The US casinos and gaming industry generated total revenues of $86.6 billion in 2006, representing an increase of 5.4% on the previous years value. The development of non-gaming business, and the launch of casinos throughout the US beyond their traditional locations, will drive revenue growth moving forward.
Casinos form the largest contributor to net gaming revenues in the US, generating 38% of the total. Lotteries and Indian casinos each contribute an additional 27%.
The 2006 ban on online gaming has dramatically curtailed earnings potential for the major companies, but high consumer demand for gambling services, particularly low denomination slot machines, will ensure strong revenue growth moving forward. At the other end of the market, gaming companies are incorporating luxury retail outlets and restaurants within casino resorts in order to leverage the international reputation of these brands and attract wealthy gamblers.
The leading companies in the US casinos and gaming industry are MGM Mirage, Harrahs Entertainment, Las Vegas Sands, Station Casinos, International Game Technology, and Wynn Resorts. Companies are expanding into the Asia-Pacific market in order to maximize earnings and mitigate against any future fluctuations at home.
Indian Gaming - The number of casinos operated by Native American communities is likely to increase dramatically over the next two years, stiffening the competition in this already highly concentrated industry. In California alone, seven communities have been granted a license to operate a casino but have not as yet opened a facility.
Changing Gambling Habits - Less heavily regulated Class II gaming is increasing in popularity, boosting revenues for the major players. Penny- and other low-denomination slot machines have stimulated earnings growth despite the short-term costs incurred installing the new machines.
Geographical Distribution - The casinos and gaming industry is geographically highly concentrated, with very little brand loyalty. Players must continually invest in innovative marketing programs and new games in order to generate repeat customers, pressurizing margins.
Added Value - Players are targeting higher-budget customers who drive incremental revenues through the provision of luxury service and exclusive events.
Asia-Pacific - Players are investing in operations in the Asia-Pacific market, where gambling is growing in popularity and the number of premium gaming customers is on the rise.
Property Developments - Casino and gaming companies are diversifying into real estate and retail operations to boost profitability and defend revenue growth from the effects of downturn in any one segment.
Innovation - Video gaming is showing strong growth in the smaller state markets outside Las Vegas. Companies are also installing video slot machines with the capacity to download new games as they are developed, reducing the need for replacement machines. This trend offers significant cost savings in the longer term, as continually replacing machines is more expensive than changing the software.
The casinos and gaming industry consists of all forms of online (if permitted) and traditional betting on sports, lotteries and slot machines, as well as gambling in casinos or bingo halls. The online segments of the sector comprise revenues generated from betting on all formats via the Internet. Market values represent net winnings (amount wagered minus payouts to players) for all operators. Depending on the type of game and its location, net winnings are typically 15-20% of total bets wagered.