Casino Revenues Hit By Growing Generation Gap

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Thursday, October 22nd, 2015 | Written by Charles Washington

The so-called greying of America and the stark differences between Baby Boomers and Millennials are changing many industries. Recent data suggests that the world of gaming is no exception and that casinos will likely have to change the way they do business to remain profitable in years to come.

A Decline in Revenue

A recent study from the Rockefeller Institute reveals that tax revenues generated by casinos are remaining flat or declining, indicating that casinos revenues are doing the same. In 16 US states that receive revenue from gambling that were included in the study, revenues increased by 0.1 percent from 2014 to 2015. Of all the states, Maryland fared the best with 17.1 percent growth due to a new casino opening in Baltimore. Between the rest of the states, tax revenues actually declined by 1.2 percent.

One extreme example of a casino market in decline is that of New Jersey, which was once the second largest gambling resort in the US, but has since seen its fortunes decline as other states have embraced casino gambling, including Pennsylvania, Maryland and Ohio. As a result, in 2014 Atlantic City saw four of its twelve land-based casinos shut for business, most noticeably Revel, a newly constructed $2.4 billion mega-casino which ran into trouble from the very first time it opened its doors on April 2, 2012.

Appealing to Millennials

Market research has shown that it is senior citizens who visit casinos in the greatest numbers, but with many once frequent visitors becoming less likely to travel due to age, casinos must now find other ways to appeal to millennials in order to remain profitable. Slot machines hold very little interest to the average millennial, as those types of games can so easily be played on a mobile device or computer without having to head to a casino. In addition, millennials tend to prefer social activities to independent ones, making gambling at slot machines not that appealing. When people under 35 do visit casinos, studies show that they want to be involved with those games that involve competitive play or more social interaction. They would rather play poker or blackjack than sit isolated at the slots.

Adding Non-gambling Activities

So what are casinos doing in the hope of attracting millennials? One strategy currently employed by casinos includes adding more non-gambling activities to their offerings. As a result, many casinos are investing in restaurants, spas, night clubs and entertainment venues to get millennials through the door, and entice them to play.

New Games and Technology

In addition, casinos are hoping to cash in on the popularity of fantasy sports by adding fantasy sports betting parlors to their line-up of games. However, slot machines have traditionally been one of the highest sources of income for casinos, and one of the most important innovations going forward is the development of new slot machine technology. The manufacturers of slot machines are currently investigating ways to make play more challenging, so that it involves skill, and as MGM Resorts International CEO James Murren, explains:

“The products are going to look different, it’s going to be configured differently. You can have more social settings, more interactive games, more social games where people are playing against one another.”

Later this year, some of these new machines, which are more like arcade games than conventional slots, will debut at industry conventions. While the traditional slots which currently line the casinos like rows of obsolete telephone boxes are an anachronism to millennials, the old-fashioned slot machine is not quite finished, yet, and commenting on the issue Phil Gelber, VP of Game Development at Scientific Games, said:

“I don’t think the traditional slot machine will go away anytime soon. There are players who want the truly random game. [But] it’s going to be a much more open environment. The regulations today are written so in most jurisdictions the slot machine is an isolated thing. It doesn’t talk to the outside world. Most of the regulations were written before the Internet.”

New Gaming Regulations

New types of casino games means that states must pass new regulations. For example, New Jersey legalized fantasy sports betting in casinos in 2013, and Nevada has passed a law to allow the Nevada Gaming Commission to regulate the new hybrid slot machines that are in development. Ultimately, it’s in the states’ best interest to help casinos keep up with the times. If the casinos fail to attract more millennial players, state coffer will suffer as much as the casino operators’ bottom lines.