Betting the Minimum. Gaming in the U.S. and State Revenues
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Atlantic City, NJ may be in the headlines for their troubled casinos, however gaming is under pressure nationwide. Increased competition is driving overall sales, however these gains come primarily at the expense of existing casinos. This is particularly pronounced in the Northeast. Sales remain depressed in mature markets, even those with little new competition, like Las Vegas. The outlook is far from robust due to slow economic growth and demographics. State and local governments rely, at least in part, on tax revenues from gaming. To the extent growth is slow to nonexistent, public sector budgets will continue to be under pressure as well.
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Betting the Minimum. Gaming in the U.S. and State Revenues
- 1. Oregon Office of Economic Analysis 1 Betting the Minimum Gaming in the U.S. and State Revenues
- 2. Oregon Office of Economic Analysis 2 Overview • Consumer Spending Reset – Entertainment dollar stabilized, gaming too • Regional and State Differences – Increased competition driving growth – Underlying demand for gaming lower • Public Revenues • Outlook
- 3. Oregon Office of Economic Analysis 3 Methodological Notes • Publicly available data – Thus incomplete coverage within states and across states • See Excel file for documentation • Focus primarily on slots • Focus on net revenues, or casino win – Gross sales minus prizes, effectively • Focus on revenues as share of local personal income – Misses wealth impact
- 4. 6% 5% 4% Entertainment as Share of Income Consumer Expenditure Survey, BLS Oregon Office of Economic Analysis 4 Entertainment Dollar Stable, But Down 3% Middle 20% Overall 1985 1995 2005 2015 0% -4% -8% -12% -16% -20% Entertainment Expenditures 2008-2013 Bottom 20% 2nd Quintile Middle 20% 4th Quintile Top 20%
- 5. 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% U.S. Gambling Expenditures as Share of Disposable Personal Income BEA, Tables 2.1, 2.4.5U Pari-Mutuels Lotteries Oregon Office of Economic Analysis 5 U.S. Gaming Stabilizing as Well • Resetting of gaming expenditures post recession • Stabilized since mid-2010 • Different patterns across games and across country 0.0% Casinos 1960 1970 1980 1990 2000 2010
- 6. 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% Lotteries as Share of Disposable Income Oregon Office of Economic Analysis 6 Spending Primarily at Casinos Lotteries Flat Peaked as share of income in mid- 1990s. Traditional lottery sales generally flat. Casinos Keep Some Gains 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% Casinos as Share of Disposable Income Exceptional growth ‘90s thru housing bubble. Keeping 40% of housing bubble gains even after recession. 0.0% 1960 1970 1980 1990 2000 2010 0.0% 1960 1970 1980 1990 2000 2010
- 7. Southwest Oregon Office of Economic Analysis 7 U.S. Gaming Data Northeast Midwest + Ohio, Michigan Gulf Data Available
- 8. Source: Las Vegas Convention and Visitors Authority 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 Las Vegas Visitor Statistics 1990 1995 2000 2005 2010 2015 Visitors, lhs Hotel Occupancy Rate, rhs Oregon Office of Economic Analysis 8 Vegas, Baby. 92% 90% 88% 86% 84% 82% 80% 78% 76% 74% Leisure and Hospitality Taxable Sales $10.0 $9.5 $9.0 $8.5 $8.0 $7.5 $7.0 Clark County, NV, Inflation-adjusted 2013$ FY2005 FY2007 FY2009 FY2011 FY2013 Billions • Visitors are back… … and spending money…
- 9. 0% -5% -10% -15% -20% -25% Vegas, Maybe? Nevada Slots and the Great Recession Oregon Office of Economic Analysis 9 -30% Slot Machine Win, 4 Qtr Average Las Vegas Strip Downtown Vegas Other NV Reno 2007 2009 2011 2013 2015 …on everything except gaming
