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Is There A Silver Lining?

Will the gaming industry come out of the economic downturn in better shape than it went in?

As you read this column, let’s hope this “Great Recession,” as it is being called by some, will be coming to an end and a recovery will have begun. As it is being written, there is no way to know how soon that happy occurrence will take place. But as difficult as it is to believe right now that this too shall pass, when we look back, we may see a proverbial silver lining in the clouds of the economic turmoil of the last two years.

First, the impact of the economy on the gaming industry and the accompanying risk to gaming communities and states has made the value of the industry crystal clear to all but the most biased of elected officials.

Nothing makes one appreciate jobs, economic development and tax revenues quite as much as the specter of losing them. As we reported in our recently released “2009 State of the States” report, while the industry held its own last year (revenues dropped a little less than 5 percent in the U.S.), it is clear the recession is taking a deeper toll this year. Still, 10 states-including Kentucky, Ohio, New Hampshire, Massachusetts, Texas and Georgia-are currently considering legalizing or expanding gaming. That is pretty strong testimony to an understanding of the contribution gaming can make.

Second, the gaming industry has solidified its place within the travel and tourism industry by working hand-in-glove with our colleagues in the industry to deal with the devastating impact of a panic-driven drop in business meetings and convention travel. These efforts have made a real impact, as members of Congress have all but silenced the rhetoric against meetings and event travel to destinations like Las Vegas.

And, finally, the industry has responded to the crisis by developing better ways to operate. It has been forced to be even more sensitive to the needs of its patrons and more creative to meet those needs in more efficient and cost-effective ways.

The industry is adapting to this tough economic climate through innovation and a commitment to providing value to its customers.

For example:

• Equipment manufacturers are developing new and exciting gaming experiences that meet the demands of increasingly frugal customers.

• The industry is working to re-establish itself as a source of good-quality entertainment at a fraction of the cost of other recreational activities.

• Casino hotels have lowered room rates to levels not seen in more than a decade.

The key is sharing what we are learning from this experience, and one of our most important roles at the American Gaming Association is to facilitate such sharing. To help increase understanding of how the industry is dealing with the ongoing economic challenges, our conference program at Global Gaming Expo last November focused on coping with and overcoming these difficult times, topics we will continue to examine during G2E Asia 2009, scheduled for June 2-4 in Macau.

Just as is the case in the U.S., these are challenging times for the Asian gaming industry, and gaming companies are being forced to rethink their strategies, adjust their balance sheets and reprioritize goals.

In Macau, for example, the lack of liquidity in the financial markets has put many building projects in the region on hold, and continued travel restrictions have limited visitation. As a result, the second half of 2008 saw the number of visitors to the peninsula decline sharply. Gaming revenues for the period totaled $6.26 billion, down 15 percent from the $7.34 billion in revenues earned during the first half of the year. The resulting unemployment has strained an already-challenged infrastructure.

While a revenue increase of 8.1 percent for the first quarter of 2009 is a sign that Macau’s gaming industry may already be rebounding, revenues were still down 13 percent from the first quarter a year earlier, when the casinos posted a record $3.7 billion in revenue.

This year’s G2E Asia will provide industry leaders with a unique opportunity to share their experiences and discuss strategies for moving through these times and into a better and more prosperous future. It also will provide the opportunity to hear from some of the leading figures in Asian gaming, including a panel of gaming analysts that will explore the future financial outlook for Asian gaming.

Arguably, the most important conference sessions will be held on the final day of G2E Asia, as they will focus exclusively on how manufacturers, developers and casino operators can navigate the economic storm. Sessions led by scholars and experts will closely examine how gaming facilities can cut costs without sacrificing their commitment to customer service, how developers can identify and capitalize on creative financing solutions, and how companies can use intelligent strategic marketing to continue building their customer base even in difficult times. These are issues we all can identify with in today’s environment.

G2E Asia will help demonstrate that-at their core-the U.S. and Asian gaming industries remain strong. Every day, across the globe, casinos continue to generate revenue. Though the recession has changed the economic landscape, gaming continues to capture the imagination of millions of casino patrons each week.

The gaming industry is no stranger to adversity. By demonstrating resiliency and ingenuity-just as we have done in the past-we can weather yet another storm. And by using forums such as G2E and G2E Asia, we can learn from this difficult situation and move forward with the knowledge that we are better for it.

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