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Economy Looks Good, Which Helps Casinos

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economy
(Nick Sortal)

Twenty-five years ago, James Carville coined some famous words for Bill Clinton’s campaign staff: “The economy, stupid.” It’s also helpful to view the casino world through that lens. Of course, 25 years ago there was no Internet gaming, but the world still revolves around money.

While some people point to market saturation and an aging clientele as reasons to fret about the future of gambling, others argue that the immediate future is buoyed by the fact that we’re living in an era where most people aren’t limited to spending only on necessities. And casinos are a good place for them to try to turn a small amount of money into a large amount of money.

“The economy continues to be strong and we’ll continue to see growth,” said Daniel Holmes, co-practice leader for Rubin Brown’s Gaming Services Group, recently. The company performs accounting, tax compliance, and consulting services for the gaming industry nationwide.

Holmes noted that even though gaming industry revenues did not keep pace with overall economy in 2016, the public’s desire for gaming led to a revenue increase of almost 1 percent. As importantly, new revenue sources – such as Internet gambling –on the verge of sprouting.

A recent earnings report from Paddy Power Betfair quoted a “transformational” growth in sales because of the Internet. That helped New Jersey, which has been perceived to be a dying market, to show real signs of life. “When you factor in online gaming, New Jersey actually had a revenue increase in 2016, for the first time in 10 years,” Holmes said. “That is huge in my mind, as well as for those properties operating there.”

Brandon Loeschner, co-practice leader in RubinBrown’s Gaming Services Group, said that New Jersey could be an example for the rest of the nation. “The demonstration of value in the online gaming market shows that it’s viable,” he said. And while the data that has been released isn’t broken out by consumer demographics, one could presume that online gambling attracts a younger audience than the brick-and-mortar versions.. “I think that’s a fair hypothesis,” Loeschner said.

Like everyone else, Loeschner and Holmes are watching states consider the legalization of fantasy sports and of traditional sports gambling. Loeschner noted that while fantasy sports has garnered a lot of attention in the news, the companies who offer it are likely not profitable. But with so many states considering legislation, it’s likely just a matter of time before gambling on fantasy sports is legalized.

The pair was reluctant to weigh in on the effect a new president will have on gaming, for several reasons. The obvious – and these are my words here – is that what President Trump says often contradicts earlier statements he has made:  his word is not exactly his bond. But Holmes said that having a president from the gaming industry is an overall positive – he’s been there before. Trump could advance the cause for sports betting, for example. On the other hand, major Republican donor Sheldon Adelson has been very much against Internet gambling.

Holmes added that the bigger picture, though, is worth remembering: “When the economy does well, gaming does well.”

But if Internet gaming were to prosper, smaller casinos could suffer, Loeschner said. “Yes, people will still go to resorts that have amenities, but what would have me concerned is what will happen to the casinos in the less densely populated markets,” he said. “How are they going to compete?”

That said, Loeschner noted that the gambling industry today is a classic example of the free market: the best products, with the best service, usually comes out the winner. “We’re talking about a dynamic industry that’s growing nationwide with new products and new segments,” he said, noting that while Nevada, New Jersey, and Mississippi have decades of experience, many newer jurisdictions are catching up.

Loeschner added, “You’re trying to find out what works in your market to keep those folks here … and that’s good for the industry.”

Nick Sortal, SouthFloridaGambling.com, posted on SouthFloridaReporter.com, Mar. 21, 2017

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Nick Sortal is the Miami Herald's new gambling columnist and covered the openings, expansions, poker tournaments, entertainment and human interest facets of the industry for the South Florida Sun-Sentinel from 2007 until taking a buyout in November 2015. He also reports on gambling on his site, SouthFloridaGambling.com.