- 10. $10 $9 $8 $7 $6 $5 Oregon Office of Economic Analysis 10 Northeast 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% New Casinos Cannibalize Existing Northeast Slot Revenue by State Rhode Island Maryland Pennsylvania New York New Jersey Connecticut Delaware 2000 2002 2004 2006 2008 2010 2012 2014 0.36% 0.33% 0.30% 0.27% 0.24% 0.21% 0.18% $4 2000 2002 2004 2006 2008 2010 2012 2014 Billions Northeast Slot Revenue Sum of CT, DE, MD, MA, NH, NJ, NY, PA, RI, VT Slot Revenue Share of Personal Income
- 11. $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 Oregon Office of Economic Analysis 11 Where Do Mature Markets Land? $0.0 2000 2004 2008 2012 Billions Mature Gaming Destinations Suffer Slot Machine Win New Jersey Connecticut State Peak Year Peak Slot Revenues (Net) 2014 Slots % CT 2007 $1.722 b $1.096 b -36% DE 2006 $0.652b $0.354 b -46% NJ 2006 $3.804 b $1.921 b -50%
- 12. $2.5 $2.0 $1.5 $1.0 $0.5 Oregon Office of Economic Analysis 12 Even Pennsylvania Slowing 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% $0.0 -6.3% past 2 years FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 Billions Pennsylvania Gross Terminal Revenue Initial 7 Casinos Newer Casinos (5 total) Share of Income, rhs
- 13. Oregon Office of Economic Analysis 13 And Here Comes Massachusetts • MA accounts for ~12% of regional personal income & population • 3 casinos on the way • How much will the market grow compared with cannibalization? – Rhode Island Study • MA casinos lower FY17 revenues by 30-42% http://massgaming.com/about/expanded-gaming-act/
- 14. 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% Midwest Slot Revenues Revenue as Share of Personal Income Illinois, Indiana, Iowa, Missouri, Wisconsin Oregon Office of Economic Analysis 14 Midwest • Most of region avoided big recessionary losses, but sales as share of income continue to fall • Illinois the exception with large declines • Indiana and Missouri seeing large declines in 2013 and 2014 (Ohio impact?) 0.0% 2000 2002 2004 2006 2008 2010 2012 2014
- 15. 0.45% 0.40% 0.35% 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% Ohio and Michigan Casinos Share of Personal Income Oregon Office of Economic Analysis 15 Buckeyes Rising, Wolverines Slowing • Detroit’s commercial casinos were doing relatively well – Windsor helping • Ohio voters approved casinos in 2009, opened in 2012 – Likely to grow further 0.00% 2000 2002 2004 2006 2008 2010 2012 2014
- 16. Oregon Office of Economic Analysis 16 West Virginia Squeezed Country Roads Don’t Take You Home West Virginia Casino Atlantic City New Casinos & Racinos
- 17. West Virginia Feeling the Impact $1,400 $1,300 $1,200 $1,100 $1,000 $900 Oregon Office of Economic Analysis 17 $800 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Millions West Virginia Video Lottery (Gross Sales) -18% from peak Now -23% Neighboring Casinos Opened: PA MD OH
- 18. 5% 4% 3% 2% Gulf Coast Revenues Share of Personal Income Mississippi Louisiana (Riverboats, Casino, Racinos) Oregon Office of Economic Analysis 18 Gulf Coast • Louisiana sales eroding as share of sales • Mississippi seeing larger declines • Florida racinos in 1% 2007 added some regional competition 0% 2000 2002 2004 2006 2008 2010 2012 2014
- 19. 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% Southwest Revenues Share of Personal Income Colorado Oregon Office of Economic Analysis 19 Southwest • Colorado’s mining town casino’s seeing slow erosion • Arizona’s boom and bust not limited to housing • New Mexico performing relatively New Mexico Arizona 0.0% well… 2000 2002 2004 2006 2008 2010 2012 2014
- 20. $200 $150 $100 $50 New Mexico Tribal Casino Net Win Millions of Inflation-adjusted 2013$, 4 Qtr MA Navajo Nation Mescalero Apache & Pueblo of Pojoaque 11 Tribal Compacts in Place in 2003 Jicarilla Apache, Ohkay Owingeh, Pueblos of Acoma, Isleta, Laguna, Sandia, San Felipe, Santa Ana, Santa Clara, Taos, Tesque Oregon Office of Economic Analysis 20 …But Even New Mexico is Flat • For mature market, New Mexico is a success • Casino win is effectively flat for 7 years • Growth driven by new casinos – Take market share $0 2003 2005 2007 2009 2011 2013
