The U.S. gaming industry has been on a record-setting roll for the last 18 months and continues to post revenue records despite the country’s broader economic uncertainty. Through the first eight months of the year, national commercial gaming revenue is pacing an impressive 15 percent ahead of 2021’s all-time high.
It feels like we’ve been asking the same question every month since early last year: Is it sustainable? As part of the American Gaming Association’s (AGA) recent biannual Gaming Industry Outlook, presented by Fitch Ratings, we asked top executives across suppliers and commercial and tribal operators how they feel about the business climate over the next six months.
About 70 percent of AGA member company CEOs or other C-suite executives offered their insights and indicted five key themes:
1. Gaming executives feel good about current business conditions, and more are optimistic than pessimistic about future conditions. However, for the first time, respondents had a net “tight” outlook on company access to credit, with more respondents indicating access to credit is tight (31 percent) than easy (8 percent).
2. In contrast with that generally positive backdrop, the overall pace of hiring, capital investments, revenue growth and customer activity is expected to moderate compared to earlier this year. Further, at the same time that most expect the pace of wage growth to continue to accelerate in the near-tern and access to credit tightens, more CEOs expect their balance sheet to improve into next spring.
3. Among gaming suppliers, expectations for future growth have also softened but still reflect strong demand for gaming units for both new and replacement use.
4. Whether an operator or supplier, executives face by a range of business challenges. Supply chain issues remain the top concern even as the number of executives citing supply chain as a “factor limiting business” fell to 65 percent from a high of 75 percent in Q1 2022. Inflation and interest rate concerns (flat from Q1 20222) as well as concerns around the uncertainty of the economy (up from 46 percent in Q1 2022) also remain major limiting factors for the industry.
5. When it comes to capital investment, F&B and hotels are slated by many for more spending than normal. Additionally, parking and slot offerings are high on many companies’ capital spending priorities.
Taken as a whole, AGA’s Gaming Industry Outlook reflects an industry aware of the headwinds buffeting certain sectors of the economy, but also one that continues to benefit from strong consumer demand.
It may be incongruent with the everyday media narrative, but that storyline was visible to everyone in mid-October as the global gaming community gathered in Las Vegas for Global Gaming Expo (G2E) 2022 to do business and celebrate the industry’s momentum. The pre-pandemic atmosphere on the show floor and the amount of business being conducted validated what we’ve heard from executives: gaming is back and our future is strong.