Last week, the American Gaming Association (AGA) published its “Gaming Industry Outlook” report which was compiled in partnership with Fitch Ratings. According to data provided by the trade body of the US gambling industry, most gaming executives confirmed their positive view of the current business conditions but remain reserved on future outlook because economic uncertainty is affecting the expectations for future industry growth.
It turns out that almost every gaming executive surveyed as part of the research describes the current business situation as good or satisfactory, with the percentage rates being 62% and 35%, respectively. When it comes to their outlook for the sector’s future, research participants have been much more cautious, with only 20% of gaming executives expecting better future conditions, and about 64% expecting future conditions in the US gambling industry to remain pretty much unchanged.
The president and chief executive officer of the American Gaming Association, Bill Miller, shared that the record momentum of the gambling sector has continued into 2023 but also noted that the projections of slowing growth have affected the expectations for the gambling industry in the medium term.
Current and Future Conditions Index for the US Gambling Industry Unveiled in Latest AGA Report
The AGA report stated that the US gambling industry’s growth kept its steady pace over the first three months of 2023. However, according to the body’s “Gaming Industry Outlook”, the sector is expected to slow growth over the second and third fiscal quarters.
The aforementioned report provides data on the current and future economic health of the US gambling sector based on casino visitation plans, a number of economic and gambling revenue indicators, and executive sentiment. Two separate indices are included in the Outlook – the Current Conditions Index, measured at 106.0, and the Future Conditions Index, measured at 97.1.
The American Gaming Association measured that the Current Conditions Index of the country’s gambling industry stayed strong in casino-related economic activity at 106.0 in the first quarter of 2023. This has been the highest-grossing quarter of the industry so far. Reportedly, the normal expansion pace has been approximately 8.4%, reflecting actual underlying growth when taking into mind the effects that inflation has on the sector. In comparison, the national US economy rose by 2.9% over the third and fourth quarters of 2022.
The “Gaming Industry Outlook” report revealed that the Future Conditions Index fell to 97.1 in the first three months of 2023, indicating that the industry’s economic activity for the year is likely to moderately decrease over the next two fiscal quarters. The reduction is partly driven by Gaming Executive Panel results and the current forecast of Oxford Economics, which predicted that the country’s economy is set to face a mild recession in the second half of 2023.
As mentioned above, while the majority of gaming executives view current business conditions as “good”, the expectations for future conditions in the sector are more balanced, with two-thirds of gaming executives issuing expectations that future conditions would be “satisfactory”.
Future Outlook for the US Gambling Market Not as Good as the Current One
The latest American Gaming Association’s report has confirmed that the Current Conditions Index, which indicates that real economic activity in the country’s gambling industry measured by employment, staff salaries and wages, and gaming revenue, remains strong but the pace of growth has been reduced in comparison to 2021 and 2022.
Reportedly, the Current Conditions Index for the first three months of 2023 amounted to 106.0, a result that is consistent with yearly growth of 6%, and has been tempered by continued high inflation through the first quarter of the year. On the other hand, the smoothed version of the Current Condition Index, which is effectively a three-quarter weighted average that is less affected by fluctuations and volatility in the shorter term, stood at 108.4% in the third quarter of the previous year. As the AGA confirmed, this result indicated that industry activity has been subject to a recent expansion at an average annual pace of about 8.4%. It also reflects actual underlying growth even when controlling for inflation’s effects.
The expectations of the surveyed gaming CEOs remain positive but, still, the Gaming Executive Panel found that the outlook has softened for the next three to six months. Still, the share of positive responses as a whole outweighed the negative responses on the issue by 4.1% in the first quarter of 2023, in comparison to 24.7% in the third quarter of 2022.
On the other hand, the Future Conditions Index reflects the current forecast issued by Oxford Economics, which has stated that the country’s economy is set to experience a mild recession between July and December 2023. According to the outlook, consumers in the US would come under pressure as savings buffers decline, nominal income growth shrinks, spending on business investments is reduced, and inflation still remains high. Concerns regarding inflation, interest rates, and economic uncertainty remain among the most serious concerns for gambling industry executives.
Consumer survey results indicate that the share of adult Americans who expect to visit a casino in the upcoming 12 months rose in the most recent quarter, moderately boosting the Future Conditions Index. The latter is calculated to provide a major indicator of changes in the gambling industry conditions.
Gaming Executive Panel Remain Cautious for Q2 and Q3 2023
The Gaming Executive Panel consists of senior-level gaming executives at companies that are currently members of the American Gaming Association. The respondents, who took part in the research, were selected across three major categories, including casino operators and owners, gaming equipment providers, and online gambling and/or sports betting operators. A total of 26 gaming executives responded to the survey that took place between March 29th and April 10th, 2023.
The current conditions in the local gambling market are good, according to US gaming executives, who, however, remained much more cautious about future conditions. While 62% of the research participants find the current business situation good, and 35% believe it is satisfactory, only 20% of the gambling officials expect future conditions to be better than the ones available now. Another 64% of them expect the future conditions to remain more or less the same.
Gaming executives have also been cautious about future growth, with many of them sharing expectations that the pace of revenue growth, hiring new employees, and customer activity would slow down over the second and, possibly, the third quarter.
Despite the cautious outlooks for future business conditions, plans for investment remain positive for the time being, as they reflect executives’ optimism for industry growth in the longer term.
More gaming executives believe that capital investment, which has been 21% net positive, and operational gaming units at already existing properties, which has been 14% net positive) are set to increase over the second, and, possibly, third quarter of 2023. In addition, the majority of gaming equipment suppliers have remained positive in their outlook for the future, with almost all of them sharing expectations that there will be an increase in the sales of gaming units for replacement use and new or expansion use. They have been 88% net positive and, respectively, 63% net positive, with both figures reflecting higher levels of optimism than the ones reported in the third quarter of 2022.
