EDITOR'S LETTER: Ready, set, survive
Those who were looking to G2E week for light at the end of this long, dark economic tunnel had to have come away disappointed. Not that there could’ve been that many of them. Maybe, just maybe, optimism is finally, legally dead, and this year’s show was the funeral. This way, everybody can get down to figuring how to make money within the parameters of what is real.
Actually, the show itself was a pretty fair indicator of the general ugliness. Total attendance was down almost 4 percent from 2008, at least for the first two days, which were the numbers available at press time, and 160 or so fewer companies exhibited. Total floor space was down about 20 percent. Given that this is the biggest shebang the industry throws every year, the magnitude of these declines is obvious.
On the other hand, if we’re to make anything of the recent results of a survey of a couple hundred subscribers to the AGA’s daily e-newsletter, nearly half of industry professionals (47 percent) think things are beginning to improve. What this means is hard to say, though, because almost as many (44 percent) also said they don’t think business will return to pre-recession levels for three or four years. A significant number (21 percent) said it’ll be more like five to nine years. Roughly one-third of respondents said conditions remain depressed and stagnant. Twenty percent think business continues to decline. Three-quarters of those who responded said they believe the economic collapse and resulting credit crisis have left the industry “irreversibly altered”.
“We’re certainly not predicting a significant improvement in 2010,” said Nick Khin, president of Aristocrat’s American operations. He was a speaker at the show.
He added, pointedly, “The players that are coming to the casinos need to be a lot more secure than they currently [are] today, with regards to their employment and their income.”
Good luck with that one.
I mean, come on now, it was debt-fueled retail spending driving economic growth for years - gambling expansion included - and this was happening in the face of declining real wages and rising household expenses for everything from the kids’ clothes to doctor visits to gasoline. And not only have we ground out Mr. and Mrs. Consumer, we’ve eliminated their jobs, a circumstance that regularly shouts itself hoarse in things like consumer confidence, which shot lower again in October, according to the latest numbers released by The Conference Board.
“Consumers’ assessment of present-day conditions has grown less favorable, with labor market conditions playing a major role in this grimmer assessment,” said Lynn Franco, who directs The Conference Board’s Consumer Research Center. “The short-term outlook has also grown more negative, as a greater proportion of consumers anticipate business and labor market conditions will worsen in the months ahead. Consumers also remain quite pessimistic about their future earnings.”
Not surprisingly, commercial casinos suffered a collective drop in revenues of 5.5 percent in the third quarter, which is pretty indicative of how things stand. Some of this can be attributed to the drag effect exerted by Las Vegas and Atlantic City. While regional markets mostly appear to be holding their own.
So there is money to be made out there, and based on the statements of many at G2E, the operators certainly have come round to the realization that they’re going to make their share, only they’re going to be doing it with less. Growth will be subdued, at best, and profits are going to be driven through the recognition and gleaning of opportunities presented by the capital they’ve already invested.
Which can’t be a bad thing. Those who survive, and most will, are going to be that much stronger.