Thread: Despite Bad Economy The Australian Casino Industry Stays Steady

Great article on how the casino industry is doing in Australia. Obviously there's huge competition from the online market with companies like Playboy Casino (attracting the European market) and BetUS (attracting the United States market) catering to internet gamblers. Interesting stuff....

Despite the downturn, industry growth for Australia’s casino industry should remain relatively stable in the next few years. But the threat of competition from overseas and online will remain a challenge.

With the economy slowing, you would think that a casino is the last place struggling Australian households would want to spend their money.

But don’t bet on it. While entertainment and eating out are among the first expenses to be cut during a downturn, gambling spending is amazingly robust and should hold up well over the next few years.

IBISWorld estimates that this industry will grow at an average annual rate of 2.4% over the five year period to 2008-09, although growth in the last 12 months has been somewhat curtailed by the deepening of the sub-prime crisis.

The industry has faced a number of challenges in the last few years, not least of which is rising competition from other gambling forms such as wagering. An explosion of the number of gaming machines in clubs and pubs in the last decade has also had an impact on industry revenue growth.

These challenges have led to significant consolidation over the past five years, which has led to the sector’s biggest player, the James Packer-backed Crown, to expand internationally.

Competition from casinos opening in China and other countries will lead to further restructuring for the domestic industry. The boom in online casino sites – particularly those offering online poker – will also continue to have an impact, although increasing interest in poker has also helped drag punters back into casinos in recent years.

IBISWorld forecasts that this industry will grow at an average annual rate of 3.1% during the five year period to 2013-14, although growth is set to slow from 2.6% in 2008 to 2.2% in 2009 and down to 1.8% in 2010. While these are not stunning growth figures by any means, they are quite satisfactory when compared with long-term industry trends.

Over the outlook period, industry revenue will be influenced by the mature stage of industry development and general industry saturation. Continuing competition from wagering, particularly sports gambling, and from gaming machines in clubs and pubs will also affect the success of this industry over the next five years.

Slow or declining growth in table gambling is forecast, however much stronger growth is expected for gaming machines over the short term. Significant global competition is also anticipated from booming casino markets such as Macau as well as internet casino sites.

Major operators are expected to continue searching for international joint venture prospects over the next five years, particularly in Britain and Asia, although larger global casino operators will stand in their way.

Domestic operators will have to be successful in their ventures internationally in order to boost revenue and profits and to maintain their global market.

These are really the key success factors for operators in the casino industry - this has to be done to continue this growth:

• Development of a symbiotic relationship with another industry. Be associated with a major hotel and/or convention facilities and other entertainment to assist in drawing visitors and in profit generation.
• Experienced work force. To be associated with an experienced operator to ensure profitable and efficient operation.
• Proximity to key markets. To be located in a high population catchment area or an area with a significant numbers of domestic and international visitors, particularly premium players.
• Superior financial management and debt management. To ensure a manageable level of debt (not over-capitalise) on the initial development costs for the casino establishment and associated facilities.
• Economies of scope. To provide a variety of games, including gaming machines, and to develop and introduce new games over time, including currently poker and mini baccarat, as fad games.
• Production of goods currently favoured by the market. To provide video-gaming machines for low-stakes gamblers – understanding that these tend to be high turnover, but with relatively good margins, as operating cost and direct labour input are low.
• Providing services to groups with high disposable income. To target the high stakes/premium gamblers from Australia and overseas while remaining aware of the volatility of this segment, especially in terms of their win rate and being able to be attracted to other global casinos offering better gaming incentives.