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Gaming is legal in 48 states in one form or another. Thirty-eight states allow lotteries. Eight states have racetrack casinos. The gaming industry is highly competitive, but it's a market that keeps growing. The 442 commercial casinos in 11 states in 2003 generated more than $27 billion in gross gaming revenue, up 2% from 2002.
Even in 2001 — when 9-11 sacked tourism — casino revenue rose 6% to $25.7 billion. Sales are up 145% since 1993. About 25% of the U.S. adult population, or 53.4 million, visited a casino in the past year, making a total of 310 million trips, according to the American Gaming Association. The West continues to account for the largest share of casino visitors. State and local governments collected $4.32 billion in gaming taxes in 2003, $320 million more than 2002. That's an effective tax rate of 16% on gross gaming revenue.
The industry has gone through several major growth spurts in hotels and casinos, and each time the warning goes out that the market will be saturated. But it hasn't happened; nor is it likely to in the foreseeable future.
Despite economic ups and downs, the growth in consumer spending on commercial casino gaming has never faltered. Las Vegas, with more than 29,000 rooms, had a hotel occupancy rate of 94% in October, 2004, up 6% from a year ago. That's despite having more rooms than before and a higher room cost. One reason for the rising revenue is the expanded reach of the gaming industry. At least 20 states now allow casino gambling, up from 11 a year ago. Maine has legalized it, and Pennsylvania is expected to do so this year.
A handful of gaming bills have been submitted in Massachusetts that would create two resort casinos and allow slot machines at the state's four racetracks. New York has seen the recent addition of casinos. Empire Resorts (NYNY) will build two new American Indian casinos in the Catskill Mountains, a big tourist destination in the summer.
Indian casinos now operate in 28 states. "Indian casinos are another parallel trend that is fueling the expansion of gaming," said Mike Pollock, managing director of Spectrum Gaming Group. "It's been a dramatic force for more than a dozen years, and it's another way states can generate revenues."
Indian casinos have cut into revenue at small gambling locations like Reno and Laughlin, Nevada. That may change when Laughlin gets its own network show this fall, “Viva Laughlin”. But they haven't taken away business from the most popular destinations such as Atlantic City, N.J., and Las Vegas. And as the number of gambling locations grows, it softens the stance that some state legislatures have held against casinos. Many states justify gaming operations by dedicating the revenues to popular spending programs, such as education. (Been there, done that)
• Upside: The expansion of gaming into more states presents a big opportunity. It's a situation that also feeds on itself. States that don't allow gambling see their residents travel to other states that do, and they become concerned about losing tax revenue. At horse racing tracks, which have seen gradual declines in attendance over the years, operators are luring people back by adding slot machines. Another positive for the industry is the ongoing consolidation, which is making companies significantly more efficient.
• Downside: One issue that could threaten the gaming industry is a class-action lawsuit. Gambling is a known addiction for some. A class-action suit could allege the industry is knowingly drawing people into a vice that can be addictive. "The American Gaming Association has been very frank in saying they don't want to become the next target, like tobacco or alcohol," said Weinert. To prevent that, the association has been aggressive in funding research into gambling addition.”
Article From Gambling Observer January 2005 |
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