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Economy Not the Only Reason for US Casinos’ Decline

Posted on April 25th, 2011

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Casinos in the United States have not been faring well lately, with the economic recession touted as the primary cause behind the dismal performance. The industry is only a fraction of what it once was despite the fact that many states are considering expanding gambling in order to increase revenues and generate jobs. Recent reports have shown, however, that this decline has been steady in the last decade and that the economic downturn is not the only cause. There have allegedly been other factors that have contributed to the decline, and these have not only hit the gambling industry but other consumer recreational activities as well.

According to approximations made by the American Gaming Association, in the present, gambling revenues have decreased in state licensed casinos in 12 US states. Last 2008 there was a drop of almost five percent in gross receipts from gambling. Also in 2009, casino revenue reportedly fell to almost around 40 billion dollars. This is a fall of almost 6 percent. Casinos in well-known gambling destinations are those hit the most. This includes Atlantic City in New Jersey and Las Vegas in Nevada. This is because consumers who do want to go gambling are choosing to visit casinos closer to their homes in order to save money in the current economic situation. In fact, the latest data from Nevada has shown that several large casinos in the state lost around 6.8 billion dollars in gambling revenues. In the same period, a decrease of almost 13 percent in revenues has also occurred for casinos which earn more than a million dollars.

Meanwhile, data from 2009 has revealed that the gambling revenue for casinos in New Jersey’s Atlantic City is at its lowest in more than ten years. The decline has continued this year in the state. As a whole, New Jersey’s casinos experienced a decline in revenues in January which fell to almost 9 percent from the same month the previous year. Revenue for January this year is around 295 million dollars. On the bright side, casino attendance has been rising slowly based on research done on the industry. Consumers though, are spending less.

Analysts have blamed the revenue drop on the economic recession which has also hurt other recreational activities. However, as mentioned earlier, the economy is not the only reason for the decline. Studies by market research companies such as Mintel have reported that other factors aside from the economic recession could have contributed to the present position of US casinos. Apparently, based on trends in the last decade, casinos have experienced little to no growth in attendance. This is despite the fact that the period experienced strong economic growth as well as two economic downturns. Thus, the trends show that other factors are also in play.
Researchers and analysts have stated that casinos are now not only competing with each other, but with other indirect competitors which offer enthralling and gripping entertainment options at home. Some examples are high definition entertainment and several home video game consoles and systems. Another threat is the Internet which offers unparalleled entertainment options. The Internet also offers several online gambling options which have been steadily increasing in popularity in the United States.

The drop in gaming revenues spell bad news for states which depend on gambling for their budgets such as New Jersey and Nevada. At the present, there are twelve states which allow casino gambling. However, based on reports, there are also around 25 states or more which are considering expanding gambling operations in order to aid their budgets with gambling revenue projected to be used to pay for health and educational programs.

Analysts have put forth the fact that the US casino industry is already saturated. True, adding casinos through gambling expansion programs may generate additional income for the host area, but this income will necessarily come from clients of other casinos. Simply put, when one state expands its gambling capabilities, it takes away possible clients from neighboring casinos. As a result, existing casino’ performance will decline. A survey from the Rockefeller Institute of Government has shown that local and state government revenues from state licensed casinos, excluding those run by Native Americans, have declined by almost three percent. In 2009, for the first time in thirty years, state revenues from gambling have declined.