Expert answer:Gambling Industry SWOT and Strategy Evaluation Pap
Answer & Explanation:SWOT and Strategy Evaluation Paper
Assignment
Requirements:
Read the industry profile overview, including the website links, on the page. (Included in Attachments Section)Complete a SWOT analysis for the gambling industry. The SWOT analysis allows a business to understand how a competitor is positioned in the environment by assessing its strengths, weaknesses, opportunities, and threats. An understanding of a competitor’s position can be a key for a business to determine where funding and resources should be allotted to create new products or services.Use information in the industry profile overview and other scholarly sources as needed. The SWOT analysis should include each of the following:StrengthsWeaknessesOpportunitiesThreatsWrite a 1,050- to 1,400-word paper, including the following attributes:SWOT analysis, including a SWOT chartIdentify opportunities (either product or service) that could improve the customer experience.Strategy evaluationDefine strategic tasks.Assess the industry’s capabilities.Identify the barriers to strategy implementation.A response to the following:Based on the SWOT analysis and strategy evaluation, what are some creative actions the industry can pursue to include innovation as a component of their strategy?Format your paper consistent with APA guidelines.
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Attachments:Gambling Industry Profile Overview.docx SWOT and Strategy Evaluation Paper Grading Guide.doc
gambling_industry_profile_overview.docx
swot_and_strategy_evaluation_paper_grading_guide.doc
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Gambling Industry
Industry Overview
Companies in this industry operate gambling facilities or offer gaming activities. Major companies include US-based
casino operators Caesars Entertainment, Las Vegas Sands, and MGM Resorts, as well as Galaxy Entertainment and
SJM Holdings (Hong Kong), Tatts Group (Australia), and UK-based IGT and William Hill.
Worldwide, gambling generates more than $450 billion in annual revenue, according to Global Betting & Gaming
Consultants. Major casino gaming markets outside the US include Macau, Singapore, Australia, and South Korea. As
gambling continues to expand in new markets, particularly in Asia, global industry revenue is expected to exceed
$525 billion by 2019.
The US gambling industry includes about 3,000 establishments with combined annual revenue of about $95 billion.
Major segments include about 500 commercial casinos, about 475 Indian casinos, and more than 40 state lotteries,
as well as bingo parlors, off-track betting facilities, electronic betting arcades, and sports bookmakers. The casino
operations of casino resorts and hotels are included in the industry.
Competitive Landscape
Demand for gambling is driven by consumer income growth and state spending. The profitability of individual
companies depends on efficient operations and effective marketing. Large operators have the financial resources to
make significant investments in facilities and efficient computer operations; they may also enjoy cross-marketing
opportunities. Small gambling facilities can thrive by catering to local residents, who may not be able to afford travel
to such gambling centers as Las Vegas or Atlantic City. The US gambling industry is concentrated: the top 50
companies account for about 60% of revenue. The casino hotel segment is even more concentrated: the top 50
companies account for about 90% of revenue.
Products, Operations & Technology
Gaming operators mainly provide a place or a means to play games of chance, where the odds of winning favor the
“house.” Popular casino games are slot machines (slots); video poker; and table games such as roulette, baccarat,
blackjack, and craps (dice). The house take on slot machines varies, depending upon the denomination of the slot
machine, but generally runs between 5% and 10%. The take on most table games may be higher, from 15% to 30%.
State lottery games are mainly numbers games. State lotteries often retain between 30% and 40% of all money bet,
according to the National Conference of State Legislatures.
The actual operation of a casino involves acquiring and servicing gambling machines, training and supervising
dealers and cashiers, entertaining customers, and managing cash. Large game equipment manufacturers are
International Game Technology and the Bally Technologies. Gambling operators are free to set the odds of
winning at a particular game as long as they prominently post a pay schedule on the machine. Operating
licenses for some casinos require the operator to pay the state a fee based on a percentage of gross revenues.
To attract and retain customers, some casino companies operate casino hotels that can accommodate large numbers
of guests and that contain a variety of entertainment, restaurants, and retail stores in addition to the casino. A
large hotel casino like the MGM Grand Las Vegas has about 6,000 hotel rooms, suites, and other accommodations;
2,000 slot machines; 150 table games; theaters; restaurants; bars; and a number of retail stores. Typically, around
70% of revenue at a hotel casino comes from the casino, 10% fromfood and beverages, 10% from hotel rooms, and
5% from retail stores, shows, and other entertainment. While the trend in recent years has been toward larger casino
hotels in Las Vegas, the economic downturn of the late 2000s generally slowed casino construction in other markets.
