Though countless economists and market analysts have attempted to answer that question, the truth is this: No one truly knows when the global economy will rebound. We’re facing a challenge the likes of which we have not seen before. This crisis is severe, complex and virtually unprecedented.
The global gaming industry – like so many consumer-driven industries – is particularly anxious for a respite after months of decline. Once thought to be impervious to economic fluctuations, it has proved vulnerable in the current downturn. Two issues – the precipitous drop in consumer spending and the global credit crunch – have significantly impacted the industry.
Throughout the U.S., consumers are tightening their belts. They are taking shorter trips for fewer days and spending less on the high-end amenities that have become intrinsic to multi-faceted casino resorts. According to early survey results from the 2009 edition of State of the States: The AGA Survey of Casino Entertainment, 60 percent of regular gamblers are visiting casinos less frequently in response to the economic downturn. Additionally, nearly 40 percent are adjusting their annual vacation plans and 56 percent are cutting back restaurant visits.
In addition, available capital dissolved abruptly in the midst of several major development projects, forcing many U.S. gaming companies to stop construction mid-stream or to cancel new projects altogether. This has made expansion, a pillar of the industry’s business strategy, much more difficult.
In Asia, too, the credit freeze has suspended new or expanded casino projects throughout the region. Once explosive growth in Macau – the highest volume gambling city in the world – has been tempered by nearly a year of falling revenues. Though the decline is due in large part to tightened visa restrictions, the global economic downturn surely has aggravated the problem.
Solving these issues is crucial to restoring the global gaming industry. Aggressive industrywide efforts are currently underway to do just that.
Gaming destinations across the globe are reemphasizing their reputations for value. Casino hotels from the U.S. Gulf Coast to South Korea have slashed room rates and are welcoming visitors with myriad special offers. Equipment manufacturers are developing new and exciting gaming experiences that meet the demands of increasingly frugal customers. The industry is reestablishing itself as a source of good-quality entertainment at a fraction of the cost of other recreational activities.
Also, the gaming industry is doggedly pursuing credit for various expansion and development projects. Unfortunately, despite our best efforts to unlock capital markets, liquid assets are still scarce. That issue remains a top priority for gaming leaders; until it is resolved, the industry cannot fully recover.
However, the industry is making some headway. In the U.S., early 2009 revenue reports indicate that some smaller gaming markets in Iowa, Indiana and Missouri are posting impressive gains. But the U.S. gaming industry is not monolithic. Though some riverboat casinos and localized gaming markets are flourishing again, gaming destinations like Las Vegas and Atlantic City continue to struggle. Still, even a modest increase in consumer spending bodes well for the future of the industry.
Interestingly, the one segment of the global gaming industry that appears to be flourishing during these difficult times is the online gambling sector. Global online gambling revenues continue to witness a steady climb, even during the recession. This would seem to indicate that online gambling, which requires little capital to operate, is more impervious to economic cycles than traditional bricks-and-mortar casinos. These numbers will likely increase pressure here in the U.S. to adopt new legislation to legalize and regulate online gambling within our borders.
Ultimately, though we may not know when the recession will subside, we have a keen understanding of the economic triggers that will bring about the recovery of the global gaming industry. Weathering the economic storm is the industry’s top priority this year, and I am confident we will be successful in the endeavor. Though some have been painful, the industry has learned many valuable lessons through this experience – lessons that will help the industry grow better and smarter in the years to come. The economy will improve, and the gaming industry will recover. We have the tools, the ingenuity and the hard-won experience to do it. I am as sure of this as I am sure that the sun will rise tomorrow.