Operator News

American gaming CEOs optimistic on industry outlook

By Phil - 30 April 2024

Amidst an evolving economic landscape, gaming executives report a positive outlook on future industry business conditions while remaining satisfied with the current business environment, according to the American Gaming Association’s (AGA) Gaming Industry Outlook.

Nearly all gaming executives surveyed characterized the current business environment as good (44 per cent) or satisfactory (50 per cent), mirroring similar sentiment from Q3 2023. Meanwhile, executives are more optimistic about future conditions, with 32 per cent of CEOs expecting business conditions to improve over the next six months, up from 20 per cent in Q3 2023.

“Gaming’s record-setting growth over the last three years has set a new standard for industry success,” said AGA President and CEO Bill Miller. “However, as we enter a period of market normalization, continued investment and innovation in offering world-class, responsible entertainment experiences will be required to maintain industry momentum.”

Gaming executives have become more positive in their views that overall balance sheet health will improve over the next six months (42 per cent net positive), but they expect the pace of revenue growth (13 per cent net negative) and new hiring (22 per cent net negative) to slow. These expectations for decelerating growth have influenced expectations for increases in capital investment and gaming units in operation, with smaller net positive sentiments than before.

In contrast to past Outlooks, gaming equipment suppliers are slightly pessimistic about the sale of gaming units for replacement use and new or expansion use (both 13 per cent net negative). However, they remain optimistic about the pace of capital investment (38 per cent net positive).

Half of operator CEOs expect capital investments in hotels over the next year to be higher than normal, and compared to last fall, more also expect higher than normal levels of capital investment in meetings and conventions and table games (28 per cent). Meanwhile, 44 percent of CEOs expect increases in food and beverage investment, down from 67 per cent in Q3 2023.

These expectations are also informed by evolving macroeconomic challenges. Executives report that inflationary or interest rate concerns continue to be a major factor limiting operations (28%), but these have been overtaken by geo-political risk (34 per cent) and uncertainty of the economic environment (34 per cent) as the biggest limiting factors in the most recent Gaming Executive Panel. The Current Conditions Index of 102.8 for Q1 indicates solid annualized real economic growth in the industry of 2.8 per cent. This includes gaming revenue, employment and employee wages and salaries. Notably, the Current Conditions Index shows gaming expanding faster than the overall U.S. economy which last week reported 1.6 percent GDP growth in Q1 2024.

The Future Conditions Index stands at 102.2, indicating annualized industry economic activity, after controlling for underlying inflation, is expected to moderately increase over the next six months. This outlook reflects Oxford Economics’ forecast that the U.S. economy will slow during 2024 but avoid recession. Despite a projected economic slowdown, consumer survey results continue to indicate that more than one-third of adults expect to visit a casino during the next 12 months, consistent with prior quarter results.