Despite headwinds, gaming CEOs confident about future conditions

The American Gaming Association (AGA) is out with its Gaming Industry Outlook, which finds industry CEOs remain positive about the current business situation and express confidence about future conditions, despite the myriad of economic hurdles in the way.

Released Oct. 4 and presented in partnership with Fitch Ratings, the survey found executives indicated that the current situation is good (68%) or satisfactory (28%) and most (92%) expect these conditions to continue or improve over the next three to six months. More than one third (38%) indicated they expect future conditions to be better, compared to only 8% that thought conditions would worsen.

“Our industry remains cautiously optimistic – and has weathered this volatile economy – because of resilient consumer demand,” said AGA President and CEO Bill Miller.

Those sentiments mirror much of what casino executives and industry leaders discussed at the recent East Coast Gaming Congress in Atlantic City, where Miller spoke, with many reporting that the pandemic and its aftermath forced tough lessons to be learned and industrywide adaptability to the new normal.

While some concerns have eased, two-thirds of gaming CEOs in the survey named supply issues (65%) as a factor limiting operations, followed by inflation and interest rate concerns (62%). Half of executives also identified the uncertainty of the economic environment (50%) and labor shortage (50%) as impediments to business growth.

Now and then

The Gaming Industry Outlook is separated into two sections: Current Conditions Index and the Future Conditions Index.

The Current Conditions Index of 99.5 shows gaming-related economic activity relatively stable compared with the second quarter of 2022, when the industry set a new quarterly revenue record. That figure also indicates that gaming-related economic activity has grown at an annualized pace of just under 5% over the last three quarters.

The Future Conditions Index currently stands at 95.3, which indicates that real gaming-related economic activity is expected to decrease over the next six months at a 4.7% annualized rate. The AGA press release announcing the Outlook notes that the Future Conditions Index is dampened by the current Oxford Economic Outlook, which anticipates a mild recession in the first half of 2023.

Additionally, 3 in 4 CEOs (76%) expect the pace of wage and benefit growth to continue to increase over the next three to six months with a slowdown in expectations around the pace of hiring compared with earlier this year.

The major question mark centers around future customer activity, with gaming operators split on their expectations between expansion and contraction. Executives believe the strong growth over the last two years has positioned the industry well despite the uncertainty, with nearly half expecting balance sheet health to improve over the next six months.

“Look ahead, future consumer confidence and spending remain an outstanding question for our continued growth,” said Miller.