Over the past five years, gaming growth can be attributed to market expansion as well as the opening of new casinos. Historically though, this market expansion has led to its neighboring states experiencing a decline in revenues. The good news for 2018 is that for the first time, new casino openings did not lead to reduced gaming revenues in neighboring states overall.
There are only two states that did experience a revenue decline in the traditional brick-and-mortar casino business—Illinois (-2.5 percent) and West Virginia (-1.8 percent). However, these two states did produce growth in overall gaming revenues when revenues from limited stakes video gaming are considered—the Illinois’ gaming market increased by 6.0 percent and West Virginia’s gaming market increased by 1.8 percent.
Strong consumer confidence, along with increased disposable income derived from the recent tax law changes, are the primary attributes to the growth. The Consumer Confidence Index, a measure used to define the level of optimism within the U.S. economy, increased throughout the first part of the year, peaking in October 2018 when the index hit the highest reading (137.9) since 2000. Meanwhile, the recent tax law also resulted in a reduction in federal tax withholdings, which led to consumers having an increase in disposable income throughout the entire calendar year.
In addition to strong economic conditions, five states quickly capitalized on the ability to offer sports wagering after the U.S. Supreme Court’s overturned the Professional and Amateur Sports Protection Act (PASPA). These five states (Mississippi, New Jersey, Pennsylvania, Rhode Island, and West Virginia) generated $128.2 million in gaming revenues from sports wagering.
When combined with Nevada’s pre-existing sports wagering market, the total net commercial gaming revenue derived from sports betting totaled $472.3 million in 2018.
Looking forward, the industry is poised for growth as the economy remains strong and numerous states explore legalizing sports wagering. However, the industry also faces increasing headwinds… most notably, the lower tax withholdings that originated from the new tax law also resulted in a reduction in the average federal tax refund. It is expected that these lower refunds will lead to a reduction in March 2019 gaming revenues, which is typically the industry’s highest revenue producing month.