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The global financial crisis and resulting recession negatively affected the casino industry’s performance.
Following three consecutive years of low revenue growth, the industry is expected to improve in 2011-12, as it benefits from more robust domestic and international economic growth. Industry revenue is expected to increase 0.8% in 2011-12 to $4.8 billion.
Over the five years through 2011-12, industry revenue is expected to increase at an annual rate of 0.2%. However, new challenges are emerging, particularly from interest rate rises and intensifying competition from new casino establishments opening across Asia.
Since the global financial crisis, interest rates have risen, resulting in consumers reducing their spending on entertainment, including in casinos. There may be some substitution between spending on gambling and spending on food and beverages in casinos. Gaming machine revenue is expected to hold up better than table betting, due to the smaller bets required for coin machines.
Competition from new casinos established in Macau and Singapore, and proposed by some other countries in Asia, is expected to be fierce, particularly for international high rollers. Macau’s growing power as a global gambling centre may be reduced however, by new restrictions from the Chinese Government on the minimum gambling age and travel to Macau.
In 2011-12, there are expected to be 13 industry establishments, with no new entrants expected in an already saturated market. Casinos will employ about 18,627 people in 2011-12, a 3.1% rise from the year before, due to improving growth in revenue and profits, as economic conditions brighten. Over the next five years, industry revenue is expected to decline an annual average of 1.0%, to reach $5.05 billion in 2016-17.
Casinos make 78.3% of their revenue from the provision of gambling services. This revenue is derived primarily from gaming tables, electronic gaming machines and providing for international VIP program players. Other gaming activities only account for 0.8% of total revenue.
IBISWorld estimates that industry takings from gaming and poker machines and gaming tables in 2010-11 exceeded $1.4 billion each. International programs are estimated to have made about $640 million, while non-gaming-related activities are estimated to have made nearly $1 billion.
Over time, the share of revenue from poker and gaming machines has grown, from about 20% of total revenue a decade ago to nearly one-third currently. The number of machines and linked jackpots has climbed, and marketing of these has increased: Casinos now use special meals, free bus transport and other value-added packages. However, this is under threat, with federal independent MP Andrew Wilkie’s proposed mandatory pre-commitment scheme, which will drive down incentives for casual gamblers to participate, along with reducing problem-gambler expenditure levels.
International VIP program players have also been slowly increasing over time, with Crown and Echo Entertainment Group (as Tabcorp) investing heavily in non-gaming facilities in recent years to build this segment. However, this revenue stream faces strong competition from both Macau and Singapore, which are stronger and closer markets for a mostly Asian clientele.
Crown Limited accounts for 51.1 % market share followed by Echo Entertainment Group Limited (35%) and SKYCITY Entertainment Group Limited (6.9%).
Over the next five years, IBISWorld expects that industry revenue will grow an annualised 1.0% to $5.05 billion in 2016-17. This stagnation is due to the mature stage of industry development, general industry saturation and rising competition from casinos in Asia. There will be ongoing fierce competition from wagering, particularly from sports gambling, and from gaming machines in clubs and pubs. Competition will also arise from the increasing popularity of internet casinos. However, more robust domestic and international economic conditions from 2011-12 are expected to stimulate growth early in the period and delay revenue decline until 2015-16. In 2012-13, revenue is forecast to grow 2.2%.
To purchase IBISWorld’s full report on Australia’s Casino Industry click here.
This article first appeared on SmartCompany.