Casino Lifecycles – What’s a Grown-Up Casino to do?

A question that comes up often for brick-and-mortar operators is “where can we invest to grow gaming revenue?”

We studied 126 commercial casinos in several states, and the answer is as usual…it depends. The chart depicts the average and median path of revenues for those 126 casinos and a pattern emerges. Casinos reach maturity at about 13 years (making me recall my own Bar mitzvah). From the 13th through the 33rd year of operations, growth as represented by the index of revenues compared to the first full calendar year of operations, is choppy but relatively flat.

As with any set of data, making inference to a particular casino can be dicey, especially if the data you are relying on has significant variability and that is partially the case here. The average was dragged upward either by casinos that underwent transformative redevelopment, or in some cases, casinos that were impacted positively by economic factors such as post COVID stimulus. Also missing from the analysis are casinos that closed.

The point however is that this looks like a typical product lifecycle curve: introduction, growth, maturity, renewal and decline. Many casinos today are nearing the end of their mature phase and possibly their useful life. The question is whether significant capital investment is warranted. As usual, it’s market and casino dependent but it’s a fair question. Through our analysis, we have identified two specific segments that should be particularly concerned.

• Aging tribal casinos faced with new competition – do you milk the cow or invest?

• Aging OPCO casinos with annual rent escalators – how do you grow revenues to meet increasing underling rent expense?

  Casinos are not alone. Mall, stadium and meeting and exhibition operators are all facing similar issues and questions, and several are facing the wrecking ball and redevelopment. Is that a legitimate option for casino operators? Unlikely, but an important discussion.