services sector will grow faster than average through 2012. Growth in the gaming industry is intricately connected to the growth rates of other tourist and leisure activities.
The U.S. economy and political affairs In some ways casino gaming is a recession-resistant industry. People who truly enjoy gambling will find a way to gamble, regardless of changes in their amount of disposable income. During the economic slowdown following the events of 9/11 many casinos like Mandalay Resort and Caesars were adversely affected. They were, however, able to cut costs and survive by ramping up marketing efforts which included major cuts in hotel room rates paired with direct mail campaigns. Events like the terrorist attacks of 9/11 accentuate the importance of diversification in the casino industry. Casino companies that primarily relied on the travel market and related services such as hotel receipts for revenue were hit much harder after 9/11 compared to other industry players. If another large-scale calamity was to occur that further discouraged people from travel and flying, it is unknown whether the industry could fare as well. An unsettled political milieu equates to a larger number of customers deciding to visit casinos closer to home, and this often means more visits to Indian casinos and fewer visits to large-scale resort locations including Las Vegas and Atlantic City. While U.S. customers are critical for the wellbeing and future growth of the U.S. casino industry, some key destination resort markets, like Las Vegas, also depend on international visitors. As reported by the LVCVA, in the 1990s, international tourists accounted for about 11% of the visitors to Las Vegas. In 2003 this figure fell to 9%. Issues like the unstable economy, the Iraq War and SARS all hinder international travel and have a negative impact on casino resort destinations like Las Vegas.
New distribution channels increase market share More than 125 countries around the globe allow casino gambling. Continued expansion is projected both internationally and nationally. Projected casino growth in Pennsylvania, Maine and New York will also help to bolster annual revenues in 2005 and beyond. New markets, which can include both new and/or upgraded facilities, are essential for industry growth since the casino industry will hit a maturation point considerably faster if new markets cannot be exploited. As confirmed by researchers at the University of Nevada in 2004, when opening up casinos in new markets, most gaming revenues increase for the initial three to five years and then begin to stabilize. Racinos may provide a significant future opportunity. There are 43 U.S. states with pari-mutuel wagering. Getting casino gambling approved at these facilities would open up important opportunities for industry growth. It requires a major capital investment to start up a casino business and sometimes racinos offer investors less expensive opportunities since the facility and the wagering milieu are already established. Additionally, future growth through the development of new Indian casinos, particularly in California, is expected to continue to drive up revenues. Sometimes the introduction of new gaming facilities may hurt established industry players since close proximity can force establishments to cannibalize one another in order to survive. Casino facilities in Michigan are threatened by the state’s consideration of racino legislation. Likewise, racinos that serve the Pennsylvania market are concerned about the impact of the new Pennsylvania-based racinos.
Contending with industry critics New markets may lead to higher incidences of gambling problems. In 1999 the NGISC reported that access to a casino within 50 miles of one’s home was associated with about double the rate of pathological gambling. Regardless of whether or not gambling abuse serves as a hindrance to the casino gambling market, examples of gambling abuse will fuel the ongoing moral debate surrounding the legalization of gambling in new markets. Gambling opponents will continue to voice concern over the problems associated with legalized gambling. The grass-roots coalition the National Coalition Against Casino Gambling (NCACG) suggests that gaming facilities lead to increased crime, abuse, suicides, divorce and increased gambling addictions. In 2004 Kansas rejected various proposals that would have allowed casinos. This same year, Texas rejected a bill that would have allowed 40,000 VLTs at seven existing racetracks. Similarly, a bill in Ohio failed that would put a ballot question to voters on a constitutional amendment allowing racinos. Maryland also rejected a bill that would have opened the state to racinos and casinos. Regardless of opposition, measuring the social impact of gambling is difficult at best, while measuring economic output can become very real in the form of tax revenue for state and local coffers.
Competition increasing as market becomes saturated If more states do not legalize gambling in the years ahead, the industry will need to focus on increasing its penetration rather than its reach. This will lead to heightened competition denoted by mergers and acquisitions as the market experiences greater levels of saturation. Some extremely significant mergers occurred in 2004 including the proposed merger between MGM Mirage and Mandalay in June 2004, and the proposed merger between Harrah’s Entertainment and Caesars Entertainment the following month. It is likely that a consolidation trend will continue to occur as companies attempt to strengthen their position in an increasingly competitive marketplace. Non-casino sources of competition for potential casino gambling dollars include current trends in VLTs which may pose a competitive threat to casinos depending upon location and popularity of the game. Although gambling sites are not legally based in the U.S., overseas companies can still draw on American business. Gamblingmagazine.com, in October 2003, reported that online gambling was worth nearly $22 billion in 2003 with revenue of $1.3 billion. Consumer research completed by Simmons NCS/Mintel in the spring of 2004 revealed that 54% of those respondents who had visited a casino in the last 12 months had engaged in online gambling in the last 30 days. Online gambling may also have a favorable impact on overall gambling expenditures as it can attract new gamblers into the industry who will then decide to visit actual brick-and-mortar gambling facilities.
The future of casino gambling as it relates to city and state
Gaming revenue increasingly important to state budgets Gambling is and will remain a viable and appealing source of tax revenue for state budgets. Casino gambling has helped states to expand their tax sources. For example, in 2003 gaming and sales tax comprised approximately 70% of the Nevada state budget. In 2001 about 8% of the Delaware state budget came from the state’s three racinos and this same year approximately 10% of West Virginia’s state budget was generated by its four racinos.
