The first six months of 2016 was pretty good for the united states.. commercial gaming industry, a minimum of so far as revenue growth is worried. This segment of the market generated $19.4 billion in gaming revenues, producing an overall 1.1 percent, or $219.5 million, increase in gaming revenues in comparison to the primary six month of 2015.  Since 2012, the gaming revenues produced in the course of the first six month of the calendar year have increased by $652.2 million at a compounded annual growth rate of 0.7 percent.

The increase is notable because it is regional growth that may be originating from existing casino operations.  Throughout the first six months of 2016, 17 of the 24 states offering commercial gaming recorded statewide revenue increases in comparison to the similar period in 2015. Most notably, the Northeast and Mid-Atlantic—which have been textbook examples of market saturation—saw an overall 4.3 percent increase in gaming revenues with five of  nine states reporting increased gaming revenues. 

During this era of growth, there were no notable large-scale casino expansion activities.  The one two markets with meaningful expansion were Florida, where the Dana Jai Alai casino reopened in January 2016 after undergoing extensive construction and renovations, and Massachusetts, where the Plainridge Park & Casino opened in June 2015.  Combined, these two casinos contributed $82.7 million in gaming expansion revenues; meaning of the $219.5 million in overall gaming revenue growth, 62.3 percent will also be attributed to organic growth from existing casino operations.

QUARTERLY SLOWDOWN

While the revenue growth reported for the industry is encouraging, the second one quarter gaming data also reveals underlying weaknesses in gaming’s overall growth. Within the second quarter of 2016, the united states.. commercial gaming industry only reported revenue growth of 0.1 percent in comparison the second one quarter of 2015. Indeed, only 10 of 24 states reported growth in gaming revenues. 

The limited growth in second quarter gaming revenues is attributed to declines along the Las Vegas Strip and overall weakness within the industry.  The Las Vegas Strip saw revenues dip $33.2 million, 2.2 percent not up to the similar period last year.  The declines were attributed to soft gaming activity (coin-in) in April and will when put next to 2015. In 2016, the Las Vegas Strip was unable to capitalize at the gaming activity historically generated across the annual Floyd Mayweather/Cinco de Mayo weekend boxing match, as Mayweather retied in August 2015.  Further compounding the soft wagering activity was an sooner than normal Memorial Day and a May weekend calendar that included two fewer gaming days. 

Outside The Strip, gaming markets continued to peer soft revenue results as overall wagering activity remained down in existing geographic markets. While a weak second quarter doesn't indicate the industry is shifting clear of overall growth, it’s a reminder of the underlying weaknesses that exist in today’s gaming markets.

GARDEN STATE DIFFICULTIES

New Jersey returned to growth within the first six month of 2016, as Atlantic City reported revenue gains of 0.6 percent when put next to the primary six months of 2015.  While the expansion is notable and a potential indication that the ground of the brand new Jersey’s casino industry depression has passed, the consequences of Northeast market saturation continues to crush the ocean side resort town.

When the revenue growth was reported, Bob McDevitt, president of Unite-HERE Local 54, praised the increases as an indication of stabilizing finances for the city’s casinos and launched efforts to recoup the concessions first-given to the casinos in 2014.  The union’s efforts made national headlines over the July 4th holiday as they threatened strikes at five Atlantic City gaming properties. 

From a knowledge perspective, the efforts made by the union are noteworthy given Atlantic City’s overall increase in profitability.  Since 2014, the casinos that remained opened have collectively seen their revenues increase $43.4 million or 3.9 percent.  However, the numbers show a unique story for those casino companies targeted for potential labor strikes over the July 4th holiday.

During the primary six months of 2014, Caesars Entertainment operated four casinos and generated $500.5 million in gaming revenue.  Since then, Caesar’s has closed one casino and endured a 21.4 percent decline in revenues. When removing the casino that closed (Showboat) from the comparison, the Caesars Entertainment casinos that operated in both 2014 and 2016 generated 1.9 percent less revenue in 2016 when put next to 2014.  While Caesars continues to endure a decline in gaming revenues, the corporate did decide on terms with the Atlantic City union—providing a lift to the union’s efforts.

A similar trend in data was also noted for Carl Icahn’s two Atlantic City casinos. While Icahn’s group didn't own the Trump Taj Mahal until February 2016, the Taj and the Tropicana were both owned by Icahn by June 30, 2016. During the first six months of 2016, the 2 casinos collectively generated 7.4 percent less revenue than they generated in same six month period in 2014. Unlike Caesars Entertainment, Icahn’s group didn't reach an agreement with the local union. Icahn reached an agreement with the union for the Tropicana’s employees, because the Tropicana has seen a 4.8 percent lift in revenues since 2014.  However, Icahn and the union couldn't reach an agreement for the Trump Taj Mahal employees. 

On August 3, 2016, the union appears to have ultimately lost their effort, as Icahn announced the Taj would close after the summer season.  Icahn cited the failure to succeed in an agreement with the union as blocking a route to profitability.  The Taj has reported a 22.2 percent decline in revenues since 2014. If the closure does occur, Atlantic City will lose another estimated 1,100 jobs, having already lost 8,000 jobs throughout the casino closures of 2014. 

While New Jersey celebrates a return to revenue growth, the continued politics surrounding the pending closure of the Taj Mahal is a robust reminder to the underlying weakness that exists within the regional gaming markets. 

LOOKING FORWARD

Gaming revenue growth continues apace for 2016; however, the second one quarter provided reminders to the industry of a few of the underlying weakness that survive. Looking forward, gaming revenues will continue to extend because the U.S. labor force continues so as to add jobs and consumer sentiment continues to enhance. Most notably, hotel occupancy and travel continues to extend providing greater strength to the casino resort destinations.  But as gaming continues to grow, the industry must remain cautious. Regulators, operators and labor unions must continue to concentrate on stabilizing regulations, financial positions and employee benefits in a way that promote the ongoing growth of the total industry. 

Read More... [Source: Gaming Industry News]