Annual Top Trends in Gaming
Integrity. Independence. Insight.
Since 2005, Spectrum Gaming Group has been identifying the most significant trends gaming for the coming year. We work with our sister companies, Spectrum Asia, based in Bangkok, and Spectrum Gaming Capital, based in New York City, to track and understand these trends throughout the year for the benefit of our work with private- and public-sector clients.
The following lists our top 10 trends for 2022, in alphabetical order. As always, the list is not exhaustive but simply focuses on what we see as the most significant trends. The list was compiled by experts throughout the Spectrum Group of Companies, as well as by Complianza, our Sweden-based strategic partner.
1. “Responsible gaming” will advance its metamorphosis into “safer gaming,” which reflects far more than simply a change in labeling. This underscores a subtle shift in which operators and regulators are being prodded to take proactive steps to address and minimize problem gambling, underage gambling and related issues. This re-labeling also recognizes that as new technologies and new forms of wagering become widespread, efforts to address problem gambling must similarly evolve, and also sends out a message that gambling can be conducted safely within certain parameters.
2. A prominent and permanent impact of the global pandemic will be the continual, irreversible growth of cashless wagering, which will lead to the additional impacts of an increase in rated gaming play and overall revenue growth (due to enhanced convenience) while also providing opportunities to more effectively track micro and macro gaming spending patterns and trends.
3. Esports will increasingly integrate with both destination and regional casinos, and will create new opportunities for both commercial and tribal gaming operators. The number of esports events taking place at casinos and greater integration of esports wagering within the ecosystem of mainstream sports wagering will take place. Equipped with more data and via trial and error, casino operators, digital gaming companies and bookmakers will have increased visibility into the profit potential of esports and all the ways it can impact the bottom line, paving the way for mainstream acceptance.
4. European regulators will advance toward tougher regulation and a tighter operating environment, thus squeezing operating margins and prompting further consolidation across vendors, operators and affiliates, as well as greater automation of operations. While more European markets will open up to igaming, suppliers and operators focus will continue to increase their focus on entry and expansion in the US market. The combination of fewer marketing options and high tax rates will also have the unintended consequence of making the black market more attractive to European players.
5. In Australia, regulatory agencies in New South Wales, Victoria and Western Australia will face tremendous pressure to reform to effectively regulate the gaming industry. The Crown hearings in New South Wales and Victoria exposed significant violations of AML laws/regulations, compliance related matters and exposed failures in corporate governance. The hearings also showed that the regulatory process failed to maintain the strong integrity standards that are the foundation of the regulated gaming industry
6. In Japan, the collapse of plans for a potential integrated resort in Yokohama is not expected to be the only disappointment, especially since strongly pro-IR Prime Minister Yoshihide Suga has recently stepped down. Despite that, we expect the RFP process to continue.
7. Policymakers across North America will continue to pivot to authorizing igaming and ilottery as the most important emerging verticals, likely eclipsing sports betting, which has already enjoyed an extraordinary expansion since 2018. This change will be fueled by the recognition that igaming and ilottery are more profitable than sports betting, as well as by the recognition that so many states have already authorized sports betting. At the same time, sports-betting providers will continue to add casino offerings to their portfolio.
8. The global pandemic is prompting both existing and potential gaming markets throughout Asia to revise their gaming policies. The Philippines is expected to expand casinos to Boracay in seeking extra tax revenues, while Thailand may finally consider establishing integrated resorts to bolster its economy.
9. The political and legal battles between regulated and unregulated gaming, including skill-based slot machines, will expand to more states as the battle gains a higher public profile. The stakes will grow increasingly high, particularly as the installed base of unregulated games grows. States will also face legislative standoffs as to whether such unregulated games should be converted to licensed, taxed games as VLTs or through other regulated means. That, in itself, will not address – and could exacerbate – the challenge that such machines create for existing legal, regulated forms of gaming.
10. The tender process for renewal of the Macau gaming concessions in 2022 will likely be delayed due to the pandemic. Given recent central government pronouncements about Macau’s role in the development of Hengqin Island, investment in Macau and Hengqin Island infrastructure will be a requirement of obtaining a concession. Moreover, Macau will not return to pre-pandemic revenue levels until 2023 and VIP gaming revenues will continue to fall. Macau regulators are expected to become more aggressive to enforce Macau gaming laws and regulations.
