Introduction
Background study
Casino is an Italian word which means a small villa specifically built for pleasure. Casinos trace their origin in Italy in 1638 with the first casino being located at Venice (Fun Casino Gaming 1). Casinos are a major component of the global gaming industry (Economy Watch 2). Some countries such as India and other Arab countries consider the industry to be illegal.
However, some countries such as Singapore are partially legalizing the industry (Economy Watch2). Over the years, casino industry has undergone a rampant growth (Persson 1). According to a report published in 2007 by PriceWaterHouseCoopers, the industry’s net worth averaged $101.6 billion. It is expected that the industry’s total net-worth will be $ 144 billion by 2011.
The projection was based on the annual industry growth rate which averages 7.2% (Onlinecasinotopic.com 3). The growth results from the high rate at which new casinos are built and also renovation of the old ones especially in the Pacific region and China.
On a global scale, the industry generates a substantial amount of revenue and offers a wide range of employment. The table below gives an illustration of the total revenue generated from the industry today from the various forms of employment.
Some countries have got a well developed casino industry compared to others. The table below gives an illustration of the countries with the largest number of casinos.
Aim
The report is aimed at analyzing the global casino industry
Scope
Various sections are included in the report. An outline of the top five casinos in the world and the performance of the industry in the past 5 years is illustrated in the first part. The effect of trade patterns on the industry is evaluated in the second section. The third section entails an analysis of the industry using the porter’s five forces.
An external analysis of the industry is conducted to identify the changes in the environment which will promote the growth of the industry. The firm which is expected to undergone significant growth and the factors which will contribute to the growth are also analyzed. Finally, a conclusion and a set of recommendations are given.
Top five casinos
The top five casinos in 2010 according to a recent rating by Hotel By City include;
- Foxwoods Resort Casino
- Tropicana Casino Resort
- The Peppermill
- The MGM Grand
- Macau
Over the past years, casino industry has witnessed a rampant growth on a global scale. The table below gives an illustration of the revenue generated for the period ranging from 2005-2010.
Change in Trade patterns
Trade patterns have had a significant effect on the industry (Walker 11). For example, as a result of the 2008 economic crisis, there was a general reduction in the consumers’ disposable income (Walker 11). The situation was worse in oil importing countries due to increase in oil prices. As a result of the trade patterns, the industry suffered due to a reduction in the level of consumer confidence.
There was a decline in revenue especially due to reduction the level of disposable income amongst in-state customers and out-of-state travelers (Walker 12). Most of the customers considered gambling as a luxury. Tourism is one of the economic sectors which contribute towards the growth of Casinos.
This arises from the fact that casinos enhance tourism by promoting other industries such as the hotel industry. As a result of the economic recession, there was a reduction in the volume of tourism across the globe. This culminated into a decline in the volume of foreign exchange received from the industry’s ‘exports’ (Seung & Harris 109).
Industry analysis
The casino industry has become very competitive as a result of changes in business environment. The table below gives a competitive analysis of the industry using the Porter’s Five Forces model.
External Analysis
There are a number of external factors which will influence casino industry (Cheong 2).
For example, various governments are legalizing operation of casinos. One of the countries which have legalized the industry includes Singapore (Cheong 2). However, there are strict regulations which are aimed at controlling operations of the firms.
The objective of the regulations is to ensure that the industry does not have a negative impact on the society. In addition, technological innovation is also contributing to growth of the industry. The 3 core technologies supporting the growth of the industry include;
- New gaming devices
- Customer data mining
- Surveillance systems
These technologies are aimed at attaining maximization of revenue and also to ensure that there is sufficient security (Schwartz 1). For example, it is expected that development of slot machines will contribute towards attraction of new customers (Knightly 4).
Marina Bay Sands Casino
The casino which is located in Singapore is expected to undergo a rampant growth in the next five years. The casino is undertaking a significant amount of investment to ensure the growth of the casino. The investment is aimed at improving the casinos infrastructure (Portmann 1). Construction of the casino is expected to generate an annual profit of $ 1 billion.
Various facilities will be incorporated in the casino so as to attract customers (Sign 9). Some of these facilities include night clubs, restaurants and shopping mall. The growth of the casino is also expected to arise from incorporation of the acquisition strategy (Sign 10). The firm is also diversifying its operation by not only focusing on foreign customers but also on the locals.
Focusing on the locus will increase the firm’s profitability potential considering the volatile nature of the tourism industry. This will further be enhanced by the company’s incorporation of corporate social responsibility which will improve the firm’s publicity (Marina Bay Sands 1).
Through corporate social responsibility, there is a high probability of a large number of Singaporeans patronizing the casino (Marina Bay Sands 1). Growth of the firm will further be enhanced by the fact that competition within the Singapore casino industry is minimal. This is evident in that only two firms are licensed by the Singapore government to conduct casino business.
Conclusion
From the analysis, it is evident that the casino industry is expected to undergo a significant growth. Some of the factors which will contribute to the growth include increased legalization of casinos as one of the major games, the high rate of technological innovation and change in consumer behavior.
Growth of the industry will contribute towards growth of the global economy. This arises from the fact that casino industry creates various jobs.
Recommendations
In order for casino industry to have a positive effect on the economy, it is vital for the following to be considered.
- The industry should be regulated to ensure that it does not influence the society negatively.
- Firms in the industry should incorporate emerging technologies such as e-commerce so as to attain a wide market share and at the same time increase their customer base.
Works Cited
Cheong, Simon. Competition, casinos and the city: an entrepreneurs’ perspective. Singapore: Singapore Institute of International Affairs, 2005.
Economy Watch. Casino industry.New York: Stanley St. Labs. 25 Oct. 2010. Web.
Fun Casino Gaming. History and origin of Casinos.2010. 26 Oct, 2010.
Hoyer, Wayne and Macinnis, Deborah. Consumer behavior. New York: Cengage, 2009.
Knightly, Arnold. Global gaming report: casino revenue forecast to increase. Ras- Vegas Review Journal. 3(2): 1-3, 2007. Web.
Marina Bay Sands. Marina Bay Sands launches youth inspirational internship program. 2010. 26 Oct. 2010. Web.
OnlinecasinonTopic.com.Casino industry to reach $144 billion in 2011, 25 July 2007. 26 Oct. 2010. Web.
Persson, Anna. Sustainable development in rapid developing casino: destination: The case of Macau. Hogskolan: University of Hogskolan, 2008. Print.
Portmann, Kai. Despite success, Singapore casinos face political risk. Cologne: Deutsch Press, 2010. Web.
Schwartz, Dave. Center for gaming research, 2010. 26 October 2010. Web.
Seung, Chang and Harris, Thomas. Impact of reduced gaming exports on the economy of Nevada. Review of Urban and Regional Development Studies. 12(2), 109-119, 2000. Web.
Sign. Marina Bay Sands: Singapore casino makes sure bet Harris digital signage. 4 Sept. 2010. 26 Oct. 2010. Web.
Walker, David. The economics of casinos gambling. Florence: Butterworth- Heinemann, 2007. Print.