You can see the impact of inflation all over America.
Is the gas pump.
Is the grocery store.
it comes for the casino industry.
Virginia is about to make a breakthrough in the casino industry, with several new sites under construction and more planned. Add to that the already booming world of iGaming and sports betting in the US, and it looks like the casino companies are printing money.
But inflation lurks in the dark corner of the playing field. Its impacts are already being felt, Caesars had to delay the opening of its Danville casino due to building costs, and the casinos can’t find people to work. These are two clear examples, but what is the next step?
No one knows what the fallout will be in Virginia, just that there is one to come.
“There’s no doubt that in most regional gaming markets that customer is an excursionist who uses gasoline to get to the facility,” said the CEO of Hard Rock International. Jim Allen during an interview on CNBC.
“And when it’s up 30-40%, it’s going to be problematic.”
There are so many things to do in Virginia
The entire gaming industry has multiplied users and revenue through improved computer technology. It could be argued that the pandemic pushed people indoors and they needed things to keep them busy. Online gambling took center stage then – but people were eager to get out of their homes (and perhaps gamble in a casino) when restrictions finally eased. Now there is a return to more balanced time at home and away, not to mention normal spending, but inflation is adding unexpected problems.
Dr. Robert McNab is the director of Dragas Center for Economic Policy and the Joint Economists Advisory Council of Virginia.
He believes that inflation is currently fueled by many factors, including external stimuli (Ukraine) and that consumers will start to reevaluate your expenses in the second half of the year.
“Casinos compete with other leisure and entertainment businesses for consumer dollars,” McNab said in an email to PlayUSA.
“In locations that will rely heavily on out-of-town visitors, higher inflation and slower economic growth will likely reduce expected visitor numbers once the initial excitement wears off. For casinos expected to draw from the region, competition for increasingly scarce consumer dollars will be intense.
Besides the Danville casino, Virginia plans to build casinos in Norfolk, Portsmouth and Bristol. These are clearly intended to be spotlights to serve as Community centersplaces where residents can eat, drink and place a few bets.
McNab said the question is how to attract customers after the novelty wears off.
“Can these casinos attract tourists to the area without shifting their spending to other local businesses?” McNab asked.
“If someone comes from New York to vacation in Virginia Beach, the question is whether [to] spend more money or just shift spending from other places to casinos.
Stand out in the market
Caesars and MGM Resorts said there is another big request to get to Las Vegas, America’s gambling mecca, but customers don’t spend as much.
“There is no doubt that the inflation of food and groceries and even gasoline has certainly impacted the lower segments of our database,” said Frank FertittaCEO of Red Rocks Resorts on an earnings conference call.
That’s why new casinos, like the ones planned for Virginia, are built more like all-inclusive resorts than anything else. Once you are on the property, the casinos don’t want you to leave. They certainly don’t want you to think about flying all the way to Las Vegas for a better experience.
That’s why they put hundreds of millions on better equipment (stereotypical buffets, fine dining) and added posh hotel rooms and entertainment pavilions.
No offense, but Norfolk is not Las Vegas.
“Remember, Virginia has legalized online sports betting as well as online lottery sales,” McNab said.
“Grey market machines, which have reappeared across the Commonwealth, will also compete with casinos.”
Gray market machines are considered ‘Skill Games’ in Virginia because they act like slot machines but give the player the ability to spin the wheels themselves for greater potential payout. Their existence has caused a major legislative battle in Virginia.
I need an agreement and a dealer in Virginia
Another area where casinos are feeling the sting of inflation is find a volunteer workforce. Someone needs to valet the cars in all these Virginia Casinoscook meals and distribute cards.
“Unemployment rates in Virginia are below 4% and continuing to decline,” McNab said.
“The leisure and hospitality industry has seen historic layoffs and the casino industry will struggle to hire if it offers relatively low wages.”
Casinos have started offering incentive packages to bring back workers who left during the pandemic and attract new workers.
McNab points out that the pool of potential workers isn’t that big. Casinos are competing against existing hotels and restaurants for the same labor but can afford to outbid them.
McNab knows it’s a background business for the worker. Their cost of living has increased.
“When it comes to economic behavior, inflation increases uncertainty about the future,” McNab said.
“As people become more nearsighted, they focus on their immediate needs and reduce their spending on leisure. If inflationary expectations harden, a recession becomes a self-fulfilling prophecy.