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Casinos traditionally are recession-proof, says analyst

State’s gaming industry impacted by economy or not?

The economy affects casinos very strongly. Casinos are somewhat recession proof.

Those are two opinions by different gaming experts. And while the statements might seem contradictory, there is evidence to support both conclusions.

Chuck Patton, director of the Mississippi Gaming Commission, is one of those of the opinion that the current economic downturn is not helping state casinos.

“We’re not having the growth that we are used to,” Patton said. “But I expect a return to the double-digit growth we are accustomed to when the economic downturn is over. I think we are poised to do well as soon as the economy turns around, which is only a matter of time,” Patton said.

Jay Osman, a Biloxi casino analyst, said traditionally the gaming industry is somewhat immune to recession-proof.

“My judgment is the gaming industry has been traditionally recession proof for two reasons,” Osman said. “One, people tend to travel closer to home than oversees and abroad in a slowing economy because, obviously, it is cheaper. Two, during the last recession in the 1990-1992 period, some states that came under pressure because of job losses resorted to gaming to offset the loss of revenues. That also helped the industry because it helped gaming proliferate.”

Osman points out that prior to 1990, only two states — Nevada and New Jersey — had legalized gaming. Now it is legal in many states.

A large gaming summit held on the Coast recently attracted about 5,000 participants. Beverly Martin, executive director of the Gulf Coast Gaming Association, said that most of the analysts who attended the summit said the gaming industry is no different from the rest of the economy.

“We may be slower to feel the economic problems, but we will feel them,” Martin said. “We’re at a plateau and probably will be for the next couple of years. The slowing economy has a direct impact on tourists and how much they can spend on entertainment and travel. Pretty much anything that affects the U.S. economy is going to affect tourist businesses. That is discretionary money, and the first thing they will cut down on.”

Martin said that while gaming revenues are holding steady, the bottom line of casinos is being hurt because they are spending more money on marketing in order to retain current market shares.

This is the first time since casinos were legalized in Mississippi that the gaming industry has faced an economic slowdown.

“For the first nine years into the gaming industry in the state of Mississippi we have been accustomed to 10% to 12% to 15% growth rates,” says Webster Franklin, executive director, Tunica County Convention and Visitors Bureau. “With any new industry you would expect it to expand. Now for the first time we are beginning to see the market not only in Tunica but on the Gulf Coast mature somewhat, and it is going to be that much more difficult to continue marketing to the locals in the 150-mile radius.”

Franklin said the upside to the picture for the Tunica area, one of the state’s most economically depressed areas prior to gaming, is the growth that has accompanied the casinos gives the area much more than just gaming. There are two golf course, 6,300 hotels rooms, a factory outlet mall and big name entertainers coming into the area on a near-weekly basis.

“The growth of the gaming industry has been the catalyst for our area to develop those other secondary leisure activities that can now allow us to go market our area in the 300- to 500-mile radius to attract new customers,” Franklin said. “Not only do we have gaming products that are one of the hottest entertainment trends in the U.S., but we also have the other amenities that will attract visitors to stay longer and come from farther away. So I think when you look at the growth potential of the market in Tunica, there is going to have to be a concerted effort by the Tunica properties to begin marketing not only individual properties, but collectively outside the 150-mile radius to draw customers in. I think that is the next logical step in the growth of the market.”

Chuck Patton agrees about the importance of developing shore-side amenities associated with casinos to make Mississippi more of a destination resort area.

“Mississippi is not really known throughout the country as a resort area,” Patton said. “We need more time to develop other attractions, and we need to have more people come to Mississippi to see what we have. Then we will see greater growth and return business.”

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.


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