Improved economic conditions are expected to trigger a recovery in U.S. gaming revenues in late 2011, although 2007 gaming revenue levels will not return until 2012. According to PwC’s Playing to win: The outlook for the global casino and online gaming market to 2014, total U.S. gaming revenues will increase to $68.3 billion in 2014 from $57.2 billion in 2009, a 3.6 percent compound annual increase. The U.S. will remain the largest region in 2014, although Asia Pacific will be the fastest growing region with a projected 23.6 percent increase compounded annually to $62.9 billion in 2014 from $21.8 billion in 2009.
The study finds that the gaming industry in 2014 will be similar to today’s market, characterized by large and prestigious destination developments. However, dramatic differences will also be apparent, with an ongoing shift in spending towards Asia Pacific.
“The gaming industry is facing an evolution, which presents both challenges and opportunities for the industry’s established players and those considering to enter the market,” said Mary Lynn Palenik, director, gaming, entertainment, media & communications practice, PwC US. “The explosion of entertainment choices for consumers will make it vital for the industry to produce an offering and experience that consumers want to spend money on.”
Regional Casinos will be Fastest Growing Category
Buoyed by growth in racetrack casinos, regional casinos will be the fastest growing category during the next five years as investment in new and improved offerings and facilities continue to re-direct visitors and revenue. Regional casinos are gaining market share from Atlantic City and, to a lesser degree, from tribal casinos. For the forecast period as a whole, revenues will rise to $22.2 billion in 2014 from $16.6 billion in 2009, a 6.1 percent compound annual increase.
Tribal casinos, which fueled growth at double digit annual rates through 2006, have since experienced fewer openings, a slower economy, and increased competition from regional casinos. A return to double digit increases that characterized the first half of the decade is not expected. Rather, revenues at tribal casinos will increase from $26.5 billion in 2009 to $30.3 billion in 2014, a 2.7 percent compound annual increase.
Nevada – which includes Las Vegas and smaller markets such as Laughlin and Reno – experienced double digit declines in 2008 and 2009, which can be attributed to the fact that Nevada casinos, more than any other casinos in the U.S., rely on foreign visitors where tourism has been down, as well as out-of-state visitation from regions that have also been significantly impacted by the recession. The report forecasts Nevada revenues to decline by 2.9 percent for 2010 as a whole, with a recovery beginning in late 2011 and mid-single digit gains projected for 2012-2014. Over the five year forecast, Nevada will increase at a 4.1 percent compound annual rate to $12.5 billion in 2014 from $10.2 billion in 2009.
According to the report, Atlantic City is the only market where revenues in 2014 will be lower than in 2009. The region is most impacted by the economic downturn and intensifying competitive pressures from regional casinos (i.e. Pennsylvania and New York). Casino revenues here slumped by 13.2 percent in 2009 and revenues are not expected to pick up again until 2013, with 2014 levels still well below their 2006 peak. For the forecast period, PwC projects a 3.2 percent compound annual decline, from $3.9 billion in 2009 to $3.4 billion in 2014.
Evolving Regulations Drives Uncertainty in Online Gaming
U.S. regulations of online gaming will continue to evolve, initially with the creation of the regulatory “walled gardens,” where authorities in a particular territory seek to license, regulate, and tax online gaming between providers and players within their own borders, without allowing cross-border activity.
By 2012-2013, growing momentum is expected to pool online gaming liquidity and align regulation across borders. For example, the potential Federal legalization of interstate online poker games in 2012-2013 will serve to legitimize the online gaming market in general, boost usage, and act as a catalyst for developments in other online gaming disciplines. As different states’ regulatory “walled gardens” for poker start to integrate and standardize, online betting on horse racing will expand beyond the states. The growth resulting from these trends will see a blend of new onshore and offshore providers enter the U.S. market.
Social networking sites will be a key distribution platform for online gaming services, resulting in collaborative partnerships between gaming brands and social networks. Lotteries will also expand their reach and scale through interstate collaboration and online pooling, combined with new online offerings.
For a copy of the Point of View, please visit http://www.pwc.com/gx/en/entertainment-media/publications/casino-gaming-outlook-2014.jhtml.
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