Financial Forecast - Could Global Gaming Bounce Back Stronger?

10 November 2008

A brutal mixture of recession panic, financial crises, wavering stock markets along with constant doomsday scenarios from 24-hour media outlets have many industries in a continuous nail-biting state. Like numerous analysts, Simon J. Holliday, director of H2 Gambling Capital, has had to reconfigure financial forecasts for the global gaming industry due to the unfortunate economic hand that’s been dealt to typically one of the most resilient industries.

His latest numbers show estimated growth downgrades for 2009 with some markets suffering from the downturn’s effect through 2010.

“2008 is expected to be the slowest year of growth for the industry since we started covering the industry in 1998,” Mr. Holliday told Gaming Industry Media. “2009 will be the first contraction. We expect a return to strong growth in 2010.”

Even though the numbers provided by H2 Gambling Capital illustrate land-based growth slowing in 2009 and 2010, it forecasts that the downturn will be followed by more growth in 2011 through 2012. Mr. Holliday believes by that time the global economy will return to a growing period, and the gambling industry will benefit from some deregulation, which he says is traditionally more likely during a recession.

“We live in a global economy, and the global gambling industry is no different,” Mr. Holliday said. “Impacts will not be staggered as the credit crunch and the resulting economic downturn works its way down the global economic food chain.”

The numbers show a decline in North American gross profits starting in 2008 and not recovering fully until 2012. However, European markets won’t see an effect until 2009, where there will be a slight dip in profits followed by a complete recovery in 2010. Mr. Holliday predicts that Las Vegas and other high-ticket items will be impacted more than local markets, and casinos will feel the effects more than betting shops or lotteries.

“The higher the ticket, and the less a gambling proposition is part of everyday life, the more it will be impacted,” he said.

Moreover, he foresees mature markets taking the biggest hits, especially North America. The numbers show that markets in Asia and the Middle East, Africa, Central and South America as well as Oceania won’t be as affected by the current global economic downturn. Mr. Holliday believes those that are still developing might continue to grow, but he says emerging markets will witness some deceleration.

“No markets will be completely immune as we have never bought any decoupling theories,” he added. “We continue to see new opportunities and expect there to be more as cash-strapped governments tend to be more open to deregulating gambling during downturns. Therefore, we expect the industry to come out of the downturn stronger.”