December gaming revenues bounced back throughout the U.S. so resoundingly that it might be time to sound the all-clear signal.
Every jurisdiction to report December results as of this writing enjoyed revenue gains. Some impressively.
• Detroit jumped 10.26 percent, its best year-over-year comparison in over two years.
• Iowa’s 6.34 percent gain was its best since February of 2012.
• Ohio, where new casinos have cannibalized earlier ones, saw same-store revenues leap 7.3 percent.
• Even Atlantic City casinos, benefitting from fewer competitors and long-awaited growth in online gaming, grew revenues a healthy 7.28 percent on a same store basis.
In brief, December appeared to be a breakthrough month that followed an on-again off-again second half of 2014 that had given glimmers of optimism.
In addition, casino executives have been reporting that business has been improving among lower-value players who had cut back during the recession and had not returned when the economy improved.
December’s breakthrough coincides with accelerating improvement in employment and consumer sentiment reports, which might be the two best economic measures for projecting business volumes on the casino floor.
For a long time, casino recovery lagged that of the overall economy as consumers spent heavily on big-ticket items such as cars and appliances but skimped on casino entertainment.
That was understandable for two reasons:
First, cars and appliances are more important to people’s lives. They also wear out and they obsolesce as developing technologies allow for more efficient and better performing new products.
Put another way, a car is a necessity for most people. There are a lot of other ways to be entertained more cheaply than by dropping a C-note or two at a casino on a Friday night.
Second, because those on the lower economic rungs lagged behind more affluent people during the long, slow recovery from recession, it was natural that they had both less discretionary income to spend, and less motivation to spend what they had.
The Great Recession shattered the belief that gaming was recession proof, that people would seek relief from their daily grind through entertainment and, most specifically, through gambling.
In retrospect, it is clear that gaming volumes held up in previous recessions more because of a lack of supply than because of demand.
Today, with the novelty of gaming having worn off, and with casinos within a convenient drive of most Americans, gaming is no longer in short supply.
Indeed, the most recent patterns of gaming resurging only with an accompanying surge in consumer confidence and employment, suggest that gaming is closely aligned with those two measures.
Of course, not all markets are alike. Las Vegas, for one, began its recovery sooner than regional markets.
That makes sense as commercial businesses rebounded sooner than consumers so an earlier rebound in convention business followed. Likewise, visitors to Las Vegas, almost by definition, are relatively affluent, so Las Vegas benefitted from their earlier recovery, too.
The big increase in international travel also plays to Las Vegas. A visitor from Europe or China wants to see America’s famous attractions—Times Square, the Statue of Liberty, Washington, D.C., Disneyworld, Hollywood, Las Vegas.
They aren’t likely to be drawn to a riverboat in Iowa or Indiana.
In other words, gaming investors might sigh in relief that the industry’s recession is finally over, but be warned to be on the lookout for future downturns.