As it has been doing annually since 2005, Spectrum Gaming Group released its annual list of the top trends in gaming – the most significant issues that regulators, operators and suppliers need to consider as they make plans for the coming year. Spectrum has long focused on the future of gaming. Spectrum has completed engagements in 40 US states and territories and in 48 countries on six continents, with clients that include 22 US state and territory governments, six national governments, 22 Native American entities, numerous gaming companies (national and international) of all sizes, suppliers, lotteries, financial institutions, developers, and other gaming-related entities.
This list (ordered alphabetically), with input from our global experts on the ground around the world, represents both the opportunities and challenges that will be most impactful to revenue, profitability and public policy.
- Efforts to authorize integrated resorts in Japan will continue, even as Japan is dealing with a change of government and a global pandemic. The government is expected to take affirmative efforts to advance the complex process surrounding the issuance of IR licenses; if it does not, it will risk further delays and the loss of interest in Japan by many of the major gaming companies.
- More North American lotteries are contemplating and developing digital offerings, and that will lead to a snowballing effect that will force other lotteries to develop their own offerings. This will create significant challenges in multiple areas as ilottery offerings could compete against igaming offerings, creating potential further conflict and competition between lotteries and traditional gaming operators.
- On the heels of widespread adoption of traditional sports wagering across the United State, esports wagering will emerge as an important subset that creates a new intersection between the casino and esports industries. This will, in turn, create demand for licensing requirements for esports providers, as well as the need for governing bodies to oversee esports events. Related to that, the demand for peer-to-peer wagering within esports will also create the need for regulatory oversight.
- Retail gaming operators that have revised their business models during the COVID-19 pandemic have learned that they can generate significant revenue with lower labor costs by focusing more of their marketing efforts on more valuable consumers, which makes it less likely that those operators will revert to pre-pandemic staffing levels in a post-pandemic world. Operators that had relied heavily on promotional spending, buffets (many of which may remain closed even in the post-pandemic world) and other traditional marketing tools will be more discriminating. Related to that, retail gaming facilities will market themselves as “safer” zones for leisure activities, thus gaining an edge over other leisure offerings.
- The New South Wales Gaming & Liquor Authority Crown Inquiry has raised serious and pervasive concerns relating to anti-money-laundering, casino due diligence, junket controls, corporate governance and overall casino compliance related to the Crown casinos in Melbourne and Perth, which will result an enhanced emphasis on casino compliance and AML issues throughout Australia and Asia and more robust governmental regulation of VIP play.
- The ongoing COVID-19 pandemic creates opportunities for technology providers to offer “digital first” gaming offerings as jurisdictions around the world forego the more traditional route of starting with a retail offering and then migrating to digital. Related to that, app developers will create and launch bespoke loyalty and multi-channel programs that will leverage these digital offerings. These apps are more likely to resonate well with millennials.
- The pandemic will advance efforts to authorize and encourage new forms of cashless wagering at retail casinos. Cashless wagering has become a priority for operators, particularly in the United States. Lawmakers and regulators are likely to be more amenable to arguments that payment modernization is safe, and allows for more effective anti-money-laundering and know-your-customer policies.
- The world’s largest gaming destinations will continue to feel the effects of COVID-19 throughout the coming year. Travel-related impediments – combined with a possibly lengthy recession brought on by small business closures throughout the United States – will slow the economic recovery in Las Vegas. Meanwhile, the Macau gaming industry will face a slow but steady increase in both visitation and gross gaming revenues as it transitions to more of a destination market, catering to visitors to Macau primarily consisting of the mass and premium mass markets segments. Government-imposed restrictions on travel for Chinese nationals will create repercussions throughout Asian gaming, including severely restricting the ability of junket operators outside Macau to function.
- US states that have developed longstanding compacts with tribal operators will feel increased pressure to reopen negotiations to address issues such as digital sports betting and igaming that were not part of existing compacts that were negotiated before such offerings existed. In the absence of revised compacts, concepts such as geographic exclusivity for tribal operators will become increasingly difficult to enforce.
- US states will continue to look for new gaming revenue, and that need is significantly enhanced by the ongoing pandemic that has severely crimped state finances. The new offerings will include the potential expansion of digital offerings in sports betting, igaming and esports, as well as the authorization of distributed gaming, including skill-based games.
The Spectrum Group of Companies are:
- In Japan, 2020 will be the “Year of the Prefecture” in that prefectures will be fully involved in evaluating whether or not they will compete for one of three authorized integrated resorts (IRs). Prefectures will establish working groups and advisory councils to assist in this process and by the end of next year one or more prefectures will have selected their IR operator partner. Meanwhile, the National Government will name the Commissioners to the Casino Regulatory Commission and the regulatory agency will become operative by issuing a series of regulatory guidelines.
