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Best of Howard Stutz

Gaming Guru

Howard Stutz

Gaming insiders not betting on end of recession

18 November 2009

LAS VEGAS, Nevada -- America's casino industry is showing slight signs of a recovery from the economic firestorm of the past 18 months, but gaming insiders believe it will be three to four years before business returns to levels seen before 2008.

During his annual Global Gaming Expo state of the gaming industry media briefing Tuesday, American Gaming Association President Frank Fahrenkopf Jr. said he discounts comments from economists who say the recession is over.

The casino industry, he said, needs more proof.

For the first three quarters of 2009, casinos nationwide produced gaming revenues of $7.94 billion, a 5.5 percent decrease from a year ago. In September, figures show that casino revenues nationwide are down 1.8 percent.

"The news is better," said Fahrenkopf, whose organization is the Washington, D.C.-based lobbying group for the casino industry. "We're seeing some signs of a recovery and some have said we hit bottom. It's still challenging."

The G2E, the gaming industry's largest annual trade show and convention, was in full swing Tuesday at the Las Vegas Convention Center when the showroom, featuring the newest slot machines and other gambling products, opened.

Attendance is expected to be down, Fahrenkopf said. Exhibitors on the showroom floor are using 258,000 square feet of space, about 20 percent less than a year ago. The American Gaming Association is co-producer of the G2E with Reed Exhibitions.

"That's actually in line with what the tradeshow industry is experiencing," Fahrenkopf said. "We lost some of the smaller exhibitors, but the large gaming companies are still here."

During his address, Fahrenkopf said there have been several positive signs the casino industry is on the road to recovery. Year-over-year gaming revenues are up in Colorado, Missouri and Indiana, thanks in part to more liberalized gaming regulations. New casinos have opened in Pennsylvania, and the state is looking at adding table games to the slot machine-only market.

"I expect the governor to sign a bill authorizing table games in the next two months," Fahrenkopf said.

But growth in Pennsylvania has come at the expense of Atlantic City, which has lost a large chunk of its customer base to the neighboring state.

Meanwhile, Ohio voted this month to approve, but gambling opponents have threatened to file lawsuits to try to overturn the election results.

The American Gaming Association surveyed subscribers to the AGA SmartBrief, a daily online gaming industry news resource, asking five questions about the state of the industry.

When asked about the industry's current business environment, 44 percent said conditions were getting somewhat better, while 31 percent thought conditions remained depressed, but were neither better nor worse. Forty-four percent thought it would be three to four years before the industry was back to where it was before the 2008 economic collapse.

"Without a doubt, the gaming industry is facing a long road to recovery," Fahrenkopf said. "However, I consider these results a sign that there is optimism within our industry that we are turning a corner."

Fahrenkopf said attention in the gaming industry is focused on what he said would be the biggest gaming industry story of 2010 -- online gambling.

In the group's survey, 39 percent of the respondents thought the legalization and regulation of Internet gaming would dominate the news. There are two bills in Congress concerning the topic.

The AGA has taken a neutral stance on Internet gaming because its members have different views. Fahrenkopf thought the issue would probably be addressed at the association's board meeting in December.