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High Tides and Headwinds

Executives remain positive on current business climate, reserved on the future outlook

High Tides and Headwinds

Stop me if you’ve heard this before: the U.S. gaming industry is continuing to set revenue records. In the midst of its most successful run ever, the industry saw all-time commercial gaming revenue highs in both 2021 and 2022—and Q1 2023 was another record-breaking quarter for the industry.The most recent quarterly earnings calls from many of the industry’s biggest players also reflect the high tides gaming is currently enjoying, with several companies praising the past quarter as one of their best yet.

High interest rates have had economists predicting an impending recession for more than a year now, but consumers have been resilient, especially when it comes to their gaming spend. So how do gaming executives view the next six months? That is the question the American Gaming Association’s (AGA) biannual Gaming Industry Outlook, presented by Fitch Ratings, attempts to answer.

Here are three takeaways from our latest Outlook, published April 25, featuring responses from 26 industry executives across casinos operators, gaming equipment suppliers, and iGaming and/or sportsbook operators.

  • Gaming executives are overwhelmingly positive on current business conditions, but harbor reservations that the current pace of growth will continue. Nearly every gaming executive surveyed characterizes the current business situation as good (62 percent) or satisfactory (35 percent). However, only 20 percent expect future conditions to be better than today and two-thirds (64 percent) expect future conditions to be the same. See Table 1.

Overall, a greater share of executives expect the pace of new employee hiring, revenue growth and customer activity to decrease over the next three to six months than to increase.

  • Concerns around interest rates and economic uncertainty are driving these dampened expectations, as are a myriad of other factors. However, in a promising turn of events, concerns around labor shortages are abating and supply chain delays have fallen out of the top five factors limiting growth. Top executive concerns are ranked in Table 2.
  • Despite general caution around industry growth rates, operator and supplier executives are both bullish about the long-term health of their businesses. More operators expect capital investment (21 percent net positive) and gaming units in operation (14 percent net positive) to increase over the next three to six months than decrease.

Meanwhile, an overwhelming majority of gaming equipment manufacturers expect sales of gaming units for replacement use to increase (88 percent net positive) and most expect units for new or expansion use to increase (63 percent net positive). No gaming manufacturer expects the pace of sales to decrease over the next six months. See Table 3.

Ultimately, the Gaming Industry Outlook shows that we expect a marginal slowdown in momentum from gaming’s current record pace—a reflection of general concerns around a mild recession in the second half of 2023, softening CEO optimism, and tightening consumer balance sheets. Despite these headwinds, this spring, more Americans said they planned to visit a casino over the coming year than at any time since the start of 2020, and CEOs expect to increase investments in the newest games to maintain and grow gaming’s share of Americans’ entertainment budgets.

As long as the industry continues to provide first-choice entertainment options, we believe the industry’s outlook remains strong in the long term.

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