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The U.S. gaming industry’s recovery from the depths of the pandemic has been well documented as commercial casino revenue reached record levels last year, but rising inflation could dampen that recovery, especially in key markets such as Nevada and New Jersey.
Brendan Bussmann, director of government affairs with Global Market Advisors, said there has not been an immediate impact in Las Vegas from rising inflationary pressures.
But Bussmann said he is expecting to start seeing a change as more pressure is placed on consumer wallets.
“In just the last two weeks, gas prices alone are up over 25 percent,” Bussmann noted. “At some point, that starts to hit people’s pocket book and they are going to have to make some choices on their spending habits.”
Bussmann added that although “we have seen a continued rise in gas prices over the last year because of inflation and policy changes, the current geopolitical landscape only is accelerating those effects.”
“I don’t see things changing much in the short term,” he added.
Rising prices for gas, housing and food helped propel consumer inflation 7.9 percent over the past year, the largest jump since 1982.
The increase reflects the 12 months ending in February and did not even include the spike in oil and gas prices that followed Russia’s invasion of Ukraine on February 24, according to the Bureau of Labor Statistics.
“This is something we’re monitoring,” said Virginia Valentine, president of the Nevada Resort Association, which represents major Las Vegas casino-resort operators.
“We are not seeing an immediate impact,” Valentine said. “After two long years of the pandemic, visitors are eager to take a trip to Las Vegas to escape and recharge.”
As of Monday (March 14), the average price for a gallon of regular gas in the U.S. was $4.32, up from $3.48 a month ago and $2.82 a year ago, AAA reported. The current price in Nevada is $4.95 a gallon, with an average price of $5.74 in neighboring California, a key drive-in market for Las Vegas gaming operators.
Stephen Miller, director of research at the Center for Business and Economic Research at the University of Nevada, Las Vegas, said the decision to drive to Las Vegas for the weekend is a more flexible choice with people able to postpone their trip or decide to visit less frequently based on economic sentiment.
“That is, the number of drive-in visitors should fall almost immediately and continue at a lower level until some relief occurs with additional crude oil supply,” Miller said.
“The drive-in visitor volume was the first to fully recover from initial decline in the pandemic recession in March and April 2020. Thus, this will be a setback for the recovery in Southern Nevada.”
At the same time, Miller said, “higher gasoline and diesel fuel prices will affect the cost of supplies, food and so on at resort-gaming properties through higher transportation costs, which will lower the supplies coming to Las Vegas.”
“If the reduction in supply exceeds the reduction in demand, then pressure will build to raise prices to patrons and visitors through higher prices. If the fall in demand exceeds the fall in supply, then prices could conceivably fall,” he added.
In the short term, rising prices have not affected travel to destination gaming markets such as Las Vegas or Atlantic City, but analysts are monitoring the potential downside as consumers set aside more of their discretionary income to fill their cars with gas and pay for everyday essentials, including groceries.
Last year, U.S. commercial casinos posted traditional gaming revenues of $45.05bn, compared with $26.9bn in 2020, according to VIXIO GamblingCompliance research. Those numbers only cover traditional land-based gaming and do not include sports betting and internet gaming.
The Las Vegas Strip accounted for $6.92bn of total revenue followed by Atlantic City with $2.55bn and the Baltimore-Washington market comprising casino properties in Maryland and West Virginia at $1.96bn.
David Forman, senior director of research with the American Gaming Association, said revenue numbers continued to look very strong in January and into February. He said there is no indication yet of a slow down from rising prices.
“It’s too early,” Forman said. “If it were to slow, it would take a little bit more time.”
In New Jersey, higher gas prices are expected to affect travel decisions, but it may be in a way that is favorable for Atlantic City because of the proximity of much of the city's customer base to the destination.
“Casino executives have reported that 65 percent to 70 percent of their customers come from Pennsylvania and New Jersey,” said Jane Bokunewicz, faculty director of the Lloyd Levenson Institute of Gaming, Hospitality and Tourism at Stockton University School of Business.
“Short trips may be more appealing to travelers because of rising gas prices so more people may choose Atlantic City over destinations further away like New England or the Carolinas,” Bokunewicz said.
“Inflation in general will likely impact spending once visitors arrive to the destination because the purchasing power of their travel budgets will be reduced.”
In terms of internet gaming, Bokunewicz said it has helped the city’s nine casinos during the pandemic and could continue to be a factor if people put off traveling, but with the pandemic transitioning to an endemic virus and more restrictions being lifted people appear anxious to enjoy in-person experiences.
“Internet bettors must be located in New Jersey in order to wager online at Atlantic City casinos,” she added. “Since Pennsylvania has legalized online gambling, if visitors from Pennsylvania choose to stay home, the gambling revenue would most likely be realized in Pennsylvania.”
