The legalization of online gaming across the United States is slowly becoming a reality. Nevada, New Jersey and Delaware have approved legislation legalizing online gaming activities.  Assuming the results in those states are positive, as many experts expect, several other states will likely pursue legislation to legalize online gaming as well. 

As online gaming activity rises in the U.S., however, experts are divided on the impact online gaming will have on traditional brick-and-mortar casinos. One school of thought is that online gaming will cannibalize brick-and-mortar gaming activity. After all, if consumers have a finite gaming budget, it’s a lot easier and more convenient to wager in the comfort of their own homes instead of travelling to a casino. 

Other experts, though, believe online gaming will create incremental exposure to gaming to consumers who may not have easy access to a casino—and that once they experience the excitement of gaming online, they will be motivated to also visit casinos, thereby increasing overall gaming revenues for the industry.

In an attempt to determine the true impact of online gaming on brick-and-mortar casinos, AlixPartners recently conducted a survey of almost 2,000 gaming consumers (the AlixPartners Gaming-Consumer Survey). We asked them about their online gaming activities as well as their casino visitation patterns.  The survey also attempted to determine what gamblers are looking for in online gaming, in terms of branding, desired activities and the security of their personal information.

Here are some key takeaways from our survey:

• Good news for brick-and-mortar casinos.  Only 15 percent of active gamblers surveyed said they are likely to reduce casino visits if online gaming is legal.

• Better news for brick-and-mortar casinos.  We were able to divide survey respondents into six distinct segments: Casual Players, Casual Happy-Go-Lucky Players, Destination Tourists, Consistent Members, Indifferent Members, and Online Enthusiasts. Online Enthusiasts—determined by their frequency of online gaming activity and their future desire to engage in online gaming activity (see Exhibit 1)—have two interesting characteristics according to our survey: they had the highest daily gaming budget of all the segments and they were also some of the most frequent visitors to brick-and-mortar casinos (see Exhibit 2).

• Even better news for brick-and-mortar casinos.  According to our survey, active gamblers are 57 percent more likely to wager online if the Internet sites are run by known casino brands.   Additionally, 58 percent of all gamblers surveyed said they would be attracted to Internet gaming sites that let them earn loyalty points redeemable at casinos.

• But not all the news is good for casinos. Our study also looked at the six different consumer segments and analyzed how well their expectations were being met by brick-and-mortar casinos during their visits. On average, Online Enthusiasts rated casinos as performing below expectations in the areas of “value” and “service.” 

 We believe there’s a lot of reason to think that online gaming will ultimately benefit brick-and-mortar casinos. However the degree of benefit will largely be determined by how well those “dual-system” operators can create online gaming sites that seamlessly integrate with their brick-and-mortar properties. Casino operators will also likely be challenged to meet the high expectations of those gamblers we categorize as Online Enthusiasts when these individuals do visit their casinos; otherwise, the potential promise of augmenting brick-and-mortar gaming revenues with additional online gaming revenues may not be realized.