Some casinos are located on land owned by legally designated American Indian Tribes. Although these Indian
casinos are regulated differently, they are operated like other casinos, usually under third-party operating
contracts with regular commercial casino operators. Typical operating contracts give the operator up to 40% of net
annual revenue and extend for a term of five years or more. Although not directly regulated by the state in which they
operate, Indian casinos must have a revenue sharing agreement (“compact”) with the state.
States operate a variety of state lottery games, most of which involve guessing a randomly drawn number. “Instant
games” let the gambler buy a ticket with a hidden number that can be revealed by scratching off the covering. About
40 states operate lotteries, with combined annual sales of about $20 billion. With a “take” between 30% and 40%,
lotteries typically return less money to players than casinos do. To counter moral objections, some states “earmark”
the proceeds of lottery operations for specific laudable social spending projects, like education. Lottery tickets are
sold through special computer terminals that retail outlets rent from the state.
Technology
Slot machine operators collect information using electronic game monitoring units (GMUs). In addition to games
themselves, the control of gambling operations relies heavily on computer devices and programs to take bets, print
tickets, track revenue and payouts from individual machines, and perform various accounting functions.
Internet gambling, especially online poker, enjoyed rising popularity in the late 1990s and early 2000s despite
federal laws designed to curb illegal online gambling and interstate wagering. The Federal Wire Act of 1961 has been
used to ban online interstate gambling and wagering on foreign websites, and the Unlawful Internet Gambling
Enforcement Act of 2006 prevents banks and credit card companies from processing transactions with those sites.
However, in 2011 the US Department of Justice ruled that the Wire Act applies only to sports betting and not to other
forms of gambling. That decision significantly expanded opportunities for legal online gambling in the US. A handful of
states have enacted legislation allowing real-cash online gambling within their borders. Nevada was the first to offer
legal online poker, in 2013; Delaware and New Jersey soon followed. The gaming industry is largely split over the
issue, as some casino operators worry that gambling websites will lure customers away from their brick-and-mortar
locations. Competing online gambling bills have been introduced in Congress in recent years, including some
measures that would streamline further legalization and others that would outlaw the practice nationwide.
Slot floors are becoming totally cashless through the use of ticket-in/ticket-out (TITO) technology. When cashing out,
players receive a ticket that can either be redeemed for cash or be inserted into another slot machine for credits on
the cash meter of the new machine. Server-based games allow casino operators to make changes to any slot
machine on the floor through a central, secure computer server. Casinos are also embedding RFID devices in their
chips to improve security and track players.
Sales & Marketing
Promotional efforts for casinos and other betting attractions target regional customers, who typically live within a
three-hour car ride of a betting attraction, and consist of radio ads and highway billboards. Online, television, and
print ads target vacationers who select “destination” resorts that provide a variety of entertainment and activities.
Many casinos play up their nongaming entertainment, such as shows, shopping, celebrity chefs, and luxurious
accommodations. States typically advertise lotteries through local billboards and radio spots.
Because most gamblers lose money, gambling operators try to make the losing fun, presenting gambling
as entertainment that is worth the price. Casinos use players club programs to award gamblers points toward
rewards, while allowing the casino to monitor the playing habits of individual gamblers, which helps them design
individualized marketing incentives. Other incentives include “comps,” in which high rollers (bettors who spend a lot
of money in a casino) are given free drinks, food, accommodations, or other perks to ensure their loyalty.
Finance & Regulation
Accounts receivable may be high, because some players may not pay their debts promptly. Many casinos may
extend credit viamarkers — personal warranties that customers are good for their debts. Capital investments in
buildings and equipment are significant, both because gambling equipment is expensive and because casinos and
casino hotels must frequently be refurbished to attract gamblers.
Casino hotels are labor-intensive: average annual revenue per employee in the US is about $125,000. For casinos
and other gambling establishments, average annual revenue per employee in the US is about $165,000.
Regulation
US gambling operations are regulate primarily by states. Until gambling was legalized in Atlantic City in 1976, casinos
operated only in Nevada. In many states, casinos must be located on riverboats, a requirement that effectively
restricts the size of operations. Regulation is largely aimed at preventing organized crime from association with the
industry, which is attractive because of the large cash flow. State regulators must approve all games played, but
gambling operators are free to set the odds of winning a particular game.