- 21. $18 $17 $16 $15 $14 $13 $12 $11 $10 $9 Oregon Office of Economic Analysis 21 Oregon Is No Exception $8 Jan-01 Jan-05 Jan-09 Jan-13 Millions Oregon Video Lottery Sales Weekly Net Sales, 52 Week Moving Average Line Games Introduced Great Recession + Smoking Ban 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% Oregon Video Lottery Share of Personal Income, 4 Qtr Avg 2000 2005 2010 2015
- 22. 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% Sales as Share of Personal Income Montana Video Gambling Machines Oregon Office of Economic Analysis 22 Northern Plains • Even states that have outperformed economically see losses and/or slower growth • Montana has regained about half of losses • South Dakota at or near all-time high, but flat past 7 years 0.0% South Dakota Slot Revenues 2000 2002 2004 2006 2008 2010 2012 2014
- 23. $9 $8 $7 $6 $5 $4 $3 $2 $1 Oregon Office of Economic Analysis 23 Public Revenues $0 1950 1960 1970 1980 1990 2000 2010 Billions States' Reliance on Gaming Tax Collections, 2013$, 1951-2013, U.S. Census Pari-Mutuels Amusements 2.0% 1.5% 1.0% 0.5% 0.0% States' Reliance on Gaming Share of All States Total Tax Collections, U.S. Census Pari-Mutuels Amusements 1950 1960 1970 1980 1990 2000 2010
- 24. $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 Commercial Casino Tax Revenues Millions of inflation adjusted dollars, $2012 American Gaming Association: State of the States Existing States in 1999 CO, IA, IL, IN, LA, MI, MO, MS, NJ, NV, SD Oregon Office of Economic Analysis 24 Commercial Casino Taxes $0 New States DE, FL, KS, ME, MD, NM, NY, OH, OK, PA, RI, WV 1999 2002 2005 2008 2011
- 25. 1 – 1.9% Oregon Office of Economic Analysis 25 Gambling Revenue as Share of State’s Own-Source Revenue, FY09 > 5% 3.5 – 4.9% 2 – 3.4% < 1% Source: Rockefeller Institute
- 26. Inflation-adjusted 2013$, Census, Federal Reserve $150,000 $130,000 $110,000 $90,000 $70,000 Median Family Struggling Income Net Worth Oregon Office of Economic Analysis 2.5% 2.0% 1.5% 1.0% 0.5% 26 Outlook, General • Stagnant incomes • Consumer preferences – Gaming vs other entertainment – Table vs Slot 23.0 22.5 22.0 21.5 21.0 Demographic Impact on Gaming Intensity Barnes et al (2011) and U.S. Census Bureau Average Lottery Gaming Days per Year Lottery Gaming Population Growth • Slow gaming pop growth • Intensity to fall with aging pop • More of an upper bound due to possible generational trends $50,000 1985 1995 2005 2015 0.0% 20.5 1970 1980 1990 2000 2010 2020 2030 2040
- 27. Oregon Office of Economic Analysis 27 Outlook, Scenarios • Scenario 1: Optimistic • Stronger economy results in more broad-based gains. Consumers are confident, increase discretionary spending. Return to previous growth path. • Scenario 2: Some Improvements • As consumer budgets repaired, increase spending on entertainment and gaming. Growth rates pick up, however remain below gains in income. • Scenario 3: Slow Growth • No acceleration in gaming growth rates. Increase more in-line with the adult population than macroeconomic variables like jobs or income.
- 28. Oregon Office of Economic Analysis 28 Outlook, Oregon • No real increase in establishments or video lottery terminals since 2008 • Video lottery sales as share of income back to pre-line game period • Previous forecasts more in-line with Scenario 2. Some growth rate improvement, but still below income gains • Possible forecast change to Scenario 3. Tie sales outlook to growth in adult population and/or recent years’ sales.
- 29. Oregon Office of Economic Analysis 29 Summary • Increased competition drives sales higher – Final shakeout in market share unknown • Masks underlying industry trends • Key factors – Stagnant incomes – Consumer preferences – Demographics • Tax revenue outlook follows sales
- 30. Oregon Office of Economic Analysis 30 Contact Information www.OregonEconomicAnalysis.com @OR_EconAnalysis Josh Lehner, Economist joshua.lehner@oregon.gov (503) 378 - 4052