GGB is committed to providing updated news and analysis on our weekly news site,

Looking Back to Look Ahead

Things may not be as bad as they looked earlier this year and next year could even be better

Looking Back to Look Ahead

The year 2010 has been pretty good for the gaming industry.

Investors have seen stock prices come back from the devastating levels of March 2009, and hold. In some cases, they’ve roared back in what appears to be a new bull market for select companies, such as Las Vegas Sands and Wynn Resorts.

The casino industry has found its legs and is standing fairly firmly, though at much lower levels of cost, debt and, in many cases, ambition.

Suppliers were the mystery group of 2010. That darn North American replacement cycle never showed up, dashing predictions of business recovery. But nothing stands completely still, and there was movement within the group as WMS continued to gain share and Konami made dramatic advances, though with some competitors carping that they were buying business.

So, having survived financial crisis and recession, the industry is ready to head into the new year looking forward with some confidence for the first time in a while.

And that, of course, begs the question of what 2011 holds in store. Here are some topics to consider:

  • Las Vegas. Will Sin City come back? Our answer is yes, though not with the swagger and abandon of 2007.

The evidence for the comeback is in the convention business. Advance bookings are up and newly scheduled meetings are being priced higher throughout the convention industry.

Convention attendance is important in itself for generating room revenue, but in taking up rooms at higher rates, it helps pricing throughout Las Vegas. And, of course, every dollar on a fixed-cost item like a hotel room falls nearly all to the bottom line.

Meanwhile, there will be no significant new capacity coming on line for years.

  • Asia. Investors are going through another wave of euphoria over Macau. But they might be wise to exercise some caution. First, the stocks of Macau casino operators have run up a lot, and may be in for a rest, if not a correction.

Second, the Chinese government is trying to find ways to put the brakes on growth and inflation. If they succeed—or succeed too well—it could slam the high-end business that Macau thrives upon.

And, simply, trees do not grow to the sky. The third quarter results announced by Genting Singapore suggest that growth can slow even in boom markets.

  • Atlantic City will someday find bottom, but there’s no telling if that’s next year. Meanwhile, Atlantic City desperately needs to turn its image around entirely to where prospective visitors consider it a hot destination, not a place they’d rather avoid. And halfway measures, or local pride on improvements to date, won’t do.

The addition of a Hard Rock and Revel would help. And New Jersey Governor Chris Christie’s tourism district would be a good start.

  • Gaming technology. The big changes in the past were all about slot machines, such as wide-area progressives, bill validators, ticket-in/ticket-out. Now, technology is coming to the table pits such as Shuffle Master’s iTable, and progressives and bonusing by various companies.

Meanwhile, server-based gaming for slots continues to roll out more slowly than expected, resulting in other products, such as slot window displays and TransAct’s Epicentral coupon printer, providing many of server-based functions without the expense of transforming entire slot floors.

We expect that these trends will continue in the coming year, providing opportunity for small companies whose products fill niches.

  • Remote gaming. Companies of all kinds are positioning themselves for the legalization of online gaming in the United States, though when it happens, and whether it is done federally or on a state-by-state basis, and whether it’s limited to just poker, remains to be seen.

We expect i-gaming is more likely to arrive gradually than in a grand single piece of federal legislation, but that it will happen.

Meanwhile, mobile and wireless gaming are progressing in the U.S.

Prediction: Within a decade, remote and internet gaming will be commonplace.

  • Gaming proliferation. Barring some sort of unforeseen repeal movement, gaming will continue to proliferate in the U.S. and beyond.

A big trend to look for is VLTs. Italy is going from zero to 57,000 machines in less than a year. Greece may follow with 50,000 machines. Illinois will have 40,000 or more at liquor-licensed establishments.

If these moves succeed in raising money for governments without political consequence, look for VLTs to spread like lotteries did a generation ago.

And if that happens, the number of slot machines in the world will explode to a huge number in a bonanza for slot companies. We’ll get our first sense of that next year as Italy and Illinois VLTs come on line.

    Related Articles

  • Bad News, Good News

    Declining gaming earnings and subsequent stock declines were expected, but the result is good bargains

  • Diamonds in the Rough

    A few companies show the way to succeed in a flat market

  • Little Giants

    Several small-cap companies offer value in a bear market

  • Best in Class

    There are a few stocks that truly are investment-grade

  • Show Me the Money

    Growth stories need to be written—and demonstrated—by the companies

    Recent Feature Articles

  • Funding the Future

    Gary Ellis’ vision of a cashless casino ecosystem with Marker Trax and Koin

  • Age of the ETG

    Electronic table games have grown from simple automated roulette machines into a genre that is steeped in innovation.

  • Online in Ontario

    Stakeholders deem Ontario a success, but also a work in progress.

  • Mixing It Up

    Developing slot floor strategies for emerging markets.

  • Gaming & Diversity: Staying the Course

    DEI has encountered big resistance of late. Here’s how gaming companies continue to build a fairer workplace.