Betting the Minimum. Gaming in the U.S. and State Revenues. Oregon Office of Economic Analysis

Transcription

1 Betting the Minimum Gaming in the U.S. and State Revenues 1

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 2

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 3

4 Entertainment Dollar Stable, But Down 6% Entertainment as Share of Income Consumer Expenditure Survey, BLS 0% Entertainment Expenditures Bottom 20% 2nd Quintile Middle 20% 4th Quintile Top 20% 5% 4% Middle 20% Overall -4% -8% -12% 3% % -20% 4

5 U.S. Gaming Stabilizing as Well 1.2% 1.0% 0.8% 0.6% 0.4% U.S. Gambling Expenditures as Share of Disposable Personal Income BEA, Tables 2.1, 2.4.5U Casinos 0.2% Lotteries Pari-Mutuels 0.0% Resetting of gaming expenditures post recession Stabilized since mid-2010 Different patterns across games and across country 5

6 Spending Primarily at Casinos Lotteries Flat 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% Lotteries as Share of Disposable Income 0.0% 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 0.0% Exceptional growth 90s thru housing bubble. Keeping 40% of housing bubble gains even after recession. 6

7 U.S. Gaming Data Northeast Midwest + Ohio, Michigan Southwest Gulf Data Available 7

8 Billions Vegas, Baby. 45,000,000 40,000,000 35,000,000 30,000,000 25,000,000 20,000,000 Las Vegas Visitor Statistics Source: Las Vegas Convention and Visitors Authority Visitors, lhs Hotel Occupancy Rate, rhs Visitors are back 92% 90% 88% 86% 84% 82% 80% 78% 76% 74% Leisure and Hospitality Taxable Sales Clark County, NV, Inflation-adjusted 2013$ $10.0 $9.5 $9.0 $8.5 $8.0 $7.5 $7.0 FY2005 FY2007 FY2009 FY2011 FY2013 and spending money 8

9 Vegas, Maybe? 0% Nevada Slots and the Great Recession Slot Machine Win, 4 Qtr Average -5% -10% -15% Las Vegas Strip Downtown Vegas -20% Other NV -25% Reno -30% on everything except gaming 9

10 Billions Northeast $10 $9 Northeast Slot Revenue Sum of CT, DE, MD, MA, NH, NJ, NY, PA, RI, VT Slot Revenue 0.36% 0.33% 100% 90% 80% New Casinos Cannibalize Existing Northeast Slot Revenue by State Maryland Rhode Island Pennsylvania $8 $7 0.30% 0.27% 70% 60% 50% New York $6 Share of Personal Income 0.24% 40% 30% Delaware New Jersey $5 0.21% 20% 10% Connecticut $ % 0%

11 Billions Where Do Mature Markets Land? Mature Gaming Destinations Suffer Slot Machine Win $4.0 $3.5 $3.0 $2.5 New Jersey State Peak Year Peak Slot Revenues (Net) 2014 Slots CT 2007 $1.722 b $1.096 b -36% % $2.0 $1.5 $1.0 $0.5 $0.0 Connecticut DE 2006 $0.652b $0.354 b -46% NJ 2006 $3.804 b $1.921 b -50% 11

12 Billions Even Pennsylvania Slowing $2.5 Pennsylvania Gross Terminal Revenue -6.3% past 2 years 0.5% $ % $ % $ % $ % $0.0 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY % Initial 7 Casinos Newer Casinos (5 total) Share of Income, rhs 12

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% 13

14 Midwest 0.7% 0.6% 0.5% 0.4% 0.3% 0.2% 0.1% 0.0% Midwest Slot Revenues Revenue as Share of Personal Income Illinois, Indiana, Iowa, Missouri, Wisconsin 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?) 14

15 Buckeyes Rising, Wolverines Slowing 0.45% 0.40% 0.35% 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% Ohio and Michigan Casinos Share of Personal Income Detroit s commercial casinos were doing relatively well Windsor helping Ohio voters approved casinos in 2009, opened in 2012 Likely to grow further 15

16 West Virginia Squeezed Country Roads Don t Take You Home West Virginia Casino Atlantic City New Casinos & Racinos 16

17 Millions West Virginia Feeling the Impact $1,400 West Virginia Video Lottery (Gross Sales) $1,300 $1,200-18% from peak Now -23% $1,100 $1,000 $900 $ Neighboring Casinos Opened: PA MD OH 17

18 Gulf Coast 5% 4% 3% 2% 1% 0% Gulf Coast Revenues Share of Personal Income Mississippi Louisiana (Riverboats, Casino, Racinos) Louisiana sales eroding as share of sales Mississippi seeing larger declines Florida racinos in 2007 added some regional competition 18

19 Southwest 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Southwest Revenues Share of Personal Income New Mexico Arizona Colorado Colorado s mining town casino s seeing slow erosion Arizona s boom and bust not limited to housing New Mexico performing relatively well 19

20 But Even New Mexico is Flat $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 For mature market, New Mexico is a success Casino win is effectively flat for 7 years Growth driven by new casinos Take market share 20

21 Millions Oregon Is No Exception $18 $17 $16 $15 $14 $13 $12 $11 $10 $9 Oregon Video Lottery Sales Weekly Net Sales, 52 Week Moving Average Line Games Introduced Great Recession + Smoking Ban $8 Jan-01 Jan-05 Jan-09 Jan % 0.7% 0.6% 0.5% 0.4% 0.3% Oregon Video Lottery Share of Personal Income, 4 Qtr Avg 0.2%

22 Northern Plains 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Sales as Share of Personal Income Montana Video Gambling Machines South Dakota Slot Revenues 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 22

23 Billions Public Revenues States' Reliance on Gaming Tax Collections, 2013$, , U.S. Census States' Reliance on Gaming Share of All States Total Tax Collections, U.S. Census $9 2.0% $8 $7 $6 1.5% Pari-Mutuels $5 $4 1.0% Amusements $3 $2 $1 Pari-Mutuels Amusements 0.5% $ %

24 Commercial Casino Taxes $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 New States DE, FL, KS, ME, MD, NM, NY, OH, OK, PA, RI, WV $

25 Gambling Revenue as Share of State s Own-Source Revenue, FY09 > 5% % 2 3.4% 1 1.9% < 1% Source: Rockefeller Institute 25

26 Outlook, General Inflation-adjusted 2013$, Census, Federal Reserve $150,000 $130,000 Median Family Struggling Demographic Impact on Gaming Intensity Barnes et al (2011) and U.S. Census Bureau Average Lottery Gaming Days per Year 2.5% 2.0% $110,000 Net Worth % $90, % $70,000 Income $50, Stagnant incomes Consumer preferences Gaming vs other entertainment Table vs Slot 21.0 Lottery Gaming 0.5% Population Growth % Slow gaming pop growth Intensity to fall with aging pop More of an upper bound due to possible generational trends 26

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. 27

28 Outlook, Oregon No real increase in establishments or video lottery terminals since 2008 Video lottery sales as share of income back to preline 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. 28

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 29

30 Contact Information Josh Lehner, Economist (503)