THE BACK PAGE: Demanding times for new supply
by Charles Anderer
April 1, 2010
One of the toughest things about the past two years in gaming is the continued upward pressure on supply in the U.S. market
Las Vegas has been the most obvious victim, bringing huge projects
to market that were well along the pipeline before the bottom fell out. But
state governments have done a lot to complicate matters as well. There is a
steady increase of competitive pressure on the installed base of casinos
virtually everywhere, and that’s not likely to change.
The phenomenon is global in nature. Looking back, we can now
safely say that one of the most brilliant
moves in the past decade was a decision to punt: Wynn Resorts’ sale of its
subconcession license in Macau for $900 million back in
2006.
We also see that where supply continues to be
constrained, such as the New York City market, where Empire City at Yonkers
Raceway continues to enjoy an exclusive position, the results are still
enviable. After a strong 2009 Empire City continues to post monthly
double-digit gains. Of course, whenever the New York market is fully built out
Yonkers will have to share the city with Aqueduct and perhaps Belmont, and it
will lose some customers to a new megaresort in the Catskills. But more than
eight years after the initial enabling legislation that envisioned such
developments, a diminished market for Yonkers remains a
hypothetical.
Granted, the industry has always risen and
fallen to no small extent on access to new jurisdictions, and muscular lobbying
efforts continue in places such as Massachusetts and Ohio. There will always be
plenty of takers when states open up. But the macro picture has grown
immeasurably more complicated than the utopian days of yore when fully invested
commercial casino companies plausibly embraced an all-roads-lead-to-Vegas
philosophy, which held that new supply ultimately led to new demand, to
everyone’s benefit.
The latest analysis from the American Gaming Association bears
this out. Commercial casino revenues fell 5.7 percent in 2009, not a bad overall
result but one that confirms the fact that last year’s pain was not evenly
distributed, with the mature, and many would say oversupplied, markets of Las
Vegas and Atlantic City taking the worst hits.
Throughout the recession operators have anecdotally maintained
that visitor volumes, after falling
initially, bounced back to previous levels but that average spend has
decreased. The official numbers in Las Vegas
bear that out to some extent. But the firm Mintel Research last month reported that 30 percent of
adults visited a casino in the past year, down from 35 percent in 2001 — a
grinding 14 percent decline over the last eight years.
“This shift has been gradual, which suggests that this is not a
result of the recession,” said Billy Hulkower of Mintel, quoted in numerous
published reports.
Hulkower said the trend suggests little or no
growth in casino attendance over the past decade, a period that included two
recessions and an economic upturn. This means economics is not the only factor,
he said.
“Casinos may be losing audience to the increasingly compelling
entertainment offerings in the home,” he suggested, “such as HDTV, high-end
video game systems and the Internet, including Internet
gambling.”
This last point is interesting. Who can deny
that personal entertainment technologies have made staying at home increasingly less
boring over the years? The first time you see a teenager camped in front of a
huge flat-screen, wearing a headset and using Xbox live to play Kill the Moving
Object (aka “Call of Duty, Modern Warfare
II,” et al.) with five or six other kids around the country, you realize how
your grandparents must have felt when they first saw you wearing a
Walkman.
We know that teens aren’t the industry’s marketing target, but the
juxtaposition of Internet gaming and falling revenue is a sign of the times.
How to keep the gaming product relevant in the United States when it remains
offline in an online world, especially when loyal older slot players must be
replaced by people accustomed to high-technology values? The drumbeat is just
beginning.
Of course, I’m skeptical about all of that. Governments have a
hard enough time adding table games to slot houses or even rewarding a franchise at Aqueduct let alone
navigating the perilous waters of Internet gaming. Plus, the turn to Internet gaming is an all-too-familiar page from a
play book that has gotten a little stale: new supply to the rescue. Tomorrow’s
winning strategy will be finding the keys to stimulating demand in existing
projects. The industry is in a same-store sales growth environment where creative uses of new game technologies and
marketing will win out.
Not as glamorous as where it has been, but
far better than the alternative.
Charles Anderer
is executive editor of BNP Media Gaming Group and also oversees content development, sales and marketing for the company’s trade shows and conferences, which include Bingo World, Southern Gaming Summit, Gaming Technology Summit, New York Gaming Summit and Casino Marketing. He can be contacted at andererc@bnpmedia.com.
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