While the global inflation rate is rising, the American Gaming Association reports that U.S. casinos recorded their best month in history in March of this year, and April was another high-grossing month. With casinos recording some record months despite global inflation, the question on many lips is whether this will last.
Casinos bring in significant gambling tax revenue
Casinos paid $11.69bn in direct gambling tax revenue to state and local governments in 2021. The Las Vegas Strip brings in the most revenue, followed by Atlantic City. Pennsylvania set two records in monthly gaming revenue in March and April this year. A huge variety of gambling games at casinos like Parx attract gamblers in record numbers. The casino industry seems to be showing resilience in the face of increasing inflation.
Online gambling revenue
Rising inflation pushes prices higher for gas, consumer goods etc. and can cause consumers to scale back on their spending. Construction costs, labor costs, supply chain problems etc., have all had some impact on land-based casino revenue but had little effect on online gambling revenue.
Despite the increasing inflation rate, New Jersey, Pennsylvania and Michigan managed to make significant revenue from online gambling. West Virginia’s internet gambling market grew to nearly $61 million in revenue in its first year of operation. Connecticut launched two online casinos in October 2021, and their combined revenue was $47.6 million.
The rise in sports betting
New and existing markets keep growing in what appears to be a healthy expansion of the market. Some of the rising gaming revenue totals come from the expansion of sports betting. In 2021, seven more states in the U.S. legalized sports betting. Sports betting and online casino gambling together bring in about 15% of the total revenue from casinos.
Will growth trends slow down?
Thinking that growth trends in the casino industry will not slow down in a continued recessionary environment could be naive. Rising Inflation affects consumers with the smallest gambling budgets. Some of them are spending less on extra amenities and restaurants. High gas prices can make it difficult for them to visit land-based casinos. However, the loss of consumers with low budgets is often offset by increased patronage from mid-to-high-end consumers.
The outlook for 2023
Economic and geo-political headwinds are putting some pressure on the casino industry, and it will be interesting to see what the outlook is heading into 2023. Foreign exchange is very affected by inflation, and it has a direct impact on forex trading. However, its impact on casinos, especially online casinos, is more indirect and harder to predict. There have been some declines in individual gaming stocks, though.
Major players in the casino industry are voicing different opinions. While some lament the effect of inflation, others, like the CEO of DraftKings, say the company is not seeing any impact from inflation. Several operators say that business levels are still strong in Q3, and bookings are strong for 2023.