AMERICAN GAMING ASSOCIATION
The Spring Outlook
While expecting revenue growth to slow , CEOs remain confident in the future
BY DAVE FORMAN
Recently released data from state regulators published by the American Gaming Association ( AGA ) shows that Q1 2024 was the highest-grossing month ever for the commercial gaming sector and the 13th quarter in a row with annual growth . But something that can ’ t go on forever , won ’ t .
While the industry is still expanding , revenue growth is decelerating as we settle into a new normal for gaming — at least in terms of revenue levels — in a post-Covid and post-PASPA world . And while brick-and-mortar gaming remains strong , industry growth has been primarily driven by online sports betting and iGaming so far this year .
As the industry ’ s premier trade association , the AGA regularly asks our member CEOs how they view today ’ s business environment , their outlook over the next few quarters , and what their biggest challenges are in navigating current operating dynamics . AGA ’ s Spring Gaming Outlook Index , featuring a survey of member CEOs , shows that most remain confident in their businesses and our industry .
Let ’ s examine a few of the report ’ s major takeaways .
Gaming executives report an improving outlook on future industry business conditions while remaining satisfied with the current business environment . Nearly all gaming executives surveyed characterized the current business environment as good ( 44 percent ) or satisfactory ( 50 percent ), mirroring similar sentiment from Q3 2023 . Meanwhile , executives are more optimistic about future conditions than they were in AGA ’ s Fall Outlook , with 32 percent of CEOs expecting business conditions to improve over the next six months , up from 20 percent in Q3 2023 .
Expectations for decelerating growth have influenced expectations for increases in capital investment and gaming units in operation , with smaller net positive sentiments than before . While gaming executives have become more positive in their views that overall balance sheet health will improve over the next six months ( 42 percent net positive ), they expect the pace of revenue growth ( 13 percent net negative ) and new hiring ( 22 percent net negative ) to slow , impacting how suppliers and operators are planning for the future .
In contrast to past Outlooks , gaming equipment suppliers are slightly pessimistic about the sale of gaming units for replacement use and new or expansion use ( both 13 percent net negative ). However , they remain optimistic about the pace of capital investment ( 38 percent net positive ) in their businesses .
Half of operator CEOs expect capital investments in hotels over the next year to be higher than normal , and compared to last fall , more also expect higher than normal levels of capital investment in meetings and conventions and table games ( 28 percent ). Meanwhile , 44 percent of CEOs expect increases in food and beverage investment , down from 67 percent in Q3 2023 .
Evolving macroeconomic and geopolitical forces are shifting industry challenges . Executives report that inflationary or interest rate concerns continue to be a major factor limiting operations ( 28 percent ), but these have been overtaken by geopolitical risk ( 34 percent ) and uncertainty of the economic environment ( 34 percent ) as the biggest limiting factors for their businesses . These will be factors to watch throughout the remainder of the year and especially during the upcoming presidential election cycle .
In all , the Spring Gaming Outlook shows that industry executives have a sober outlook for the pace of revenue growth over the next few quarters . Despite these attitudes and uncertainty around the cost of capital and the political landscape both at home and abroad , executives expect to continue to invest in their businesses and shore up balance sheets .
As consumers engage with gaming products at record levels and our members continue to invest in creating world-class entertainment experiences , it ’ s not surprising that executives are bullish on the business outlook for gaming through this summer .
Dave Forman is vice president , research , for the American Gaming Association .
10 Global Gaming Business JUNE 2024