- The internationalization of gaming brands will continue, with Hard Rock International, Melco Resorts & Entertainment, and MGM Resorts International leading the pack. More jurisdictions in Europe, Africa, Latin America and elsewhere will seek out such brands as they continue to look to the development of IRs as economic generators.
- While igaming has been active for more than five years in the United States, more states will expand into this area in 2020. Digital sports betting will also continue its post-PASPA expansion. Those simultaneous trends could lead to more conflicts between lotteries and casino operators, as both industries look to igaming and sports betting as the means to attract younger demographics. Related to that, the expansion of sports betting into non-traditional outlets such as stadiums and sports bars will fuel the use of self-service betting terminals (SSBTs), leading to the potential installation of thousands of SSBTs in multiple states.
- Electronic gaming devices characterized as “skill-based” games that are not regulated will become more pervasive throughout the United States, garnering support from legislators seeking additional revenue as well as from retailers attracted by the prospect of additional revenue and foot traffic. This trend is also generating significant pushback from regulated offerings, particularly lottery games, based on concerns that such games cannibalize other forms of gaming.
- As mergers and acquisitions among gaming companies continue, more states will find themselves in a position in which their licensees operate facilities in nearby states. This will put pressure on states to develop more investment-friendly regulatory and tax systems to keep capital, jobs and revenue from flowing to more appealing jurisdictions.
- The Asia-Pacific Group, the organization affiliated with the Financial Action Task Force in Paris overseeing anti-money-laundering issues worldwide, will continue to push countries in Southeast Asia to increase their regulation of gaming especially in the areas of Licensing (determining beneficial ownership of casinos and online casinos) and anti-money-laundering.
- Crypto-based betting and gaming will continue to gain momentum. Many countries are seeking to regulate this activity, thus adding legitimacy and stability to what had been a highly fluctuating, volatile currency market. Similarly, the gaming industry’s use of artificial intelligence and virtual reality technologies will expand, with a focus on enhancing the customer experience.
- Handle from betting on team-based leagues and players in competitive esports gaming will grow in international regulated markets. In the US market, esports betting will remain minimal as the domestic gaming industry continues to focus on traditional sports betting, and will not devote significant resources to esports. However, regional gaming operators will increasingly view esports as an amenity, fueled by the increasing frequency of esports-related events in gaming hubs such as Las Vegas and Atlantic City.
- In Europe, gambling advertising will come under increasing pressure and scrutiny in the face of regulatory and pubic concerns that some messages do not sufficiently promote responsible gaming policies and practices, as required by law. At the same time, regulators throughout Europe and especially in the UK have signalled an increasing willingness to levy more fines, with greater penalties, against their licensees in a broad-based effort to ensure full compliance.
- Separating real estate from operations with real estate investment trust (REIT) ownership will become a more commonplace activity. At least one more REIT will enter the gaming field to provide more competition to leaders GLPI, MGP and VICI. Traditional, non-gaming real estate funds such as Blackstone will continue to buy well located but underperforming properties.
- An increasing number of jurisdictions around the world will seek to authorize integrated resorts – largely through a competitive bidding process – as the most effective means of leveraging gaming as an economic tool to help achieve their policy goals. Related to that, Japan will appoint a gaming oversight board and promulgate IR regulations, and prefectures will position themselves to attract and be selected for IR sites by the national government.
- In Asia, the online gaming industry – including the streaming of casino games to China from the Philippines and Cambodia – will begin to face scrutiny from China and from international regulators. Concurrently, we expect changes to the Asian junket industry as some junkets position themselves as casino operators and others go out of business as the reliance on junkets diminishes in Macau and Macau continues to evolve as a mass and premium-mass market.
- Sports-betting legislation will continue to proliferate in the United States and gain momentum, as we expect at least nine state governments and lotteries to begin the process of authorizing legal sports betting, spurred by various forces, including the fiscal needs of states. Concurrently, the relatively slow acceptance and expansion of online gaming in the US will speed up in 2019, fueled in part by the proliferation of sports betting in a digital format, as well as by the need for legislatures to plug budget deficits.
- The interest of lotteries to expand into both igaming and sports betting will grow significantly, creating competitive tensions in jurisdictions that have both lotteries and either tribal or commercial casinos, requiring legislatures to address such conflicts through new policies that provide limits as to the online channels and offerings that lotteries and casinos can pursue.
