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The COVID-19 pandemic isn’t quite over yet, but economic recovery from its effects is already well underway. The US commercial gambling sector – comprising retail casinos, sportsbooks and iGaming – is now right back where it was before the world changed, and starting to surge higher still.
The American Gaming Association launched its Commercial Gaming Revenue Tracker last summer, just after the industry hit its lowest point in decades. These quarterly reports are intended, in part, to document its recovery. The latest, released May 11, paints the rosiest picture we’ve seen in the past year.
Across all channels, the industry managed to bring in $11.13 billion in revenue in Q1. This figure falls just a rounding error shy of setting an all-time record. Q3 2019 beat the current quarter by less than one-tenth of one percent, but the third quarter has also been the best one for casinos most years. In all likelihood, then, 2021 as a whole will prove to be a record-setting year.
Naturally, the new channels of sports betting and online gambling have shown the most growth. Both have more than tripled since Q1 2020, due in part to new state markets opening. Online casinos in particular actually benefited from the pandemic, as retail casino closures drove customers to try the new apps.
However, even now these account for less than 16% of total revenue, and can’t take all the credit. Traditional, retail casino revenue was up 6.7%. Although modest compared to the explosive growth of the new products, this still beats the industry’s historical average growth rate.
It’s actually remarkable how stable that growth rate has been in recent years, even including the launch of these new verticals. Over the time period shown by the AGA, annual growth has fluctuated between 0% and mid-single digit percentages.
That rate has trended upwards slightly over time, especially since the repeal of the Professional and Amateur Sports Protection Act. That decision enabled sports betting in states other than Nevada, and has indirectly boosted interest in online gambling more generally.
Quarter-to-quarter fluctuations have been quite small. For the most part, these seem to follow an annual cycle, with revenue increasing each quarter from Q1 through Q3, but Q4 being the weakest of the four most years.
The events of 2020 are all the more dramatic when contrasted against that steady and predictable baseline for the industry.
There are few North Americans who don’t remember how things played out last year. As the new year dawned, we all watched the first coronavirus stories come out of China, and made jokes about beer. Mid-month, the first US case appeared in Washington State.
The first deaths came the following month, though they weren’t identified as such immediately. It was also at this point that we started calling it COVID-19, rather than simply “the novel coronavirus.” The world was still largely in denial, and the Trump administration only released emergency funding to deal with the threat in early March.
Things accelerated rapidly at that point. Within the span of a couple of weeks in mid-March, state governments began declaring an emergency, many businesses including retail casinos closed down, and professional sports seasons were suspended or cancelled. Losing the tail end of the month was already enough to send revenue plunging almost 15% from the previous quarter to $9.43 billion, what was then the worst quarter in years.
Q2 was far worse: unprecedented, and hopefully not to be repeated. A few commercial casinos began to reopen, starting with those in Deadwood, South Dakota at the beginning of May. Nevada began its reopening the following month, albeit at limited capacity and only a few casinos at first. New Jersey remained closed throughout.
Every US commercial casino was closed for at least one month of the quarter. Many didn’t do any business in Q2 at all. Revenue plunged to just $2.30 billion, a year-on-year drop of 79%. This is despite the contributions of iGaming, which rose 254% during that quarter to contribute 17.5% of the national total. By contrast, its share of revenue for Q1 this year was just 7.0%, and that is with the addition of two new states since last summer.
Almost all remaining casinos opened over the following three months. Those that have remained closed are mostly tribal casinos in remote areas. These aren’t reflected in the commercial sector’s revenue figures in any case.
Even so, the industry didn’t recover instantly. Q3 revenue remained down 18.9% year-on-year, and Q4 was only slightly better with a drop of 16.5%. Restrictions on capacity and game availability, social distancing protocols, etc. may have contributed to this. There was also a second wave of casino closures starting in December, albeit not as widespread as the first.
However, those shutdowns lasted into January, and capacity restrictions remain in place even now in many states. Despite that, 2021 has started much stronger than 2020 finished. What’s the difference?
It may not be a change at the casinos’ end so much as among the guests. A poll late last year showed that, between COVID-19, mass shootings and civil unrest, a large majority of Americans said they only truly feel safe at home. No follow up on that poll is available, but 36% of the population is now fully vaccinated. It stands to reason that fears of contracting COVID-19, at least, should be abating for some.
Indeed, the AGA reported in January that about a third of Americans said they plan on visiting a casino this year. Of those that do, 80% are satisfied that the industry is doing enough to make casinos safe. Only 70% of casino-goers last year said the same.
It’s possible that the story for the remainder of 2021 will simply resemble a normal year. If that’s the case, revenue should continue to improve in smaller steps through Q2 and Q3, followed by a seasonal slump at the tail end of the year. Even that would be enough to set new all-time quarterly records over the next six months.
Things could go even better than that, however. AGA CEO Bill Miller thinks there’s considerable pent-up demand for in-person entertainment. That’s certainly the way things work for some types of product. If refrigerators became unavailable for six months, you’d expect nearly six months worth of additional sales over a short period once supply was restored.
Demand for casino gambling is probably much more elastic than that, however. It’s unlikely that many casino-goers have been carefully saving up their gambling budget through the pandemic, with the plan of dropping it all on the table at the earliest opportunity. A lot of that money will have gone to alternative forms of at-home entertainment during lockdown, perhaps including online casinos in states where those are available.
Either way, though, 2021 should be the best year on record. It’s only a question of whether we’re seeing a real post-COVID surge, or merely a quick return to the earlier growth curve. On its own, Q1 looks more like the latter. And yet, the rate of change from Q4 2020 suggests that this summer could be huge if the trend continues.
Quite likely, the next update of the Commercial Gaming Revenue Tracker will give us a better idea of how much revenue has been lost for good, and how much was merely delayed by a year.