• Home
  • Feature Stories
  • Gaming Profile
  • New Products
  • Facility Profile
  • E-News
  • Advertise
  • Subscribe
  • Contact Us
You are here >   CGB Feature: HLTNumbers2011
  
 
For advertising information, please contact
Richard Swayze
 
 

 

Feature Story - Archives
The State of Recovery:
An Update on the North American Numbers
Email
Leave a comment
  
 
 
In the November 2010 edition of Canadian Gaming Business, HLT’s article entitled “After the Impact: The North America Numbers After the Worst Recession in a Generation” stated that the gaming industry in Canada (as a whole) experienced its first decline in revenues during 2010 (March 31st year-end) after 15 years of continuous growth. A year later and after updates to and minor reclassification of our numbers, we can confirm that the industry did in fact contract between 2009 and 2010, going from $15.47 to $15.12 billion for a 2.3% percent decline (slightly less than our original estimate of 2.5%).

 

 

 

 

Our latest estimates point to the industry as a whole growing in 2011 to $15.32 billion or by almost $200 million (or 1.3%), with gains estimated in all provinces, except Quebec.  Quebec is estimated to have declined by about $100 million.  Ontario and British Columbia posted the largest increases at almost $124 and $84 million, respectively. The remaining seven provinces posted modest increases (around $90 million in total).  Although the gaming industry grew in all provinces but Quebec, the performance of individual gaming sectors show significant variation in 2011.

From a sector perspective, the lottery sector accounted for the largest increase at over $350 million (or 9.0%) followed by the EGDs-Other sector (i.e. slots at racetracks in Ontario, slots at bingo halls in British Columbia, etc.) at $79 million (or 4.1%). All other sectors declined. The EGDs-VLTs sector declined in all provinces that have VLT networks.  In total, EGDs-VLTs declined by $97 million (or 3.6%), with Quebec accounting for just under half of this decline. While the total casino sector declined marginally (by $72 million or 1.2%), some provinces did experienced growth. Casino sector declines in Ontario, Quebec-- and to a lesser extent Alberta-- were somewhat offset by modest increases in New Brunswick (first year of Casino New Brunswick operation), British Columbia, and Manitoba.
 

 

If not for the growth in the lottery sector (and specifically the success of the national Lotto Max game which replaced the Super 7 game), the Canadian gaming industry as a whole would have declined for the second straight year in 2011. Further, despite a $200 million increase in gaming win in 2011, the industry has not yet rebounded to the level reached in 2009 ($15.47 billion). While there are a variety of factors at play, mixed results of a number of provincial casino sectors, and the further decline of the EGDs-VLTs sector in each province that operates a network, are not indicative of a strong recovery.  

The Casino Sector – Canada vs. United States

Last year, we reported the Canadian gaming industry, and especially the casino sector (including slots at racetracks and bingo halls), weathered the economic recession better than commercial casinos in the United States. In short, the impact was shorter in terms of time (one year decline in Canada compared to two in United States) and less severe in terms of magnitude (1.9% decline in Canada compared to a 5.9% and 4.0% decline in United States). On a-go-forward basis, we suggested future Canadian growth was not certain and it would likely take a couple of years before the industry reached the win level achieved in 2009.

Prior to presenting the updated numbers, it is important to review definitions and data sets used. In the United States, the casino sector can be divided into two groups: Indian casinos and commercial casinos.  Indian casino revenue numbers are released by the National Indian Gaming Commission (NIGA) on a broad regional breakdown annually.  The latest available numbers are for fiscal year 2010.  Commercial casino revenue numbers are released by individual states. As per the American Gaming Association, there are now 14 states that have commercial casinos. Five of these states also permit racetrack casinos (similar to slots at racetracks in Canada).  Revenue numbers from these racetrack casinos were included in the commercial casino numbers for those states that have both.  

*Please note since last year’s article, one additional state has been added to the commercial casino list (West Virginia). With this said, West Virginia was excluded from the analysis since we could not easily source monthly revenue data for comparison purposes.  

