Has US casino gaming reached saturation point?

Casino gaming in the US continues to regain strength following the economic downturn, but some analysts suggest the land-based sector is beginning to hit saturation point. Rapid growth of new facilities and the introduction of online gaming could significantly impact the growth of bricks and mortar casinos.

There are now commercial casinos in 30 of the country’s 50 states, which has exploded from four states, just a decade ago. Casino gaming has become a major industry and generated nearly $37.5bn in annual revenue last year, not to mention the Native American casino industry, worth an additional $28bn a year.

Prosperous markets such as Pennsylvania, Maryland, Massachusetts and New York welcome large investments, as operators pounce on legislation unfolding throughout the country. But this is impacting visitation in traditional gambling states of Nevada and New Jersey, with patrons opting to stay closer to home. While Las Vegas tourism numbers are recovering, players are gambling a lot less and in Atlantic City, gaming revenue has been declining for half-a-dozen years.

Even a $2.4bn facility to reinvent Atlantic City failed, when the Revel Casino-Hotel opened its doors in April 2012. Despite its hefty price tag, the resort launched without anything ingeniously different, at least from a customer’s point of view, and had to file for bankruptcy protection less than a year after opening. An influx of legislative reforms that added new amenities such as in-casino strip clubs and mobile gaming at racetracks, hasn’t been enough to draw back players.

“Many markets are seeing a point of saturation,” noted Michael Paladino, a Fitch Ratings gaming analyst. “Some new casinos are not growing the market – they’re just cannibalizing the existing market.”

Operators are turning to alternative solutions to refresh their sluggish casino businesses by diluting gaming with an all-encompassing entertainment experience. Rather than adding venues, both commercial and tribal casinos are spending big dollars to reinvent their facilities, with branded restaurants, boutique retail stores and entertainment centres. The Cosmopolitan of Las Vegas, for example, recently opened an outdoor ice rink and MGM Resorts is building a 20,000-seat arena. Both are situated in prime Las Vegas locations to maintain customer engagement with the legendary Strip.

“There’s over 150 business lines at the Cosmopolitan of Las Vegas, so it’s a very complex business,” commented John Unwin, The Cosmopolitan of Las Vegas CEO. “But, it’s founded on a very simple principle – provide people what they want in terms of the product and the experience, and they’ll come back and they’ll reward you for it.”

Of course, new land-based casinos are opening in the US, but like the facilities that house them, casinos are looking to mature rather than expand. With so much competition, new technologies are becoming of vital importance to retain customers and keep them gambling in a land-based setting. While mobile and social are evolving sectors in their own right, operators are using them as marketing tools to keep up visitation and money spent in bricks-and-mortar casinos.   

Then comes online gaming – the next frontier in the US gaming industry. While suppliers are tirelessly developing ways for the internet to complement the industry, the online market will undoubtedly keep some patrons from land-based casinos. This is why operators are keeping a watchful eye on regulatory movement and some have started to test the waters, overseas or via social media. New technologies are also being explored online in terms of marketing reach and building playing confidence by practicing before they enter a casino.
Still undetermined if it will unfold at state- or federal- level, online gaming is inevitable and will force casinos to innovate in order to survive. Only three states have legalised online gaming so far – Nevada, New Jersey and Delware; but if successful, the sector will quickly spread and impact the land-based sector throughout the country. While the internet can’t replicate the live gaming experience and greater marketing power could turn more infrequent players into regular gamblers, something New Jersey Governor Chris Christie is banking on, land-based casinos are bracing for the sector to unfold.