Nathan Associates Principal Economist Alan P. Meister, Ph.D., and educational affiliates Clyde W. Barrow, Ph.D., and David R. Borges, M.P.A. announced the publication of a groundbreaking article in Gaming Law Review & Economics, that's the primary systematic analysis of market saturation within the U.S. casino gaming industry.

The authors note that although the united states.. economy remains on a slow growth trajectory, casino gaming supply has seen a rapid and ongoing expansion because the beginning of the good Recession (2007-2009). Nevertheless, in lots of local and regional markets, gaming revenue was flat or declining and, in some well publicized cases, corresponding to Atlantic City, New Jersey and Tunica, Mississippi, casinos have filed for bankruptcy or ceased operations completely. In other cases, existing casinos have seen precipitous drops in gaming revenue – Connecticut and Illinois, as an example – as new gaming facilities seem to “cannibalize” revenues from competing casinos.

Consequently, the authors point out, state lawmakers, tribal governments, regulators, and gaming executives have increasingly shifted their attention from the politics of gaming expansion to the issues of regional competition, market saturation, and cannibalization.  The question of “market saturation” has become a salient point of public policy debate in lots of state legislatures and an issue that may be now frequently raised within the media in accordance with proposals for extra gaming expansion.  Nevertheless, while it's widely agreed within the industry that some local and regional markets are saturated, no person has previously attempted to define or measure saturation at the basis of clear and objective metrics. The authors develop several metrics for measuring saturation in multiple markets often deemed to be saturated, including:

• Gaming Machines per 1,000 Adults (21+);

• Gaming Machines per $1 Billion in Disposable Personal Income (DPI);

• Win per Machine per Day;

• Gross Gaming Revenue (GGR) per Capita (age 21+); and

• Gross Gaming Revenue (GGR) as a Ratio of Disposable Personal Income (DPI).

In the article, Dr. Meister, Dr. Barrow, and Mr. Borges identify and compare these metrics for measuring market saturation, apply them to markets which were widely acknowledged as being saturated, and propose them as benchmarks for evaluating saturation in other markets.

The markets studied indicate that market saturation is also reached at nearly 6 Gaming Machines per 1,000 Adults and is almost certainly reached at 7 Gaming Machines per 1,000 Adults. Similarly, when the researchers examined the choice of Gaming Machines per $1 Billion of DPI, they concluded that market saturation occurs at about 100. Similarly, the authors found that a Win per Machine per Day of around $200 and lower signals market saturation. Taking a look at GGR per Capita, the authors conclude that $500 GGR per Capita is a great indicator of market saturation. In relation to GGR as a Ratio of DPI, the authors conclude that a ratio of 0.8% or higher seems to suggest market saturation.

In looking across all five market saturation metrics, the authors found it noteworthy that the indications generally appear to corroborate one another with the Tunica/Lula market showing the top level of saturation a number of the selected markets in relation to all five market saturation metrics.  The St. Louis market was the second one most saturated market on four of the five metrics (third most saturated on one metric).  The Kansas City market was the third most saturated market on four of 5 metrics (second most saturated on one metric).  And Atlantic City was the least saturated on all five metrics after what seems to be a market recalibration following four casino closures. Used together, the authors conclude that the five market saturation metrics could have a better predictive capability in determining even if (a) a gaming market is saturated and (b) if gaming expansion specifically jurisdictions will lead to a saturated market.

For example, the authors found that the Chicagoland market, which some have identified as a saturated market, is definitely less saturated than the benchmark markets (including Atlantic City) on all five metrics, and significantly below absolutely the levels indicating market saturation. The Chicagoland market has 2.5 Machines per 1,000 Adults in comparison to the 5.8 in St. Louis, 5.9 in Kansas City, and 7.3 in Tunica/Lula. Chicagoland had 41.3 Machines per $1 billion of DPI compared the nearly 100 in St. Louis and Kansas City, and over 150 in Tunica/Lula.  Similarly, Chicagoland’s Win per Machine per Day of $292 was certainly the benchmark markets and the $200 threshold.  Chicagoland’s $338 in GGR per capita is definitely below the $500 plus in Tunica/Lula, St. Louis, and Kansas City.  The same holds true for its GGR as a ratio of DPI, that's 0.56%, well below the 0.8% plus in Tunica/Lula, St. Louis, and Kansas City. 

The article, "An Empirical Framework for Assessing Market Saturation within the U.S. Casino Industry," appears within the latest issue of Gaming Law Review and Economics (June 2016, Vol. 20, Issue 5), a number one peer-reviewed journal addressing legal, regulatory, and economic issues within the industry.

To obtain a duplicate of the article, visit the Gaming Law Review & Economics’ website or contact Dr. Meister.

Over the past 15 years, Dr. Meister has conducted extensive scholarly and consulting research and analysis of the gaming industry, including Indian gaming, commercial casinos, racinos, card rooms, and online gaming. Dr. Barrow is a Professor of Public Policy and Chair of the dep. of Political Science on the University of Texas Rio Grande Valley. Mr. Borges is Director of analysis & Administration for the general public Policy Center on the University of Massachusetts, Dartmouth.

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