States of declineThe United States commercial gaming industry endured its worst first quarter since the Great Recession of 2008. 

In the first three months of 2014, the U.S. commercial gaming industry generated $9.34 billion, down 2.2 percent from the same period in 2013. The decline in gaming revenues is largely attributed to the harsh winter weather that plagued much of the Midwest along with gaming alternatives that have garnered newfound attention.
 

AREAS OF GROWTH

Of the 23 states that offer commercial gaming, only five states experienced revenue gains in the first quarter of 2014.  These gains can be primarily attributed to gaming expansion, rather than organic growth from existing casinos.

Ohio gaming revenues increased by 46.7 percent. The state benefitted from the Horseshoe Cincinnati casino operating for the entire first quarter of 2014, after opening in March 2013. In addition, the state profited from three new racinos (Thistle Downs, Miami Valley and Hard Rock) that did not operate in the first quarter of 2013.

Maryland and Rhode Island gaming revenues increased by 39.9 percent and 19.6 percent, respectively. The increases are the result of the introduction of table games midway through 2013 in both states.

Florida and New Mexico gaming revenues increased by 15.3 percent and 9.2 percent, respectively. Florida’s increase is attributed to the opening of the Hialeah Park and Dania Jai-Alai and Casino in February 2014. The increase in New Mexico gaming revenues is credited to the reopening of The Downs Racetrack and Casino, which had been closed in the first quarter of 2013 for renovations and expansion.

 

OVERALL DECLINE

For the remaining 18 states, the first quarter proved difficult as these states experienced a 5.7 percent decline in gaming revenues. When looking at the monthly data, January and February proved the most difficult with the extreme cold weather serving as the primary factor. These states experienced declines of 5.8 percent in January and 7.6 percent in February.

The impact of the weather was most evident in the Midwest, where NOAA’s National Climatic Data Center reported the region as experiencing one of the top 10 coldest winters since 1895.  This cold weather translated into the Midwest experiencing an 11.8 percent decline in January gaming revenues.

In addition to the frigid temperatures, the U.S. commercial gaming industry continued to face challenges associated with more gaming alternatives and an aging patron base. Increased gaming alternatives have been most notable in Illinois. Traditional brick-and-mortar casinos saw revenues decline 9.2 percent in the first quarter of 2014; however, the video lottery terminal (VLT) market at Illinois-based travel centers, restaurants, and bars experienced substantial gains.  In fact, when combining revenues from the traditional commercial casinos and the VLT market, total gaming related revenues increased 13.1 percent in Illinois. 

This trend is easy to observe in Illinois, as the gaming alternatives, such as VLTs, closely resemble the traditional brick-and-mortar casino industry. Throughout the rest of the country, this trend is expected to continue as more entertainment options are becoming available through online, mobile and social games that emulate traditional brick-and-mortar casino games.


Daniel Holmes is a national practice leader for the Gaming Services Group at RubinBrown, which specializes in financial statement audits, business valuation, regulatory consulting, and gaming compliance and operational audits. He can be reached at www.rubinbrown.com.