- Private companies and organizations that have not previously been involved in any form of legal gaming, such as sports bars and restaurants, will seek to offer sports and/or online wagering, largely choosing to become lottery retailers, as they follow the lead of lotteries into this burgeoning field. More states will respond to fiscal pressures by expanding their gaming offerings through additional licenses, lottery expansions, retail gaming and other means, prompting existing land-based casino licensees to push back, as they view such expansions as detrimental to their operations and to the value of their existing licenses.
- Lotteries that seek to offer mobile and online sports betting will be pressured to adopt regulatory policies that have to date largely been limited to gaming operators, including more robust, comprehensive licensing of retailers, as well as rules governing areas ranging from internal-control submissions to responsible-gaming policies and other areas.
- States and tribal governments that have existing compacts that did not contemplate online or sports betting will face increasing pressure to overcome their reluctance to open compact negotiations to address these areas.
- European and Asian B2B sports-betting and online gaming providers will seek entry points into the US market, with many facing challenges due to previous online ventures into gray and black markets. This will prompt legislators and regulators to develop clear, uniform definitions as to what constitutes a gray or black market. Concurrently, as online and sports betting expand in the US, regulators and legislators will be pressed to restrict and regulate advertising and related rules, following similar plans under consideration by some major European jurisdictions — including Italy and the United Kingdom.
- More gaming and pari-mutuel operators, from large integrated resorts to small race tracks, will seek esports offerings, in part to better leverage under-utilized space, and in part, to address an aging slot demographic. Offerings will range from offering esports as an amenity to ultimately offering esports as a wagering opportunity.
- M&A activity is likely to ramp up in US casino operations, as online gaming consolidation in general will continue, as sports book/online platforms and operators will be on the radar for US operators and suppliers. Related to that, we expect European players to be hunting for US acquisitions as well.
- Through legislative and/or judicial action, more states and tribes across the U.S. will look for ways to legalize sports betting, as well as iGaming, while political struggles will ensue between those who seek federal oversight of sports betting versus those who seek to keep all forms of gaming within the purview of state and tribal governments.
- After a decade of debate and missed opportunity, casino gaming in Japan is expected to be legalized in 2018. A battle is then anticipated over the following one to two years between international operators and domestic corporations for one of the three expected licenses.
- As forecast by Spectrum last year, Macau has generated much stronger GGR across the board ($16.7 billion, or 15% growth YOY through the first half of 2017). However, as the crackdown on corruption in China continues into its sixth year and new property openings are scheduled for 2018, there are still challenges ahead for the market.
- Gaming operators will focus on legalization opportunities in the critical jurisdiction of Brazil, as up to 35 casinos could be authorized under new legislation.
- Skill-based gaming will ramp up, with new product offerings from both the traditional equipment suppliers and skill-based leaders Gamblit and GameCo.
- U.S. states that already legalized casinos will attempt various means to plug budget deficits, including the addition of retail gaming, i.e., electronic gaming devices in liquor-licensed establishments and truck stops.
- Online gaming in Europe will come under greater compliance pressure, leading to further consolidation of operation and supply, while affiliate marketing will endure greater scrutiny.
- A second major wave of new property openings (from small-scale to full integrated resorts) is expected in Asia (most notably Macau, South Korea, Philippines, Cambodia and Vietnam) in 2018. Spectrum does not foresee that the broader regional gaming market will become oversaturated as a result of these changes.
- Emerging markets in Africa, Asia and parts of Europe will look to the integrated-resort model as a means of growing their tourism industries and generating tax revenue.
- With its emergence from bankruptcy, Caesars Entertainment will become a renewed force in global gaming expansion and consolidation.
- Significant expansion opportunities are expected to arise as legislation is crafted in Brazil, India and Japan.
- Lotteries and casinos will both seek online opportunities — sometimes with competing efforts in the same states and countries, creating competitive challenges that legislators and regulators must sort out.
- Casinos will leverage their under-utilized square footage to create special attractions for Millennials, including lounges, entertainment, and skill-based gaming options.
- States will attempt to overcome stagnating gaming receipts by proposing new forms of, or locations for, gaming such as retail gaming (i.e., a limited number of electronic gaming devices in liquor-licensed establishments), satellite casinos, and slots at airports.
- Proponents of legalized sports betting — including the American Gaming Association, state associations and individual operators — will push their agenda more forcefully as state budgets continue to be strained, and as major sports leagues seek to capture a substantial new revenue stream.