Indian casinos are regulated by the National Indian Gaming Commission (NIGC) under the Indian Gaming Regulatory
Act (IGRA), which sets rules defining eligible Indian tribes, their relationship with states, and requirements for
oversight of gambling operations.
International Insights
Gambling generates more than $450 billion in revenue worldwide, according to Global Betting & Gaming Consultants.
As casino gaming and other forms of gambling continue to expand in new markets, specifically in Asia, the industry’s
gross yield (gaming income minus payouts to winners) is expected to exceed $525 billion in sales by 2019. Landbased casinos generate about 35% of worldwide gaming revenue, followed by lotteries, which account for about 30%,
according to Morgan Stanley. Online gambling makes up about 10% of the global market. Other forms of gaming,
such as wagering on sports and parimutuel events such as horse racing, account for the remainder.
The world’s largest casino gambling markets include the US, Macau, Singapore, Australia, and South Korea. The
growth of Europe’s casino industry has leveled off in recent years, but the region’s online gambling sector is thriving,
especially in the UK, the largest regulated Internet gambling market. Major companies based outside North America
include Tatts Group (Australia); Galaxy Entertainment and SJM Holdings (Hong Kong); and UK-based IGT and
William Hill. All of the major US casino companies also have foreign locations or investments in overseas gambling
operations.
Macau, a special administrative region (SAR) of China, has become one of the world’s largest gambling markets,
thanks to heavy investment from both domestic and international casino developers. US-based casino companies
that operate properties in the territory now earn as much as two-thirds of their global revenue in Macau, according to
Scotiabank. However, gaming revenue in the region began falling sharply in 2014 after the Chinese government
launched a widespread crackdown on corruption and organized crime that caused casinos to lose business from
wealthy VIP customers.
Despite the downturn in Macau, emerging markets in the Asia/Pacific region offer potential for growth in traditional
casino gambling, fueled by the size of the Chinese market and the steady expansion of the middle class in many
areas. Developers are opening multibillion-dollar Vegas-style casino resorts in markets such as Singapore and the
Philippines to attract local and international gamblers, putting additional competitive pressure on casinos in North
America and Europe. Another market primed for gaming industry growth is Japan, which is considering legislation
that would permit casino gambling ahead of the country’s hosting the summer Olympic Games in 2020.
Australia has a thriving gaming industry that includes casinos, lotteries, sports betting, and various forms of racing.
Melbourne and Sydney are home to some of the country’s top casino destinations. The lottery business includes both
government-run games and those contracted to private operators.
Major growth is also taking place within the international online gaming sector. Interactive gambling generates
about $40 billion in annual global revenue, and that figure could approach $60 billion by 2018, according to H2
Gambling Capital. Online gaming services may face regulatory challenges in some markets. Internet gambling on
websites served by companies located in other countries is a contentious issue in the US.
Regional Highlights
In the US, the largest casino markets include Nevada (about $11 billion total gaming revenue); Pennsylvania ($3.1
billion); New Jersey($2.7 billion); Louisiana ($2.5 billion); Indiana ($2.2 billion); and Mississippi ($2.1 billion),
according to the UNLV Center for Gaming Research.The Upper Midwest and Northern Plains regions of the US have
the largest numbers of tribal casinos, while California and northern Nevada lead the nation in tribal gaming revenue,
earning a combined $7.3 billion per year. Some states don’t allow casino gambling and many states restrict casino
advertising. States that generate the most revenue from lotteries include New York, Florida, and California.
Human Resources
Most employees in the gambling industry work at casino hotels as regular hotel employees, who provide
housekeeping and janitorial services, work as servers, or provide security. Casino employees who work the gaming
activities need licensing by regulatory authorities and require special training. The average hourly industry wage is
moderately lower than the national average, although casino dealers get high pay.
Due to lower wages and a reliance on part-time employees, turnover in the leisure sector can be significantly higher
than average. The injury rate for employees of casino hotels is nearly 40% higher than the national average. Injuries
occur less frequently among workers at standalone casinos and other gambling establishments.
