Since the pandemic, the gaming industry has been riding a wave of luck.
Like the rest of the economy, gaming was on a roll in 2019. It appeared set to continue into 2020. But as we all know, an infamous “black swan” showed up in the guise of a global pandemic. Again, like the rest of the economy, gaming came to a halt. It was a full stop with all casinos in the country closing in March. It wasn’t until May that some states permitted casinos to reopen with restrictions. It took the rest of 2020 for most of the nation’s gambling halls to reopen.
Even with fewer casinos and many operating restrictions still in place, a totally unexpected trend surfaced. The reopened casinos did extremely well. In 2021, gross gaming revenue (GGR) was $53 billion, not only a record, but also 20 percent more than the previous record in 2019. Few observers believed that trend could continue, yet in 2022, GGR was $60 billion, up from $53 billion in 2021 and $44 billion in 2019. The trend is ongoing; it is likely that 2023 will produce 10-15 percent more GGR than 2022.
However, there are some cracks in the trendline; Nevada casinos were down 3 percent in March. The decline suggested that further declines might be in Las Vegas’s future, although March marked the 25th consecutive month of gaming revenues over $1 billion in the Silver State. A billion-dollar month used to be a rare event in Nevada; now it is the norm. Reaching that level every month will be a challenge.
The University of Nevada released a report predicting that by 2024 declines in gaming revenue might be the rule rather than the exception. Stephen Miller, director of research for the Center for Business and Economic Research at UNLV, believes the year-over-year comparisons will become very difficult due to the many record months. One cannot, after all, set a record each time the game is played.
Professor Miller’s second reason is the economy. He fears the same things we all fear: wars, plagues, recessions, and depressions. It is a well-established fact that what goes up must come down; in economies, booms led to busts as busts led to booms. “Inflation poses a palpable threat to the economic prosperity of America and, by implication, of Nevada and southern Nevada,” Miller said.
At the level of a single state like Nevada, that is a hard argument to refute. However, at the level of a national industry, the picture becomes murkier. Of course, another pandemic, a Great Recession, or a world war would have a catastrophic effect on every segment of the economy, including gaming. Short of that level of event, the national industry is more complex. Some parts are growing very strongly, even when other segments may be stagnant or even declining.
In states that have limited casino capacity and are not adding new capacity, the Nevada argument fits. In Illinois, New York, Nebraska, Virginia, Kentucky, and others where new capacity is being added, it is less applicable. In those states, the growth trend can be expected to last several more years.
Sports betting and igaming are separate and unique. Both are relatively new and still expanding into new jurisdictions. In fact, since 2018, sports betting and igaming have been growing like weeds.
Sports is a national pastime; watching and talking about sports are deeply embedded in our culture. Thus, when the Supreme Court opened the door for states to legalize sports betting in 2018, it caught hold like a spark in a haystack
According to Sports Handle, 36 states have legalized wagering on sports, of which 18 permit online or mobile wagering. In 2022, the amount of money legally wagered on sporting events was $94.596 billion; the win was $7.483 billion. And mobile wagering is really the driving force. In the states that allow people to bet from their phones or computers, the wagering handle is 90 percent of the total. New York is the poster child for mobile wagering. New York legalized retail sports betting in 2019 and averaged less than $20 million in handle per month. Mobile wagering was legalized in January 2022; since then, only two months had a handle of less than $1 billion. There are not many new jurisdictions for sports, but it is likely that many with retail-only wagering will revisit the issue and permit mobile. The economic/tax argument is too strong for most lawmakers to resist.
Igaming has spread more slowly than sports. Only six states currently allow legal igaming. But as casino tax revenue flattens, many states will reconsider that issue also. Unlike sports, we do not have the handle, or the total amount wagered on igaming, but we can guess that the revenue numbers represent between 7 and 10 percent of the amount wagered. In 2022, igaming GGR was $4.918 billion. It was $3.691 in 2021. By our 7-10 hold-percentage rule, $40 billion to $50 billion was wagered in just six states. It is conceivable that igaming will continue to grow by 20 percent or more for the next decade.
Professor Miller is probably right: Gaming cannot continue to grow at a record pace forever and he is likely to be correct in predicting an economic downturn that impacts the industry. Yet, with new casinos and more states adding mobile sports betting and igaming, the industry is probably set to continue its lucky streak.
In the wake of the pandemic, the casinos and the gaming industry in general were lucky. After being locked up for months, gamblers were eager to get back into the game. Igaming and sports betting also blossomed in the wake of the pandemic. But how long can the lucky streak last? The answer is easy; it will last until it ends. The end will probably be caused by the next black swan. At that point, none of us will be lucky.
