As an industry, casino gaming has always been a unique source of entertainment for its customers, and-all too often-a focus of governments’ regulatory spotlight. As a highly discretionary element of consumer spending, it is also exposed to changes in economic confidence and conditions. Today, all these long-standing attributes are reflected in a range of challenges and opportunities facing both the industry’s established players and also those contemplating entering the market.
InPlaying to Win, a study of global casino and online gaming trends, the analysts at PricewaterhouseCoopers (PwC) wrote that not the least of these challenges is the continuing global economic uncertainty. Recent experience confirms that the casino gaming industry is not immune to recessions. While the 2.8 percent decline in total global spending on casino gaming in 2009 appears at first sight to be a fairly resilient performance, the global figure masks a slump of 12.2 percent in 2009 in Europe/Middle East/Africa (EMEA), and of 3.4 percent in the U.S. What is more, spending in the U.S. and EMEA has fallen for the three successive years up to 2010, and will trend upward only modestly in 2011.
In contrast, Asia Pacific-which overtook EMEA in 2008 as the world’s second-largest region for casino gaming revenues-has hardly paused for breath, registering a modest slowdown in spending growth to 7.4 percent in 2009, before rebounding back into double-digits with growth of nearly 50 percent in 2010. The much smaller Latin American market has also stayed in positive territory in terms of growth.
A similarly stark contrast in growth rates will be evident during the recovery phase that is now under way. Globally, spending is showing a steady recovery, growing at 9.3 percent compounded annually through 2014. Asia Pacific will grow at a compound annual growth rate (CAGR) of 23.6 percent, dramatically outpacing the U.S., EMEA and Canada. As a result, the Asia Pacific casino gaming market-which was just over one-third, or 34.3 percent, the size of the U.S. in 2008-will be equivalent to 92 percent of U.S. spending in 2014. Latin America will also achieve double digit CAGR over the five years, at 12.8 percent compounded annually.
In assessing the outlook for growth across the world, it is important to take into account the likelihood that supply side changes will tend to overpower cyclical effects. Recent examples of this include the effect of changes in visa restrictions on the market in Macau, and the opening of major resort casinos in Singapore. However, in the absence of significant changes on the supply side, then cyclical effects will come through strongly, as seen with U.S. casinos in the past three years. A further factor clouding the issue in Europe is smoking bans. These were introduced into many countries during 2007–2008, and have undoubtedly had a negative impact over and above the effects of the recession.
Reprinted with permission from PricewaterhouseCoopers.