True to their reputation, economists are once again sitting on the fence regarding the US’ financial outlook.
Covid, the Ukraine war, historic presidential and congressional proceedings, wildfires and storms; all have contributed to and continue to influence a very confusing socio-economic outlook for the country.
Until recently, a recession looked pretty damn likely but the Wall Street Journal’s latest quarterly poll found that top business and academic economists now put the chance of a US recession in the coming year at 48%, down from 54% in July.
The markets have seen a mixed bag too with big swing growths and slumps across a range of sectors in recent months. But one industry that is undeniably suffering at present is the casino business.
Some publicly-listed owners and operators have seen their share prices drop around 20% and many more are feeling the pinch both on the casino floor and online.
So what explains this turn of misfortune for the industry and what does the future look like for them? Let’s dive in.
In an industry-wide turndown, naturally those who have felt it most are the biggest operators around; MGM Resorts and Las Vegas Sands. According to Markets Insider reporting, only one of the US’s 10 largest-cap gambling stocks made a gain in H2 of this year, slot machine maker Light & Wonder, which edged up just 0.5%.
It’s a marked decrease from even earlier this year, when Vegas was seeing high footfall (though much lower than pre-pandemic) and even higher house winnings. Revenues from the strip casinos hit a record total of nearly $8.3 billion in 2022 – a total nearly 25% higher than that seen before the pandemic – according to a Wall Street Journal report from May.
Since then, however, the US government and federal reserve has been on a tightening policy which has, in all likelihood, led to a widespread squeeze on the everyday US citizen’s financials.
According to a recent Smart Asset Study the average American now needs to be earning $68,499 a year after taxes to live comfortably; that’s 20% higher than the average amount of $57,013 needed in 2022.
As a result, the amount of money people have to spend on leisure pursuits, including gambling, lessens. Inflation has risen steadily since July and it is likely that the Federal Reserve will hold interest rates higher for the foreseeable future in an effort to combat it.
Unemployment is also starting to tick up towards 4% of the population and consumer credit card debt has officially topped $1 trillion for the first time ever.
Data released back in March by insurance company Primerica showed that the majority of middle income families who earn between $30,000 and $100,000 say their earnings aren’t sufficient to cover basic day-to-day living expenses.
All of these are sufficient reasons why the stock market is grim reading for those invested in the casino industry.
Indeed, there may be less blow-out trips to Las Vegas by groups of friends or even regular casual visits, but how are the wide range of casino websites online market faring amidst the squeeze?
It’s been no secret that casino operators have chosen to heavily invest in the online casino industry in recent years and there are now more ways and methods to bet and play than ever before.
Indeed, the US online gambling market is poised for significant growth, with a projected market value of $22.31 billion by 2028, representing a Compound Annual Growth Rate (CAGR) of 11.7% from 2022 to 2028.
This is according to the ResearchandMarkets.com 2023 report into the industry, which highlights several key areas which are predicted to mature in favor of the gambling industry.
The first, and perhaps most obvious when talking about online presence, is the strength of the millennial market, which the company estimates will drive online gambling, likely through sports betting.
Don’t forget the boomers though, America’s richest generation along with Generation X are famed for their spending power, to the consistent delight of all sectors from Fast Moving Consumer Goods to insurance.
Gambling is no different in this instance and as they become more au fait with technology and progressively favor urbanization, they will likely be a key driver for the casino market.
One of the interesting aspects about the casino market is this disparity between the physical and the virtual.
How much bigger can Las Vegas get? For years it was seen as a vibrant homage to decadence, sin and escapism quite unlike anywhere else Americans could access. The clientele ranged from the Nevada and middle America everyman to celebrities from the Z list to the top of the A.
It seems that currently the frivolous luxuries offered by a place such as Vegas are far from the priority of people’s minds – mostly because it requires a conscious commitment to book travel, stay and be present in the city and then engage in its culture.
Online casinos offer none of those challenges, but the same betting procedure and potential to win from anywhere in the world with signal and wifi.
And yet, the Las Vegas strip remains a last frontier for billionaires looking to create the last word in stupendous. This year, billionaire entrepreneur Jeffrey Soffer is set to unveil Fontainebleau Las Vegas; a multi-billion dollar vanity project 20 years in the making and a true temple to materialistic one-upmanship. Projects like this do bring the crowd in, however but it remains to be seen how many more ventures of this kind have a shot at saving Sin City’s business from online casinos.
It’s hyperbolic of course, Las Vegas isn’t going anywhere anytime soon, but the online casino industry really is cutting its own lane and is set up to be an almost recession-proof business model. As long as people are never more than 3 feet away from phones or laptops, are surrounded by wifi or data access and have a decreasing interest in socialising with other humans, industries like online casinos where dopamine doesn’t come cheap are very much here to stay.
