Despite inflation, supply chain issues, and a need for more employees, gaming CEOs are bullish on the industry’s prospects.
According to the American Gaming Association’s Gaming Industry Outlook, presented in partnership with Fitch Ratings, 68% of executives have positive outlooks about present conditions, with 28% considering industry prospects satisfactory. And 92% expect conditions to continue or improve over the next three to six months.
“Our industry remains cautiously optimistic—and has weathered this volatile economy— because of resilient consumer demand,” said AGA President and CEO Bill Miller. “Looking ahead, future consumer confidence and spending remain an outstanding question for our continued growth.”
More than one-third (38%) of CEOs surveyed expect future conditions to be better, compared to only 8% that think conditions will worsen.
Despite the industry’s strong annual revenue numbers, macroeconomic factors temper future outlooks. While concerns have eased from earlier this year, 65% of gaming CEOs named supply chain issues as a factor limiting operations, followed by inflation and interest rate concerns cited by 62% of the CEOs. Executives also identified the uncertainty of the economic environment (50%) and shortage of labor (50%) as hurdles to business growth.
The Gaming Industry Outlook includes two separate indices:
The Current Conditions Index of 99.5 indicates real gaming-related economic activity is relatively stable compared to the second quarter of 2022 when the industry set a new quarterly revenue record. Looking back, the CCI indicates gaming-related economic activity has grown at an annualized pace of approximately 4.9% over the last three quarters, reflecting real underlying growth, and controlled for the effects of inflation.
The Future Conditions Index of 95.3 indicates real gaming-related economic activity is expected to decrease moderately over the next six months at a 4.7% annualized rate. While growth expectations of the Gaming Executive Panel remain positive, the FCI is dampened by the current Oxford Economic outlook, which anticipates a mild recession in the first half of 2023.
Three in four CEOs surveyed (76%) expect wage and benefit growth to continue to increase over the next three to six months, although the pace of hiring compared to earlier this year is expected to slow down.
Gaming operators also consider future customer activity a major question mark, with expectations evenly split between expansion and contraction.
Among gaming suppliers, 50% expect the sales of both new and replacement units to increase over the next two quarters. None expect a decrease in sales.
According to the report, strong growth over the past two years positions the industry well despite future uncertainty. While respondents note a significant deterioration in the credit environment, nearly half expect balance sheet health to improve over the next six months.