For comparison purposes, monthly United States data was reformatted into March 31 fiscal year ends to match how Canadian casino (and EGD-Other) numbers are reported.  Also, no attempt to convert currencies was made. Canadian and United States figures are reported in their respective currencies. 

The Canadian casino (including EGDs-Other) sector currently accounts for 50.9% (or $7.80 billion) of the total Canadian gaming industry.  In 2011, the sector only grew by 0.1% (or less than $10 million).  This flat performance was primarily due to the negative performance of casinos in Quebec and Ontario, which offset increases in other provinces.  In 2009, at the height of the market, the sector reached $7.94 billion.

The commercial casino sector in the United States also generally remained flat in 2011.  The sector only grew by 0.5% from $30.74 billion to $30.90 billion.  Like Canada, the commercial casino sector in the United States is still below its historic high ($34.0 billion) that was reached in 2008.  Also like Canada, certain States grew while others contracted (7 contracted and 6 grew).  If not for Pennsylvania, which grew by over $500.0 million (mainly due to the opening of a casino in Philadelphia and introduction of table games), the United States would have experienced a third consecutive year of decline.

Within individual States there were also mixed results. For instance, Las Vegas strip casinos posted a 1.5% increase in 2011 (to $5.77 billion), while the Rest of Nevada posted a 3.7% decrease (down to $4.61 billion). With that said, Las Vegas and the Rest of Nevada are still well below their historic highs reached in 2008 (15.1% and 22.4% respectively).  Discounting 2010 results (bottom of recession in Nevada), the 2011 results for Las Vegas strip casinos represent the lowest total since 2005, while for the Rest of Nevada, current results are the lowest in the past decade.

In conclusion, while both the Canadian and United States casino sectors (in total) have rebounded, not all provinces/states experienced a rebound. Also, in both countries the current results have not yet rebounded to historic highs. In the United States, 2011 results are off by 9.1% from 2008 results even after significant new supply has been added in some states. In comparison the Canadian casino sector is only off 1.7% from its historic high achieved in 2009. In this sense, Canada continues to fare better than its neighbor to the south.

What to Expect in the Near Term

The current state of the economy coupled with the increasing maturity of the industry in many regions of Canada is making the annual budgeting process more difficult for industry operators. In the past, a significant component of the budgeting process was timing implementation estimates of new gaming supply (e.g. new facilities, new devices, etc.). While supply changes (including new and enhanced gaming products) will continue to be important, the economic outlook for the consumer market will likely dominate annual budget discussions over the next few years. 

There are a number of new and enhanced supply developments/enhancements that are planned to be implemented in a number of provinces over the next two years. Two significant developments/enhancements include:

VLT replacement/modernization initiatives in Quebec, Alberta, Manitoba, Saskatchewan and Nova Scotia.  

Introduction of internet gaming in Ontario and the continued expansion of internet gaming initiatives in British Columbia and Quebec.

Just how (including the speed that) the consumer market reacts to these supply changes is not certain. Uncertainty about the economy still persists and fears of another recession are real. The weaker recovery (specifically in the United States), in addition to the European debt crisis and major issues surrounding the financial markets have forced major banks to lower Canadian growth expectations for the next couple of years. The latest bank forecasts indicate that Canada’s economy will continue to grow over the next couple of years; however, near–term growth is forecast to be significantly below 2010.

In short, the current state and near-term growth outlook for the Canadian economy does not support the expectation of a strong rebound in gaming win for the next couple of years. To achieve growth in this type of economic environment, gaming operators need to be creative and able to identify and penetrate new demand segments. If operators are successful in identifying and penetrating new segments, part of the growth will likely offset potential decreases in historic key consumer demand segments.

By Robert Scarpelli and Katia Muro, with HLT Advisory Inc. 

  < Back     Copyright © Canadian Gaming Business Magazine. All rights reserved.  



 
Google
-


|   Login