Gambling revenues produced by America’s commercial casino industry during 2008 suffered their first-ever year-over-year decline as the nationwide recession took a toll on consumer spending habits.
Still, the head of the American Gaming Association, which announced its annual state of the casino industry findings Monday, attempted to point out a few bright spots.
Just a few.
According to the report released by the Washington D.C.-based lobbying arm for the gaming industry, the 12 states with land-based and riverboat casinos collected $32.54 billion in gaming revenues during 2008, a 4.7 percent decrease compared with revenues of more than $34.13 billion in 2007. The drop marked the first time commercial casino revenues fell since the association began releasing the figures in 1999.
The drop in U.S. gaming revenues was almost half the 9.7 percent decline reported by Nevada casinos in 2008.
One bright spot alluded to by American Gaming Association President Frank Fahrenkopf Jr.: The $32.54 billion was the second largest one-year total for gaming revenues ever reported.
“It’s no secret that our industry, like many other industries, has been negatively impacted by the worst economic downturn our nation has seen in more than a half-century,” Fahrenkopf told reporters during a conference call.
“Our industry was hit with a double whammy. Consumer confidence plummeted while the credit markets disappeared, taking away available capital and forcing some companies to stop construction projects,” Fahrenkopf said. “Liquidity dried up.”
Fahrenkopf, however, saw a few hints that the casino industry’s prospects are reversing.
Gaming revenue figures for the first quarter of 2009 indicate a bottoming-out in several markets. The results are somewhat in line with figures many casino jurisdictions reported in the fourth quarter of 2008.
“It seems like we may have taken the worst of it, but we really won’t be in any position to judge until the second-quarter numbers are reported,” Fahrenkopf said.
The number of states with commercial casinos didn’t change between 2007 and 2008, but there were 22 fewer casinos operating in 2008 than the prior year.
Meanwhile, the $5.66 billion in gaming taxes contributed directly to states in 2008 was down just 2.2 percent compared with 2007. The number of commercial casino jobs in 2008 was 357,314, a less than 1 percent decrease from the prior year. Those jobs, however, accounted for $14.1 billion in wages, a more than 2 percent increase.
The recession and other factors caused layoffs in several casino states in 2008 including Nevada, New Jersey and Mississippi, but other states, such as Pennsylvania, Michigan and Colorado, saw double-digit increases in casino employment.
“The industry continues to be an important provider of jobs and direct gaming taxes,” Fahrenkopf said.
Led by steep declines in the nation’s two biggest gaming markets, Nevada and New Jersey, which accounted for almost half of all the gaming revenue produced nationally, casinos suffered as American consumers reduced what they spent on gambling in 2008.
National pollster Peter Hart, who surveyed casino customers for the association, said the cutbacks in discretionary dollars spent on gambling were similar to the cuts consumers made in other recreational activities, such as dining out or taking weekend getaways.
“The recession has caused Americans to reduce their spending on leisure activities across the board,” Hart said.
A return of consumer spending and consumer confidence, Fahrenkopf said, would bode well for the casino industry and help lead a recovery. Nevada, he said, should recover as soon as the credit markets recover, allowing some gaming companies to restructure their massive long-term debt.
“Nevada will fully bounce back when the liquidity crisis ends,” Fahrenkopf said.
While casinos experienced their first-ever decline, revenues produced at the nation’s racetrack casinos, known as racinos, were $6.19 billion in 2008, an increase of 17.2 percent from 2007.
Indiana became the 12th state to add racetrack casinos in 2008 and Fahrenkopf said others could follow.
“In some gaming jurisdictions, racinos are the primary expansion opportunities,” Fahrenkopf said.
Casino expansion into new markets during the current economic crisis could be troublesome, he said. While state and local governments might be open to legalized gaming as a way of subsidizing tax coffers, casino operators may be hard-pressed to expand because of the lack of available financing.
Contact reporter Howard Stutz at firstname.lastname@example.org or 702-477-3871.