Industry Employment Growth
Bureau of Labor Statistics
Average Hourly Earnings & Annual Wage Increase
Bureau of Labor Statistics
Industry Growth Rating
News and Social
Quarterly Industry Update
8.17.2015
Trend: US Gaming Industry Revenue Forecast to Rise – Revenue generated by the US gaming industry has been
increasing steadily through the first half of 2015, and analysts predict that the upward trend will continue over the next
12 to 18 months. Moody’s Investors Service upgraded its outlook for the industry from “negative” to “stable” in July,
forecasting year-over-year revenue increases of up to 2% for each month through the second half of 2016. The
agency downgraded its rating last summer as the gambling sector struggled to spark significant growth, but casinos
have been able to rebound since then as the national economy has recovered. Also, many companies have
expanded their margins by aggressively cutting costs over the last several years. Moody’s cautioned that the
industry’s revenue growth may be tempered by relatively slow growth in disposable income, which is keeping US
consumer spending in check.
Industry Impact – US gaming establishments may accelerate plans to invest in new equipment if predictions of
higher revenue in the year ahead are realized.
5.18.2015
Challenge: IRS Proposes Lower Threshold for Taxing Casino Winnings – US casino operators are pushing back
against a proposal by the Internal Revenue Service to reduce the threshold at which gamblers must report slot
machine, bingo, and keno winnings for tax purposes. Under current law, casinos must require customers to fill out
IRS paperwork when they win $1,200 or more in one day, but the proposed policy would lower that limit to $600.
Analysts estimate that the lower threshold could result in three to five times as many taxable jackpots, increasing a
casino’s annual costs by as much as $500,000, according to Law360. The gaming industry contends that the
additional reporting burden would require operators to hire more employees to process paperwork, notify guests of
rule changes, and handle more disputes over the accuracy of reported wins and losses for the day, Casino
Journal reports. Many casinos would also need to overhaul their player tracking systems, which were primarily
designed as loyalty programs rather than financial recordkeeping tools. The potential for inconvenience — more
frequent interruptions, longer wait times for slot machines, etc. — could deter some guests from visiting casinos
altogether, resulting in lost revenue.
Industry Impact – Gaming industry groups will lobby to prevent the IRS from lowering the threshold for reporting
winnings. If the new limit is approved, casino operators would need to adjust their budgets to account for additional
staff and technology expenses.
2.16.2015
Opportunity: Support Grows for Legalized Sports Betting – The debate over whether to expand legal sports
wagering in the US is gaining momentum following a record year for sports gambling revenue. While total earnings at
Nevada casinos declined in 2014, the industry saw gains in revenue from sports betting, which reached $227 million,
a bump of about 12 percent from 2013, according toThe Las Vegas Review-Journal. Illegal gambling is also on the
rise: The American Gaming Association (AGA) estimates that about $3.8 billion in illicit bets were placed on the 2015
Super Bowl, compared to about $115 million collected legally by Nevada sports books. The gaming industry is asking
Congress to crack down on unlawful gambling, which causes casinos to lose business. To recapture some of that lost
revenue, some stakeholders are advocating for legalized sports wagering at the federal level, which proponents claim
would generate new revenue for states, create jobs, and protect customers. Executives of two of the largest
independent sports book companies in the US claim that expanding legal sports gambling would benefit the industry
as a whole, and not just within Nevada. The AGA has not yet taken an official position on legalization and is gathering
input from its members.
Industry Impact – Legalized sports wagering would generate a significant boost in revenue for sports book
companies, which would welcome new business from customers who previously placed bets illegally. Some Nevada
casinos are still evaluating the potential consequences of federal legalization, which would disrupt their effective
monopoly on US sports betting.
11.17.2014
Challenge: China’s Casino Revenue Declines Sharply – Casino revenue in Macau, the gambling hub of China, fell
by almost 25 percent in October 2014 compared to the same month last year, marking the largest decline in the
territory’s history. Macau’s gaming establishments had been riding a five-year hot streak until recently, reaching a
peak revenue of $4.8 billion in February, according toThe Wall Street Journal. But the industry’s fortunes reversed
this summer after the Chinese government launched a widespread anti-corruption crackdown that led to fewer visits
from wealthy Chinese VIPs. Other factors such as tighter visa restrictions and a slowdown in new resort openings
may have also contributed to the downturn, which many analysts expect to worsen through early 2015. Casino resort
companies have also taken a hit in the stock market, as the share prices of major companies including MGM China,
Galaxy Entertainment, and Wynn Macau have each dropped more than 20 percent since the start of the year.
Industry Impact – Companies that operate casinos in Macau should be prepare …
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