According to the National Revenue Report published by Fantini Research, regional gaming revenues edged up 0.51 percent in July to .451 billion thanks to new casinos.
But the overall number masked continued weakness that is revealed by the 3.68 percent same-store decline in July, the latest month for which full statistics are available.
As gaming revenues continue to lag the country’s economic recovery, the question has to be asked whether this is a long-term, perhaps even permanent, trend.
One often-blamed factor is the proliferation of casino gambling throughout the country, as something that once was special has become commonplace.
But casino fatigue seems an unlikely reason. Most new casinos are in new or underserved markets and should contribute more to growth than to cannibalization.
It appears more likely that there is a change in consumer behavior reflective of broader causes.
A look at the restaurant industry shows that gaming is not alone.
Revenue at casual dining restaurants declined a significant 3.5 percent in July following a 2 percent drop in June, according to the Knapp Track Index.
Those numbers are interestingly close to regional gaming revenue declines of 3.7 percent and 2.7 percent.
And these declines come in the face of improved consumer confidence, usually a dead-on predictor of better times for a consumer discretionary industry like gaming.
Meanwhile, sales of the biggest-ticket items for most Americans—homes and cars—continue to grow.
That is counter-intuitive. When times are tough, it is expected that it is the smaller items—especially those involving entertainment, such as gaming and casual restaurant dining—that would hold up while consumers wait for an improving economy to give them the resources to buy cars and houses.
And, indeed, that is what happened during the Great Recession. While GM and Chrysler were on the ropes and homebuilders and mortgage companies collapsed, casinos and restaurants outperformed.
An interesting change in the dynamics of regional casino play has occurred since the recession.
Then, it was common for casino operators to report that customers were still coming to casinos; they were just spending less. That behavior makes eminent sense when budgets are tight but people still crave entertainment, if not outright escape from the daily grind.
Today, casino operators report the opposite: customers are making fewer trips, but spending more.
That trend is borne out by admission statistics from three Midwestern states that operate turnstiles and where there are few new casino openings to blur the picture.
July admissions compared to last year:
Missouri same store*-13.5
July win per admission vs. last year:
*Factors out Isle of Capri’s Isle Casino Cape Girardeau, which was opened this year
Why are fewer players spending more money? The answer probably has more to do with decisions by casino management than decisions by consumers. In order to control costs in the slow business environment, casinos have cut back, or cut out, marketing to low-value players and focused resources on their best players.
Thus, the casual player who accepted a free buffet offer for a cheap night out during the recession isn’t getting that offer as often, or at all. And that can lower overall revenues, too, depending on the marketing and player mix.
Interestingly, there is one aspect of the casino business that is booming, at least in Las Vegas—the uber-nightclub.
By now, everyone knows of places like Hakkasan in MGM Grand and the clubs in Wynn and Encore where patrons order $10,000 bottle service and DJs earn $250,000 a night.
On the surface, that would seem to fly in the face of overall industry trends. Colliers International and the UNLV Center for Gaming Research recently drew the conclusion in their semi-annual Las Vegas update that gambling has become less important in Las Vegas and the future is in non-gaming spending.
But the trend toward non-gaming spending is not new. It dates back a quarter century to the 1989 opening of the Mirage.
The excessive nightclub spending is at least partly fad, for sure, but might have more to do with the fact that affluent people are faring better in today’s economy. And the January increase in payroll tax deductions by definition hit wage earners harder than many others higher on the wealth scale.
And that, as well, might contribute to the overall weakness in casino revenues. People are making decisions on how to spend, and more are choosing big-ticket necessities at the cost of entertainment.
Consider win-per-admission again. The typical casino patron is not a high roller playing thousands of dollar per hand or $100 a spin, especially in regional markets.
In Illinois, average win per admission is $99. In Iowa it’s $61. Missouri’s average per patron is $72. Those folks are grinding it out.
That free buffet is more important to them.