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Casinos Industry Report


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.

Industry Gross Revenue
Commercial casinos $34.11 billion
Indian casinos $25.08 billion
Card rooms $1.10 billion
Legal bookmaking $191.0 million
Charitable games $2.24 billion
Pari-mutuel wagering $3.58 billion
Lotteries $24.63 billion

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.

Country Number of casinos Country Number of casinos
United States 1673 Lavtia 46
Canada 123 United Kingdom 366
Mexico 34 Spain 70
Germany 137 South Africa 47
France 460 Netherlands 88
Czech Republic 85 Australia 423
Estonia 123 New Zealand 58
Ireland 56 Macao 39
Croatia 51 Bulgaria 53

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.

Casino gaming 2005
(Amount in
2006 2007 2008 2009 2010
Revenue million $). 442.0 677.9 983.1 1,241.3 1,445.9 1,597.5

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.

Porters Forces Description Intensity
Barriers to Entry Government Regulations. There has been a decline in government regulation towards the industry in various counties. Some of the regulation relate to reduction in tax revenue (Walker 167). Very Low
Buyers bargaining power There has been a change in consumer behavior with regard to casinos. Consumers are incorporating casinos in their consumption patterns. Despite the change in behavior, consumers have little bargaining power. This means that they do not have a significant influence on prices. Medium
Suppliers bargaining power There are a number of private and public institutions which supply facilities for casinos such as gaming tables and machines. This makes the casino industry to be highly. Low
Competition A large number of competitors are venturing the industry due to its lucrative nature. This has greatly influenced the distribution of casinos across the globe (Hoyes & Maccinis 475). The industry is also facing competition from other industries such as the hotel industry. A large number of hotels and resorts are incorporating casinos as one of their new ventures. Very High
Substitutes As a component of the gaming industry, casinos are facing an increment in the number of substitutes. This is evident in that consumers are adopting other forms of games such as lotteries, horseracing, slots and online gambling. The pricing of the games is attracting a large number of customers. High

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.

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IvyPanda. (2019, June 6). Casinos Industry. Retrieved from https://ivypanda.com/essays/casinos-industry/

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"Casinos Industry." IvyPanda, 6 June 2019, ivypanda.com/essays/casinos-industry/.

1. IvyPanda. "Casinos Industry." June 6, 2019. https://ivypanda.com/essays/casinos-industry/.


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IvyPanda. "Casinos Industry." June 6, 2019. https://ivypanda.com/essays/casinos-industry/.

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IvyPanda. 2019. "Casinos Industry." June 6, 2019. https://ivypanda.com/essays/casinos-industry/.

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IvyPanda. (2019) 'Casinos Industry'. 6 June.

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