In its latest Gaming Industry Outlook, the American Gaming Association found that more gaming CEOs are optimistic about future conditions, despite a potential slowdown in the U.S. economy.
Most gaming CEOs think current conditions are good (44%) or satisfactory (50%) according to the AGA’s Spring 2024 Gaming Industry Outlook. This is on par with their sentiment six months ago. Gaming CEOs, however, are more optimistic about the future than they have been.
In the latest survey, 32% of CEOs were expecting business conditions to improve in the gaming industry. Six months ago, only 20% thought conditions would improve. Their optimism is a bit surprising, given the stellar performance of the sector over the past couple of years. Executives understand the sector may finally be reaching a peak. Yet, gaming CEOs are still optimistic about the future.
Gaming’s high bar
Both retail and online gaming went on a tear in the aftermath of the pandemic. Resort casinos posted record RevPAR (revenue per available room) as consumers tried to make up for lost gaming time. In February, the AGA reported the industry’s 36th straight month of annual growth and a new record for revenue generated by traditional casino games, sports betting, and iGaming during the month.
Meanwhile, states continued to legalize both retail and online sports betting. The sports betting handle in the U.S. topped $100 billion in 2023. The AGA estimated $2.72 billion was likely legally wagered on March Madness, alone, this year.
A pause in gaming’s record-breaking growth, however, is likely. Oxford Economics, the AGA’s parent company, is projecting a slowdown in the U.S. economy in 2024. It isn’t predicting a recession, but like many forecasters, it expects higher-than-normal inflation and interest rates to take a toll. In fact, the U.S. GDP for 1Q 2024 came in at 1.6%, its slowest pace in nearly two years.
“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.”
Growth expected with some caveats
Despite the economic headwinds, the AGA’s Futures Conditions Index came in at 102.2 this quarter, reflecting CEO expectations of moderate growth in the sector. The executives do have some concerns, however, going forward.
Over the next six months, gaming executives expected balance sheets to improve, while revenue and new hiring to slow. The most pessimistic outlook came from gaming equipment suppliers, who don’t expect much in the way of gaming unit sales in the near term. Also, fewer casino operators (44% vs. 67% in the Fall 2023 Outlook) are expecting to invest in food and beverage operations.
Inflation and interest rates continue to be the biggest concern for more than a quarter of those responding. But a greater number of this survey’s respondents cited geo-political risk (34%) and uncertainty of the economic environment (34%) as their biggest limiting factors.
