What’s in your wallet? That’s the question one credit card company likes to ask in their television ads. Given the state of the nation’s economy, it’s probably not a bad question to start asking casino players. Pocketbook issues are front and center. And, as we head closer to November and the presidential election, expect the news to be littered with stories of economic forecasts - the good, the bad and the ugly.
Taking the measure of the U.S. economy and working it to an advantage is critical as casinos struggle with drops in visitation and lower win per unit. It’s the question Ronald Reagan used to win the presidency in 1980: Are you better off now than you were four years ago? That question, which Reagan asked 28 years ago in a debate with then-incumbent Jimmy Carter, was the key moment in that campaign’s closing days. At a time of high interest rates and high unemployment, many voters answered that question with a resounding no. Fast forward to 1992 and witness Bill Clinton beat a sitting president, who just a few months before the election enjoyed unprecedented approval ratings topping 80 percent. Clinton’s message was as simple as a bumper sticker: “It’s the economy, stupid.” Columnist George Will writes that a sense of economic suffering is rampant much like Joseph Conrad surveying the jungle and crying, “The horror! The horror!”
Today's economic woesHarried by rising gas prices, a collapsing housing market and credit crisis, consumer confidence recently slid to a 14-year low, according to the ABC News Consumer Comfort Index. Meanwhile, consumers’ outlook on the economy, the job market and their income prospects is even more pessimistic and suggests that further weakening may be on the horizon. Looking ahead, consumers’ economic expectations for the future are now at a 35-year low; levels not seen since the 1973 oil embargo and Watergate.
What does all this mean for the gaming industry? Plenty. While studies indicate that, as a whole, gamblers are a generally more optimistic lot than the public at large, the economy has taken a toll on the perceptions and optimism of America’s casino gamblers. In surveys with more than 3,000 gamblers nationwide conducted since the beginning of this year, about 23 percent rate the national economy positively, about eight points higher than the national numbers recorded on this question. Possibly more important though, when gamblers were asked to rate their own personal financial situation, nearly half (47 percent) said that they were OK. This compares to a national number of 24 percent who rate the buying climate positively.
While gamblers are more optimistic than other segments of the population, a few points are worth noting. Older players (65 and older) and those in the middle income brackets are turning sour on both the national economy and their own personal financial situation - and these numbers are sinking fast. The public’s perception on the economy is having a two-pronged effect on gaming.
First, depending on the region of the country, gaming surveys are finding that anywhere from 25 percent to 43 percent of casino gamblers now say that they are visiting their favorite casino less than in the past. This doesn’t mean that they visiting the competition more. In fact, larger numbers of players report that they are visiting the competition less or not visiting casinos at all. By the same token, overwhelming numbers of players are opting for gaming venues that are “easy and convenient” to get to, not willing to go out of their way in the wake of high gas prices.
Secondly, and probably most important, players now report that they are bringing less to gamble with. Anywhere from 17 percent to 25 percent now report that their gaming budget is down as compared to last year. The number of players reporting smaller gaming budgets has been rising steadily since the beginning of the year. These numbers may be evidenced in the recent statistics coming out of Las Vegas in which the number of visitors has remained fairly constant year-over-year, yet the gaming revenues are off.
Real value in tough timesAre the good times gone? Not necessarily. They are just tougher. I am reminded of two quotes; the first is Hunter S. Thompson’s famous aphorism, “When the going gets tough, the weird turn pro.” The second is from Winston Churchill, “Statistics are like a drunk with a lamppost: used more for support than illumination.” Taken together, it is hoped that these q
uotes shape what casino operators do with the following statistically viable research finding: cash back may be losing its luster. While cash back still remains the top answer when asked what players want from a players club program, other tangible player perks are gaining ground. Things like free or discounted hotel rooms and food offerings are having more value with players now as when compared to similar surveys conducted in previous years. In a recession, cash is king. It is an old saying and not without some wisdom. When a recession strikes, asset prices, shares, real estate and prices in general fall - and the person with cash on hand can take an advantage.
So, why the research dichotomy? Simple. Players don’t necessarily equate cash back as being theirs to hold and save. Rather, they view cash back as something to be given back to the casino at the tables or in the slots. Many players echo the sentiments of this locals market player: “I like getting cash back, but I just play it back to the casino. It feels as if they’re just giving me money to play. A hotel room or a dinner has real value - I know what that is worth.” From now, until - at least - the election in November, the news focus will be on the economy. The economy has now taken the place of the war in Iraq as the most important issue facing the country. Still, a number of economic indicators are pointing that the country is not falling into a deep recession, but may instead be stabilizing at a slow but positive rate. The question is, like Hollywood and the movie industry 75 years ago, can the gaming industry take a front seat in shaping a new sense of optimism and relief? We’ll ask the players what they want.