The first “Gaming Industry Outlook,” based on a survey of industry CEOs and released this month during the Global Gaming Expo in Las Vegas, provides “a data-focused way to talk about where the industry is going,” said David Forman, AGA senior director of research. That contrasts with “backward-looking information,” such as revenue results and public-opinion data.

The AGA plans to conduct an Outlook survey every six months, leading to long-term views of industry trends.
“As we move past this first report, it’s going to be interesting to watch how these numbers change,” Forman said. “The first time you do anything, you don’t have a real trend line. I think watching how CEO sentiment changes as we keep doing these is going to be the most interesting thing.”

The initial report is based on comments from CEOs of 24 companies that are members of AGA. Forman said that’s a response rate of about 70 percent, split fairly evenly among commercial operators, tribal operators, and gaming suppliers. Survey responses go to Oxford Economics, which calculates results and keeps individual responses anonymous.

The survey, conducted between Aug. 16 and Sept. 14, found that the CEOs expected industry activity to increase slightly in the next six months. All respondents described the current business situation as good or satisfactory, with 48 percent expecting even better conditions ahead. About two-thirds of CEOs said supply-chain delays and labor shortages were the biggest factors limiting operations.

Half said they plan to spend more than usual on capital expenditures for hotel and food-and-beverage facilities in the next six to 12 months. The lowest-scoring targets for extra capital investment (7 percent each) were meetings and conventions, parking, and poker facilities.

he Outlook report introduces two indices that will be part of each survey. The Current Conditions Index reflects annualized growth of gaming revenue, employment, and wages and salaries compared with the previous quarter. The Future Conditions Index measures the industry’s expected trend over the next six months, based on:
    economic conditions, using Oxford Economics’ forecast for disposable income, household net worth, and consumer spending;
    consumer intentions to visit a casino in the future, based on a monthly AGA survey;
    sentiments expressed by members of the Gaming Executive Panel.

Forman explained that an index rating of 100 is a “line of demarcation between expansion and contraction.” The first Outlook put the Current Conditions Index at 115.1, which the report said reflected “exceptionally strong growth” from the second quarter. The first Future Conditions Index was 102.7, with the report saying it indicated industry activity was expected to expand in the next six months, although not as rapidly as in the third quarter.

Forman said the Current Conditions Index is “very high,” because the industry is coming out of the COVID slowdown and many areas posted huge revenue gains from low totals during the brunt of the pandemic.

“It’s not reasonable to expect 20 percent year-over-year gaming revenue growth to go on forever,” he said. “That’s going to come back down to Earth, which I think is reflected in the Future Conditions Index.”

That index forecasts a “much more reasonable” annualized growth rate of 3 percent. Forman said that might sound low, but it would be among the industry’s best under normal operations.

While the twice-a-year survey of CEOs will provide important information for the industry, journalists, and investment analysts, Forman said it will be especially helpful in detailing the industry’s challenges for federal policy makers and regulators.

“It becomes a little more impactful than just an anecdote to share,” he said. “This is looking much more broadly at the economic impact the industry has on the country. The Current Conditions Index is measuring the overall economic contribution the industry makes. It’s broader than just gaming revenue or profitability.”

Groups representing other economic sectors produce outlook reports that are widely watched. For example, the National Federation of Independent Business releases a monthly Small Business Optimism Index and the Institute for Supply Management compiles the monthly Purchasing Managers’ Index.

Forman said the AGA’s new indices reflect its unique access to so many industry CEOs. While earnings calls and analyst reports focus on specific companies, he said, the Outlook survey “presents a pretty interesting look into how executives think collectively about where the industry is today and where it’s going to go over the next few quarters.”

By Mark Gruetze