Casino Industry Analysis

Casino industry analysis, economic characteristics, Porter’s Five Forces, competition, opportunities, threats, external driving forces, success factors
Slot machines. What are the casino industry’s economic characteristics, level of competition, opportunities, threats, external driving forces and success factors? What are the implications of a Porter’s Five Forces analysis on the casino industry? (Photo: Public Domain)

The casino and gaming industry is a significant contributor to the economic progress of the United States. For instance, reports indicated that the industry contributed about 1% of the 2010 US GDP, reaching the level of about $125 billion in 2010. In this regard, the casino industry is frequently viewed as a potential opportunity for administrators to consider in order to increase overall economic development of their respective jurisdictions. Another factor about this industry is that it involves not just gaming per se, but also covers related products or services, such as hotels that are linked to casinos, as well as real estate surrounding casinos. As a result, the economic impact of the casino gaming industry is large and significant.

What are the characteristics and current situation of the casino industry, and how can these factors affect casino companies?

Casino Industry: Economic Characteristics

Casinos in the United States were able to achieve $125 billion in revenues in 2010, which is a significant increase when compared to the 2009 revenues that declined because of the recession. This condition of the casino industry is a positive indicator of the continued development of industry.

In addition, such a positive characteristic of the industry emphasizes the ability of the industry to recover from crises like the recent recession. Another factor to consider about the economic situation of this industry is that it is significantly dependent on consumers coming from outside the localities of these casinos, especially because the visitors are the ones who bring in the major chunk of the revenues of the industry.

Casino Industry Brief Porter’s Five Forces Analysis

In terms of Porter’s 5 forces analysis, the bargaining power of suppliers is weak because of the fact that casinos basically provide their own services with internal resources, such as employees properly trained in various casino games. The bargaining power of customers is strong, especially because even a slight change in the demand for casino services could directly impact the revenues of the industry. The threat of new entrants is weak because of the fact that the establishment of a casino generally requires massive initial investments. The threat of substitute products is moderate, because these substitutes, such as other forms of entertainment that could involve some form of gambling, do not necessarily match the customer experience in casinos. The competitive rivalry in the industry is strong because casinos, especially those that are located within the same area, engage in aggressive marketing strategies against each other.

Casino Competition. The overall competitive landscape of the casino industry is characterized with high levels of competition among the existing players in the industry. In addition, competition also extends to new markets. For instance, many of the casino companies in the United States are looking at establishing operations in other countries, especially countries like Singapore and Macau.

Brief PESTEL Analysis of the Casino Industry

In terms of the political or legal aspect of the industry, the United States has engages in regulations that open up the industry, for the purpose of improving its performance. The economic environment significantly impacts the situation of the casino and gaming industry in the United States. The recent recession that started in 2008 led to a decline in the revenues of the industry from 2008 to 2010. In addition, the overall demand for hotels influences the demand for casino services because Casinos usually have hotels. In relation, real estate market impacts casino performance because the attractiveness of the locations of casinos is partially dependent on the real estate value of such locations.

Social values also affect the casino industry. For instance, the attitude of Americans towards gambling has provided support for the growth of the industry. However, current emphasis on treating casino gaming as addiction tends to counteract such American openness to the industry. The technological aspect of the industry is also significant, with new technologies providing increased efficiency in the performance of the casino or gaming companies. Ecological or environmental concerns are minimal among casinos. Foreign competition remains low because there are only a few locations around the world that have thriving casino industries.

Opportunities & Threats in the Casino Industry

The main opportunities for the casino industry include expansion in the online environment, which presents extensive access to a larger market composed of people from all over the world. Casino companies also have opportunities of improving real estate and hotel services to take advantage of the improving economic situation in the United States.

In spite of such opportunities, the casino and gaming industry experiences threats in the form of a shift of people to online forms of gambling, rather than going to the Casino facilities such as those located in Las Vegas. This trend has the potential to reduce the revenues of the casino industry in Las Vegas and other specialized locations.

Casino Industry External Driving Forces

The external driving forces of the leasing industry and real estate development motivate for casino companies to develop new facilities. In addition, because the industry contributes to the GDP, regulators have now become more open to providing greater support for casino companies. The economic situation of the United States also significantly impacts the industry. The recovery of the American economy resulted in considerable profits of casinos after 2010.

Key Success Factors in the Casino Industry

The key success factors that should be considered in the casino and gaming industry include innovation in products and services. The competitive rivalry in the industry is high, such that mediocre products and services would attract only a small percentage of the market. For a casino company to succeed, it needs to effectively integrate its products and services. Such innovation could attract more clients into the casinos. The attractiveness of casinos based on such innovation helps in developing loyalty among repeat customers.

Another key success factor is the ability of casino companies to continue to reach for affluent populations. Affluent people are the greatest sources of revenues for the industry. Casino companies need to target these affluent populations. However, casino companies also need to attract the vast majority of the population to ensure a buffering of the performance of their businesses. The vast majority of the population helps in ensuring stability and steady flow of revenues for casinos.

Casino Industry Attractiveness

The overall attractiveness of the casino industry for investors and entrepreneurs is based on the revenues and profitability of existing casino companies. Reports indicate that the situation of industry presents stable outlook for the next years, which means that the attractiveness of the industry remains moderately positive as it continues to recover from the recent recession. Another factor that influences the attractiveness of the casino and gaming industry is the economic situation of the United States and the other countries from which many of the visiting clients come. For instance, the relative improvement in the economic situation in the United States and other countries means that the purchasing capacities of customers are improving, thereby contributing to an increase in the demand for products and services of casinos. The moderate attractiveness of the industry for investors presents opportunities for casino companies to tap investor confidence to fuel the development of additional facilities or related businesses.

Attractiveness for customers is based on the innovative entertainment characteristics of individual casino companies. Casino companies engage in aggressive marketing that correspond to innovative entertainment programs, including magic shows and stage performances, to attract individual customers to stay at the casino hotels and spend their money on the casino floor. Casinos generally have highly aggressive marketing campaigns and rapid innovation of products and services. The attractiveness of the industry for individual customers is high. Such high industry attractiveness presents opportunities for casino companies to further develop their businesses through new products and services or the expansion of their facilities in other locations.

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