Tax policies in existing markets will also be important for future growth There is considerable state variation in terms of taxation laws. The current wave of legislation which proposes to raise the rates of the gaming privilege taxes has hindered the casino industry. States with low rates of gaming privilege taxes help to place economic policy goals before fiscal policy goals. Gambling is even used by the U.S. government to generate money. There are about 8,000 slot machines operated by the four branches of the U.S. armed forces in close to 100 overseas U.S. military bases. Economically deprived regions including Atlantic City, New Jersey, and the Mississippi Gulf have historically used casinos as part of a more general growth tourism growth strategy.
Attract tourists and convention-goers Diversification towards non-gaming tourism is important to growth in order to generate other revenue sources. Non-gaming revenue in places like Las Vegas is exceeding all gaming revenue and the margins are better in non-gaming revenue. Cross-border effects have been an important source of revenue generation in the casino gaming industry. Residents who live in states like Kentucky and Ohio where casino gambling is prohibited often travel to a border state like Indiana in order to partake in legalized gambling activities.
Tourist market Successful casinos will push towards diversification so that risk is spread out among a number of markets and a number of revenue sources including offerings like spas, golf courses, nightclubs, conference facilities and related entertainment venues. In order for diversification to be successful, cities must build permanent tourism infrastructures with adequate transportation venues. An increasing number of casino gambling facilities are enhancing the shopping experience for visitors, particularly upscale leisure shopping. As reported by Women’s Wear Daily (WWD) in May 2004, sales at the Forum Shops in Las Vegas exceeded $1,300 per sq ft, making it one of the most productive shopping facilities in the U.S.
Convention market The convention market is a valuable market for the casino industry. As reported by the LVCVA, convention attendee spending on non-gaming products and services rose 7.2% in July 2004 compared to the same month in 2003. In order to promote conference business, casino companies have had to consider concerns from business owners. Corporations may worry that pairing a conference or business meeting with a casino experience may promote gambling or it may downgrade the general efficiency of the overall meeting. Some companies may be concerned that people will not attend sessions. Others wonder whether the more individualistic experience of gaming may undermine team building. To address these concerns, some casinos have set up a private casino in the business meeting area. Conference-goers are organized into teams and given imitation chips to wager. The winning team may earn a company-sponsored gift.
New technology will continue to dazzle Technological innovation has been an important driver in the slot machine market and it will continue to lead the market. Slot machines are experiencing shorter product lifecycles as customers gravitate towards the newest technology and demand more of it. Future trends will push away from ticketing technology towards cashless Electronic Funds Transfer (EFT) systems which can include handheld units like electronic wallets which can be carried on key chains. Technological innovations will increasingly be responsible for bringing gambling into the home through interactive TV wagering systems and through the Internet. Interactive television has the ability to bring gambling into homes via satellite wagering. Airlines like British Airways are starting to offer interactive gambling during international flights. It is banned on all flights that originate or end at a U.S. destination. Facial recognition equipment will be used in order to enforce the self-exclusion policies adopted by some casino facilities. Other innovations include software that alerts casino officials when someone has made a large withdrawal from the cash machine. When the player’s customer loyalty card is inserted into a slot machine, an employee would be able to locate the person to provide them with more comps. An increase in tracking technologies and data mining based on technological innovation will yield further information about consumer preferences and behavior. Many of the companies continue to struggle with system integration issues as they grapple with tremendous amounts of data situated in separate databases.
Conclusion A sizeable segment of the American population are willing to spend a fair amount of time and money on casino gambling. This helps to make the casino gaming industry resilient through economic turbulence. Broad support for casino gambling may in part be more about a celebration of individual liberty than a definitive desire for casino access. Similar to a variety of national polls that consistently suggest that more than half of Americans believe that abortion should be legal in all or most cases, the majority of Americans believe that they should have the freedom to spend their disposable income as they see fit. Major operators in the casino gaming market are able to survive in a business that thrives on a constant state of change. In order to stay fresh, trendy and hip, the most successful casino companies will engage in a process of renewal as they change with the customer to meet and exceed expectations. Casino gamblers are entertainment consumers rather than just gamblers. In order to sell customers an entertainment experience, casinos must offer visitors a good time so that they decide to return. This multibillion dollar industry will expand in the years ahead as more Americans join the ranks of gambling enthusiasts everywhere. Greater exposure and access to gaming translate into more dollars spent.
Casino Gambling - US - November 2004
Mintel used SPSS statistical software to forecast the market trend to 2009. The methodology correlates historical market size data with significant economic and demographic determinants including income and population. Those factors having the most influence on the market are used to produce the market size forecast.
Casino gambling Total U.S. casino gambling revenues are forecast to increase at an inflation-adjusted annual rate of 5.3% through 2009. Figure 60 shows Mintel’s forecast of casino gambling revenues.
Graph 5: Forecast of total U.S. casino gambling revenues, at current and constant prices, 2004-09
*Adjusted for inflation using the All Goods CPI; CPI is estimated as of October 2004
Total U.S. casino gambling revenues are predicted to increase 46% at current prices and to increase 29% at constant prices from 2004 to 2009. By comparison, from 1999 to 2004, total U.S. casino gambling revenues increased by 43% at current prices and by 26% at constant 2004 prices.
Commercial casinos U.S. commercial casino revenues are forecast to increase at an inflation-adjusted annual rate of 2.6% through 2009. Figure 61 shows Mintel’s forecast of commercial casino revenues.
Figure 61: Forecast of U.S. commercial casino revenues, at current and constant prices, 2004-09
Sales at current prices
Sales at constant 2004 prices*
*Adjusted for inflation using the All Goods CPI; CPI is estimated as of October 2004
U.S. commercial casino revenues are predicted to increase 29% at current prices and to increase 14% at constant prices from 2004 to 2009. By comparison, from 1999 to 2004, U.S. commercial casino revenues increased by 25% at current prices and by 10% at constant 2004 prices.