In the first quarter of 2015, the United States commercial gaming industry generated $9.53 billion in gaming revenue, growing at a rate of 3.0 percent compared to the first quarter of 2014. The growth in revenue is notable as it is not primarily attributed to the expansion of gaming into new markets. The majority of existing markets reversed the trend of declining revenues and experienced an increase in gaming revenues.
Of the 23 states that offer commercial gaming, 15 states experienced revenue increases in the first quarter of 2015. Furthermore, only three of the 15 states with revenue growth benefitted from an increase in the number of casinos (Louisiana, Maryland and Ohio). The revenue growth seen in the other 12 states is considered organic growth and is a welcomed change for the industry, which has become accustomed to existing markets enduring year-over-year revenue declines.
In 2014, the only states that saw an increase in gaming revenues during the first quarter of 2014 benefitted from an expansion in gaming (i.e. legalized table games) or the opening (or re-opening) of new casinos. Those states included Florida, Maryland, New Mexico, Ohio and Rhode Island.
Similarly in the first quarter of 2013, there were seven states that generated an increase in gaming revenues. Of the seven states generating revenue increases in the first quarter of 2013, only two did not have significant expansion activities. Those two states included Nevada and Oklahoma, growing at rates of 0.4 percent and 0.8 percent, respectively.
REASONS FOR GROWTH
The growth in revenue across existing gaming markets is attributed to a mild winter and a resurgence in the regional markets.
The 2015 winter was much warmer and had much less precipitation than the 2014 winter. According to the National Oceanic and Atmospheric Administration (NOAA), the 2015 winter was the 19th warmest dating back to 1895 and not a single state had a top ten driest or wettest winter. Meanwhile, the 2014 winter produced one of the coldest winters on record for the heart of the Midwest.
The difference in weather was most notable in January, where the overall nation saw gaming revenues increase by 9.5 percent when compared to January 2014. In fact, 20 of the 23 states offering commercial gaming, experienced year-over-year revenue growth in January. The only three states to see revenue declines were Maine, New Jersey and Rhode Island.
Beyond milder weather in 2015, the existing regional markets have seen a resurgence in growth. Of the 65 gaming markets monitored by RubinBrown, 44 markets, or 68.8 percent, experienced year-over-year revenue growth in the first quarter of 2015. In comparison, only 13 markets, or 20.0 percent, saw growth in the first quarter of 2014. This growth seen in the majority of regional markets has been attributed to increased consumer spending and continued reductions in unemployment.
MARKETS IN DECLINE
While the revenue growth produced a renewed since of optimism, eight states still experienced a decline in gaming revenues. Of the eight states with declining revenues, three experienced increases in competition from neighboring states, those states included Delaware, Illinois and West Virginia. The increased competition was most notably from the opening of the Horseshoe Casino in Baltimore, Md., continued expansion in Ohio, and the expansion of slot machines in restaurants, taverns and truck stops throughout Illinois and West Virginia.
Of the states with declining gaming revenues, New Jersey continues to endure the largest declines. In the first quarter of 2015, the state saw the Atlantic City market decline by 10.2 percent. However, the declining market is attributed to the impact of four casinos closing in 2014. The market contraction has effectively increased the revenues for the eight remaining casinos.
Looking forward, growth in gaming revenue is expected to continue throughout 2015. The growth will be attributed to a continued rebound in the existing gaming markets and continued market expansion.