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There are few areas of the US economy that haven’t been touched by the COVID-19 pandemic. The brick-and-mortar casino industry has been one of the hardest hit, however, along with other forms of live, social entertainment, such as bars and restaurants.
Virtually all of the country’s retail gambling establishments shut down in rapid succession in mid-March. A few began reopening as of the end of April, but it was mid-June by the time most of the country had resumed in-person gambling in some form. Demand for online casino and poker products skyrocketed, but these are only legal in a few states.
The result has been a massive crater in nationwide gambling revenue. The American Gaming Association (AGA) has added a new feature to its site – the Commercial Gaming Revenue Tracker – to help quantify the impacts of the shutdown, and hopefully to track the industry’s recovery.
What it shows is a bit of a good news, bad news story.
The good news is that the recovery is well under way, though there’s still a long way to go.
About 85% of the country’s casinos are now back in business. Most of those are operating at limited capacity and with various precautions and restrictions in place.
Gross gaming revenue for the country’s commercial casino operators in June was $1.81 billion. That’s almost exactly half of what they made in June last year.
Turning that around, however, it means that the industry is almost halfway back to where it was before the crisis began. After all, revenue had dropped to nearly zero in April. Even in May, with a few casinos starting to open, the year-on-year loss was close to 90%.
It’s also close to where things stood in March. The closure of casinos midway through left that monthly total just shy of $2 billion. The climb up the far side of the valley is likely to be slower than the descent, but good progress is being made.
On the other hand, no matter how quickly recovery happens, there has still been significant damage. April and May were essentially write-offs for the industry. It made roughly half as much money as expected in March and June.
Putting all that together, the hole in this year’s annual commercial gaming revenue is going to be at least the size of an entire quarter.
Retail slots revenue dropped 82% year-on-year in Q2. Table games fared even worse, at a deficit of 86%. The interruption of major league sports took its toll too. Sports betting was down 46% despite online betting being available in many more states than it was last year.
Online verticals were the only beneficiaries of the situation, pulling in more than 3.5 times as much as they did last year. This was due as much to the debut of online casinos and poker in Pennsylvania as to players moving online during the casino shutdown.
Unfortunately, those gains were just a drop in the bucket on the national level, due to a lack of legal online gambling options in most states. New Jersey, Pennsylvania and Delaware were all able to compensate for part of their losses that way. Yet their iGaming revenues amounted to just $403 million for the quarter, while the national year-on-year shortfall in total gaming revenue was a whopping $8.5 billion.
All told, Q2 revenue this year was 79% lower than last. It’s a shame, because the year had been off to a good start. Thanks to recent gaming expansion, particularly in the sports betting space, monthly revenue in January and February was up more than 10% year-over-year. Unfortunately, despite those gains, it’s now all but guaranteed that the total for 2020 will wind up well below that for 2019.
The AGA’s new revenue tracker only includes data once all states with commercial casinos have reported for the month. Some states are slower than others in providing those figures, so we don’t yet have national numbers available for July.
Some states’ gaming authorities have reported their July revenues however. Looking at these, it seems clear that there has been substantial further recovery over the past month.
In Pennsylvania, for instance, total gaming revenue increased from just over $130 million in June to nearly $290 million in July. That’s actually a slight improvement over last year, though retail channels remain down about 22%. Remarkably and encouragingly, the boost in online revenue hasn’t come back down very much since casino gambling resumed.
New Jersey’s casinos did only slightly worse, despite the unpopular prohibition on smoking, dining and beverage service. Their July revenues were down 23% year-over-year.
Given the similarity in results for these two states, we’ll probably see the same trend emerge elsewhere once national data is available.
It’s unlikely that brick-and-mortar revenue will get back to January-February levels before the end of the year, however. Although roughly 90% of commercial casinos and 80% of tribal casinos are now open, that number hasn’t changed much since mid-June. Those that haven’t yet reopened may not do so until the pandemic is more under control.
Here’s what the picture looks like currently:
The AGA’s COVID-19 Casino Tracker lists 136 casinos as still being closed. The majority of these fall into three general categories:
All but one of New York’s tribal casinos have reopened, but Gov. Cuomo has not given its 12 commercial casinos the green light. As of the beginning of August, there was no timetable in place to do so. New York has, of course, been a hot spot for COVID-19 from the start, especially New York City, and the governor is taking no chances with non-essential businesses.
Aside from Nevada, the Southwest has mostly kept its casinos closed. Utah has none to begin with, and Texas has only two, which remain shuttered. New Mexico, however, has almost three dozen, yet only four have resumed business. Casinos in eastern Arizona have stayed closed as well.
The reason for this is likely a combination of proximity to Las Vegas, and socially conservative political leanings that make these states’ casino industries contentious even under normal circumstances.
Tribal sovereignty allowed Native American casinos to begin reopening before state governments began extending authorization to their commercial counterparts. Now, the situation has reversed itself, as there are more than twice as many tribal properties still closed as commercial ones.
Most of those that haven’t reopened are either located far from major population centers or close to other, larger casinos that have opened. Many are the sort of smaller casinos found along highways as part of a travel station and may have calculated that the cost of opening with appropriate safety measures doesn’t work out when weighed against the reduced business they would receive.
Recovery for gambling revenue will likely follow a similar pattern to the reopening of the casinos themselves. That is, the first part of the recovery has gone quickly, but it will soon plateau and remain below pre-COVID levels until the pandemic is well and truly over.
Exactly where it levels off remains to be seen. Based on July numbers for the states that have them available, it looks likely that monthly revenue will get back to at least 75% of what it was before, and quite possibly more.
On the other hand, a renewed surge in cases could force some or all casinos to close again. Scientists studying the virus have found that it replicates best at around 48 degrees, so the situation could get rapidly worse as cool weather arrives.
Other verticals will also play a big role. There’s still no guarantee that the NFL season will begin on schedule, or be able to continue uninterrupted through to the playoffs. It is of course the biggest sport for betting in the US. As such, its fortunes will have a huge impact on the revenue numbers for that vertical.
Meanwhile, Michigan is trying to get its online casinos off the ground ahead of schedule in anticipation of continued difficulties for land-based gambling. West Virginia has already done so. Thus, iGaming could be a bigger factor in the final quarter of the year than it is at the moment.
There are, in other words, a great many variables in play. It’s likely that national gross gaming revenue for Q3 will be in the ballpark of $7 or $8 billion. Making predictions beyond that, however, would require a crystal ball. In the meantime, we’ll be keeping tabs on things as they develop, and the AGA’s revenue tracker remains a useful resource.