US Land-based Casino Gaming Revenue Still Not Back to Pre-recession Levels

The June issue of Casino Journal magazine included a quick story derived from the recent AGA State of the States report.  The main point stated was that commercial casino (brick and mortar) gross gaming revenue (GGR), the amount won from bettors, was almost back to pre-recession levels.  To support that, a chart showing those revenues from 2003 to 2012 was published.  At first glance, it appears correct.  However, these numbers don't take into account the impact of inflation on the value of those dollars.  If inflation eats away the value of currency, a greater dollar amount in the future may not be truly more money if compared to earlier years.

I took the CPI data from those years and adjusted the annual gross gaming revenue to equivalent 2003 purchasing power, to see how much of the improved revenues are due to industry growth, or just the inflation of the underlying currency.  Here's the chart showing both sets of data:

Sources:  American Gaming Association, Casino Journal, US Department of Labor

So, you see that GGR is higher in either case, but when taking inflation into account, not that much higher.  In the AGA published data, GGR increases at a compound annual growth rate (CAGR) of 2.96% for the period 2003-2012.  That's not terrible given the recession.  When inflation is factored in, GGR CAGR is a measly 0.48% - much worse.  Gross gaming revenues are basically flat for the last decade.  That is not a sign of a thriving, bright industry.

Wait, there's more!

Going back to the 2004 and 2013 State of the States reports, the AGA reported 443 casino facilities in 2003 and 979 in 2012.  What that means is that in the last decade, the number of brick and mortar casino facilities in the US more than doubled, with overall GGR remaining flat in constant dollar terms.  Now do you see why the land-based casino companies are deathly afraid of more casinos and the dreaded online gaming operators?  If you have to spend tens of millions to a couple of billion dollars to construct a facility, how do you make back the money invested in an industry where profits are flat?  You have to take market share from competitors, who will not allow that to happen willingly.

In my opinion, those casino operators that have facilities the closest to major population centers will be in a much more survivable position than those located farther away.  I see this industry becoming extremely cutthroat in the future, particularly if online gaming becomes more established, further siphoning off revenues from the land-based casinos.

References:

AmericanGaming.org. (2004). 2004 State of the States, The AGA Survey of Casino Entertainment. Retrieved from: http://www.americangaming.org/industry-resources/research/state-states

AmericanGaming.org. (2013). 2013 State of the States, The AGA Survey of Casino Entertainment. Retrieved from: http://www.americangaming.org/industry-resources/research/state-states

Anonymous. (2013, June), Gaming industry revenues almost back to pre-recession levels, Casino Journal, p. 8.

US Department of Labor, Consumer Price Index 1913-2013, Retrieved from:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt