Post on 25-Jun-2015
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Oregon Office of Economic Analysis1
Betting the Minimum
Gaming in the U.S. and State
Revenues
Oregon Office of Economic Analysis2
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
Oregon Office of Economic Analysis3
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
Oregon Office of Economic Analysis4
Entertainment Dollar Stable, But Down
3%
4%
5%
6%
1985 1995 2005 2015
Entertainment as Share of IncomeConsumer Expenditure Survey, BLS
Overall
Middle 20%
-20%
-16%
-12%
-8%
-4%
0%
Bottom20%
2ndQuintile
Middle20%
4thQuintile
Top20%
Entertainment Expenditures 2008-2013
Oregon Office of Economic Analysis5
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%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1960 1970 1980 1990 2000 2010
U.S. Gambling Expenditures as Share of Disposable Personal Income
BEA, Tables 2.1, 2.4.5U
Pari-Mutuels
Lotteries
Casinos
Oregon Office of Economic Analysis6
Spending Primarily at Casinos
Lotteries Flat
Peaked as share of income in mid-
1990s. Traditional lottery sales
generally flat.
Casinos Keep Some Gains
Exceptional growth ‘90s thru housing
bubble. Keeping 40% of housing
bubble gains even after recession.
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
1960 1970 1980 1990 2000 2010
Lotteries as Share of Disposable Income
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.9%
1960 1970 1980 1990 2000 2010
Casinos as Share of Disposable Income
Oregon Office of Economic Analysis7
U.S. Gaming Data
Northeast
Midwest
+ Ohio, Michigan
Gulf
Southwest
Data Available
Oregon Office of Economic Analysis8
Vegas, Baby.
• Visitors are back… … and spending money…
74%
76%
78%
80%
82%
84%
86%
88%
90%
92%
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
1990 1995 2000 2005 2010 2015
Las Vegas Visitor StatisticsSource: Las Vegas Convention and Visitors Authority
Visitors, lhs Hotel Occupancy Rate, rhs
$7.0
$7.5
$8.0
$8.5
$9.0
$9.5
$10.0
FY2005 FY2007 FY2009 FY2011 FY2013
Bill
ion
s
Leisure and Hospitality Taxable SalesClark County, NV, Inflation-adjusted 2013$
Oregon Office of Economic Analysis9
-30%
-25%
-20%
-15%
-10%
-5%
0%
2007 2009 2011 2013 2015
Nevada Slots and the Great Recession Slot Machine Win, 4 Qtr Average
Reno
Las Vegas Strip
Downtown Vegas
Other NV
…on everything except gaming
Vegas, Maybe?
Oregon Office of Economic Analysis10
Northeast
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 2002 2004 2006 2008 2010 2012 2014
New Casinos Cannibalize ExistingNortheast Slot Revenue by State
Connecticut
DelawareNew Jersey
New York
Pennsylvania
Rhode Island
Maryland
0.18%
0.21%
0.24%
0.27%
0.30%
0.33%
0.36%
$4
$5
$6
$7
$8
$9
$10
2000 2002 2004 2006 2008 2010 2012 2014
Bill
ion
s
Northeast Slot RevenueSum of CT, DE, MD, MA, NH, NJ, NY, PA, RI, VT
Slot Revenue
Share of Personal Income
Oregon Office of Economic Analysis11
Where Do Mature Markets Land?
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
2000 2004 2008 2012
Bill
ion
s
Mature Gaming Destinations SufferSlot 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%
Oregon Office of Economic Analysis12
Even Pennsylvania Slowing
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014
Bill
ion
s
Pennsylvania Gross Terminal Revenue
Initial 7 Casinos Newer Casinos (5 total) Share of Income, rhs
-6.3% past2 years
Oregon Office of Economic Analysis13
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/
Oregon Office of Economic Analysis14
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%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
2000 2002 2004 2006 2008 2010 2012 2014
Midwest Slot RevenuesRevenue as Share of Personal Income
Illinois, Indiana, Iowa, Missouri, Wisconsin
Oregon Office of Economic Analysis15
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 further0.00%
0.05%
0.10%
0.15%
0.20%
0.25%
0.30%
0.35%
0.40%
0.45%
2000 2002 2004 2006 2008 2010 2012 2014
Ohio and Michigan CasinosShare of Personal Income
Oregon Office of Economic Analysis16
West Virginia SqueezedCountry Roads Don’t Take You Home
West Virginia Casino
Atlantic City
New Casinos & Racinos
Oregon Office of Economic Analysis17
West Virginia Feeling the Impact
$800
$900
$1,000
$1,100
$1,200
$1,300
$1,400
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Mill
ion
s
West Virginia Video Lottery (Gross Sales)
-18% from peak
Now -23%
Neighboring Casinos Opened: PA MD OH
Oregon Office of Economic Analysis18
Gulf Coast
• Louisiana sales
eroding as share of
sales
• Mississippi seeing
larger declines
• Florida racinos in
2007 added some
regional competition0%
1%
2%
3%
4%
5%
2000 2002 2004 2006 2008 2010 2012 2014
Gulf Coast RevenuesShare of Personal Income
Mississippi
Louisiana (Riverboats, Casino, Racinos)
Oregon Office of Economic Analysis19
Southwest
• Colorado’s mining
town casino’s seeing
slow erosion
• Arizona’s boom and
bust not limited to
housing
• New Mexico
performing relatively
well…0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
2000 2002 2004 2006 2008 2010 2012 2014
Southwest RevenuesShare of Personal Income
New Mexico
Arizona
Colorado
Oregon Office of Economic Analysis20
…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
$50
$100
$150
$200
2003 2005 2007 2009 2011 2013
New Mexico Tribal Casino Net WinMillions of Inflation-adjusted 2013$, 4 Qtr MA
11 Tribal Compacts in Place in 2003Jicarilla Apache, Ohkay Owingeh, Pueblos ofAcoma, Isleta, Laguna, Sandia, San Felipe,Santa Ana, Santa Clara, Taos, Tesque
Mescalero Apache & Pueblo of Pojoaque
Navajo Nation
Oregon Office of Economic Analysis21
Oregon Is No Exception
$8
$9
$10
$11
$12
$13
$14
$15
$16
$17
$18
Jan-01 Jan-05 Jan-09 Jan-13
Mill
ion
s
Oregon Video Lottery SalesWeekly Net Sales, 52 Week Moving Average
Line GamesIntroduced
Great Recession+ Smoking Ban
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
2000 2005 2010 2015
Oregon Video Lottery Share of Personal Income, 4 Qtr Avg
Oregon Office of Economic Analysis22
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%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
2000 2002 2004 2006 2008 2010 2012 2014
Sales as Share of Personal Income
Montana Video Gambling Machines
South Dakota Slot Revenues
Oregon Office of Economic Analysis23
Public Revenues
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
1950 1960 1970 1980 1990 2000 2010
Bill
ion
s
States' Reliance on GamingTax Collections, 2013$, 1951-2013, U.S. Census
Pari-Mutuels
Amusements
0.0%
0.5%
1.0%
1.5%
2.0%
1950 1960 1970 1980 1990 2000 2010
States' Reliance on Gaming Share of All States Total Tax Collections, U.S. Census
Pari-Mutuels
Amusements
Oregon Office of Economic Analysis24
Commercial Casino Taxes
$0
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
1999 2002 2005 2008 2011
Commercial Casino Tax RevenuesMillions of inflation adjusted dollars, $2012
American Gaming Association: State of the States
Existing States in 1999CO, IA, IL, IN, LA, MI, MO, MS, NJ, NV, SD
New States DE, FL, KS, ME, MD, NM, NY, OH, OK, PA, RI, WV
Oregon Office of Economic Analysis25
Gambling Revenue as Share of
State’s Own-Source Revenue, FY09
> 5%
3.5 – 4.9%
2 – 3.4%
< 1%
1 – 1.9%
Source: Rockefeller Institute
Oregon Office of Economic Analysis26
Outlook, General
• Stagnant incomes
• Consumer preferences– Gaming vs other entertainment
– Table vs Slot
• Slow gaming pop growth
• Intensity to fall with aging pop
• More of an upper bound due to possible generational trends
$50,000
$70,000
$90,000
$110,000
$130,000
$150,000
1985 1995 2005 2015
Median Family StrugglingInflation-adjusted 2013$, Census, Federal Reserve
Income
Net Worth
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
20.5
21.0
21.5
22.0
22.5
23.0
1970 1980 1990 2000 2010 2020 2030 2040
Demographic Impact on Gaming IntensityBarnes et al (2011) and U.S. Census Bureau
Average Lottery Gaming Days per Year
Lottery Gaming Population Growth
Oregon Office of Economic Analysis27
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.
Oregon Office of Economic Analysis28
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.
Oregon Office of Economic Analysis29
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
Oregon Office of Economic Analysis30
Contact Information
www.OregonEconomicAnalysis.com
@OR_EconAnalysis
Josh Lehner, Economist
joshua.lehner@oregon.gov
(503) 378 - 4052