Gaming Executives Expect “Mild” Winter Recession for the Industry

Article by : Erik Gibbs Oct 5, 2023

• 
• 

A recent survey conducted by the American Gaming Association, with the participation of 33 C-suite executives from various gaming industry sectors, has revealed a more positive outlook than six months ago.

The “Gaming Industry Outlook” study was carried out between August 28 and September 6 and was prepared in collaboration with Fitch Ratings.

According to the survey, the casino industry continues to grow, albeit slightly slower than the rapid expansion seen after the pandemic.

The Current Conditions Index, which measures the industry’s current state, stood at 100.6, indicating ongoing growth. However, the Future Conditions Index, which forecasts the next six months, was at 99.6, suggesting a potential slowdown.

This outlook was seen as positive but also indicative of a mild recession forecasted to start in the fourth quarter.

The cautious sentiment is attributed to cumulative Fed rate hikes, tighter lending conditions and high inflation, which may lead to reduced consumer and business spending.

Despite these concerns, the survey found that 33% of American consumers plan to visit a casino in the coming year.

Additionally, the Future Conditions Index showed more positive responses than six months earlier, with positive sentiments outweighing negative ones by 6.4%, up from 4.1%.

The Current Conditions Index reflected vigorous activity in the casino industry, though not at the levels seen in 2021 and 2022. Inflation-adjusted gambling revenues and employee salaries tempered the Index due to persistently high inflation in the third quarter.

Taking a nine-month view of the economy, the Current Conditions Index indicated steady expansion, with industry activity growing at an annualized pace of approximately 2.8%, even when accounting for inflation.

Executives were generally optimistic about current economic conditions, with 42% considering them “good” and 55% “satisfactory.” Looking ahead, 58% anticipated the next quarter or two to be “about the same.”

The top concerns among gaming executives were interest rates and inflation, cited by 58 percent of respondents. Twenty-six percent had experienced challenges in accessing credit, while 19 percent reported no such difficulties.

Despite economic concerns, many executives expected capital expenditures on maintenance and equipment purchases to continue. This included anticipation of slower gambling revenue, 13%, and reduced hiring, 19%, but 26% expected improvements in their balance sheets.

Suppliers of gambling equipment displayed optimism, with 44% expecting increased capital investment in new and replacement units. However, casino floors were not the top priority for investment among operators, as 67% focused on food and beverage outlets and 39% on hotel rooms.