- Macau will again become a growth story as gross gaming revenues continue to climb and new integrated resorts open. The mass market will dominate and VIP play will decline to less than 50 percent of GGR for the first time since Macau reverted back to China.
- The trend toward private management and, in some instances, private ownership of lotteries will accelerate in various countries and US states.
- State legislatures will face pressure to reduce gaming tax rates, as well as to amend or streamline regulations, in response to increasing competition and the potential for saturation in various markets.
- More casinos in Las Vegas and Atlantic City will stage eSports events and contests, while Atlantic City will attempt to reposition itself as an eSports hub.
- The South will be a focus of casino opportunities, as the potential for legalization and expansion is debated in Alabama, Florida, Georgia and Louisiana.
- States weighing legalization, expansion or current performance of 1. With the exception of the Las Vegas market, casino expansion occurring in the Northeast US demonstrates that bricks-and-mortar casinos parallel the gravity-effect of the retail industry in that convenience trumps all else with respect to demand and visitation to regional casinos, further saturating that market. As revenues stagnate or decline, gaming operators in various states will seek tax relief and other remedies.
- The legal and regulatory issues involving daily fantasy sports will continue to be prominent in statehouses across the country while the DFS industry moves to implement a self-regulation model in response to challenges to its legality.
- State lotteries, seeking grow revenues in the crowded gambling space, will push to sell their games online ï¿½ and develop games specifically suited for online sales and play.
- Atlantic City which faces the likelihood of a 10th straight year of declining gaming revenue will have more clarity by year end, as the future of Revel, Showboat and Drumpf Taj Mahal properties become known and the State of New Jersey tries again to authorize a vote in casinos in the northern part of the state.
- More states, seeking to recover or enhance gambling receipts, will follow the lead of Illinois by considering retail gaming, which is the installation of a limited number of electronic gaming devices in authorized establishments.
- Junkets and VIP room operators in Macau will be under increased revenue pressure until they change their business model and comply with Chinese laws and procedures for high-value patron play. With four new properties expected to open in 2016 (Parisian, Wynn, MGM, Louis XIII), all eyes will be focused on whether this new supply can grow the Macau market ï¿½ with revenues expected to stabilize at US$26 billion ï¿½ or be another factor contributing to its constraint.
- Gaming operators will begin to focus their attention on how to attract millennials as an emerging generation of consumers.
- The US Treasury Financial Crimes Enforcement Network (FinCEN), Financial Intelligence Units and international law enforcement will continue to aggressively combat money laundering in casinos.
- Financial institutions will continue to monitor their casino clients to ensure full compliance with agreements made with banking regulators in the United States and Europe.
- Gaming expansion will continue throughout Australia and Southeast Asia, but it remains unlikely that Japan will legalize casino gaming in 2016.
- States weighing legalization, expansion or current performance of casinos will have to deal with the impacts of market saturation within and beyond their borders. The national pie will grow slowly, but many markets will continue to be flat or declining.
- Asia will continue to be the focal point in global gaming, as governments and developers armed with nine- and ten-figure checks seek to tap the lucrative Asian market, from Vladivostok to Saipan to Cambodia.
- Las Vegas will continue to show strength, as it benefits from increasing international visitation, from added non-gaming major attractions such as the High Roller, and from the anticipation under-development major projects such as Gentingï¿½s Resorts World Las Vegas and the MGM-AEG arena.
- Atlantic City will move toward stability with fewer casino operators and a renewed focus on non-gaming resort development, assisted by state aid. The city will continue to be displayed as an example of the dangers of dependency on gambling revenues.
- Macau will continue to be challenged in the near term due to the Chinese crackdown on corruption, and in the longer term due to increased competition in Southeast Asia.
- There will be continued expansion efforts in the Northeast US, with movement closer to population centers that will result in more market share shift than new growth, continuing to pressure older markets such as Atlantic City, Delaware and Connecticut.
- Flat and declining growth in regional markets will continue to be a driver of M&A activity, spurred also by activist investors.
- US and international law enforcement agencies will continue to enhance compliance and enforcement efforts regarding money laundering in financial institutions, casinos in particular.
- Tribal gaming will continue to expand, innovate, and increasingly compete on an equal footing with commercial casinos while continuing to push the envelope with off-reservation casinos and Internet wagering.
- The convergence of gaming will continue, with casinos, lotteries, i-gaming, social games, pari-mutuel, and bingo offering products that cross into the others traditional space.