Casino Industry Strategy Case Study

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Assignment 1 - the Casino Industry

1. Introduction - current situation overview

The three most common forms of casino gambling in the USA are the land-based, the river-boat and the Native American gambling. During the year 2009, the commercial casino industry used to employ about 375000 people earning around $13 billion in wages, making it one of the biggest industries in the USA. Commercial casinos are a major part of the actual entertainment landscape. For proof, ¼ of the U.S. adult population spends money at a casino at least once a year. Casinos are one of the main contributors to the economy of the USA contributing to this with total revenue around $32.5 billion in 2009. They are very important to the states in which they are settled thankful the employment they offer and the numerous business opportunities for local producers. Casinos provide more than $5.6 billion in direct gaming tax revenues, which of course help local and national economies. Moreover casinos are a way to increase diversity as a business way of doing: they use to employ more minorities than the national U.S. In the same way they also bought more than $631 million in products/services from various sellers. Casinos and racetrack casinos (Racinos) create an entire economy based on entertainment and gambling and this for 20 states in the USA. With the subprime and the resulting global crisis, the revenue in the sector went down to 4.7% in 2008, with a continuous tendency for year 2009. Indeed, the gross gaming revenues compared to 2007 have kept decreasing since February 2008. Consequently the monthly revenue decreases became much more important as the crisis in the USA and the rest of the world had negative effects. The gaming industry suffers from the combined two major crises which occurred these previous years, the precipitous fall in consumer spending and of course the national credit crunch. With the apparition of the recession, American consumers who go to casinos have begun to be careful regarding the money spent. Their trips are shorter and they now take care of not spending too much on other entertainment places like shows or restaurants. The loss of money during the crisis has laid to difficulties to find funds for the on-doing projects, so that some have already been delayed and some others cancelled. The American casino industry has had to make difficult choices regarding their expansion and their current situation, and the costs hunt has already begun. The global situation of America’s economy for 2009 portends another extremely difficult year for the Casino Industry.

2. Summary of macro environment analysis

The macro-environment analysis will follow the principles of the PEST theory.

Casinos in the USA are deeply suffering from the economic crisis. This is translated by an average decrease of 5,7% in 2009, following a 4,8% in 2008. Recession is the main cause of the problem for American casinos but another factor is the competition due to gambling websites in casino games, poker or sports wagering. Some companies have realized to take market shares from the classic casinos during the crisis. The US government is by the way currently thinking of authorizing and legalizing this form of gambling in the territory. Recession has also an impact on the gamers behaviors, as they now have less money to spend in casinos and entertainment. Las Vegas casinos like the Bellagio, Venetian or the Wynn Resort, have lost nearly 7 billion at the tax closure in June 2009.

We can see a major decrease in consumer spending in the USA because of the crisis. Several consequences appear: •A 4,7% decrease in the general casinos gross gaming revenues •60% of gamblers stopped spending money as they use to do it before •61% of US citizens think that they will try to spend less when the economy will be better than they did before the crisis. •Lack of Investment Money poses bigger problems than decrease in consumer...
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