Climate Change Proves to Be the Latest External Threat to Retail Casino Revenue, While iGaming Remains Resilient

The ongoing battle between Atlantic City casinos and coastal erosion serves as the latest reminder to policymakers that one key advantage online casinos offer is that they suffer from fewer external threats. The casinos, particularly those on the city’s northern side, face an even greater shortage of safe ocean frontage than last year. The US Army Corps of Engineers will bring in new sand to replace that lost to winter storms, but it won’t arrive until the end of the summer. In the meantime, the damage to Atlantic City tourism and casino revenue will likely be severe.

Fortunately, New Jersey has one of the strongest online casino and sports betting markets in the country. That revenue stream will make up for part of whatever losses the brick-and-mortar sector suffers.

It wasn’t long ago that the retail gambling industry suffered a much more significant setback brought on by external circumstances. Casino properties nationwide were shut down or operating under severe restrictions for most of 2020 while the COVID-19 pandemic raged.

Four years later, the gambling landscape in the US has changed significantly. Seven states now have legal online casinos, and iGaming revenue is rapidly growing. Meanwhile, land-based casinos suffered many losses due to closures and restrictions but have bounced back and are also reporting record revenue.

However, while online casinos benefit from constantly improving technology and interactive games, land-based locations face challenges. They include climate change effects like natural disasters and the shift of preferences by younger gamblers who look for more than just spending money on the casino floor.

Climate Change is an Emerging Threat to Retail Casinos

Ocean, Resorts and Hard Rock are the north-shore casinos most impacted by Atlantic City’s vanishing coastline. All three are pressing federal and state authorities to accelerate the beach reconstruction project. Last year, Ocean spent $700,000 to rebuild its eroded beachfront, but one rough winter has already undone that effort. Hard Rock’s popular beach bar was swept out to sea over the winter.

The storms that battered Atlantic City over the winter are part of a pattern of intensifying weather worldwide, which climate scientists link to rising ocean temperatures. Climate change threatens many aspects of daily life, and brick-and-mortar casinos also feel the effects.

As younger generation visitors prefer spending more money on amenities and experiences, beach erosion could seriously threaten the casinos’ revenue, as the beach is their one advantage over others in the area.

Beach erosion isn’t the only way the changing climate impacts brick-and-mortar casinos.

Last month, a wildfire resulted in the evacuation of two tribal casinos in Oklahoma: Native Lights Casino and the 7 Clans First Council Casino Hotel. The fire did not reach the casinos, but the evacuation hurt their business. Had there been physical damage, the impact would have been far worse. And even when the casinos escape fire damage, the possibility raises insurance rates in fire-prone areas like California.

The Las Vegas Strip is also experiencing climate change. In both 2022 and 2023, flash flooding has damaged casinos and caused delays at the Las Vegas airport.

Land-Based Casino Revenue Is Not Growing as Fast

Looking back to 2020 again, COVID-19 impacted the retail sectors in opposite ways. During lockdown, online casinos saw a massive uptick in customer acquisition. Yet the retail casino industry was hit hard.

Since then, it has bounced back, and according to the gaming trade group American Gaming Association (AGA), 15 states experienced record land-based casino revenue in 2023. Overall, retail casinos generated $49.36 billion last year, an increase of 3.3%.

However, when we compare the growth in 2023 and 2022, we see that most of the top markets are seeing a slowdown in growth. In 17 out of the top 20, including eight of the top 10 markets, revenue grew slower in 2023 compared to 2022.

Pennsylvania, home to online and land-based casinos, is an excellent example of the overall picture. The Pennsylvania Gaming Control Board’s 2023 annual report shows that while land-based casinos generated record revenue, their growth was outpaced by online casinos. Additionally, the report showed that land-based table games’ revenue declined by 4.1%, while online table games recorded a 22.6% increase.

Cyber Attacks Threaten The Gambling Industry

One external threat affecting both online and retail operations is the possibility of cyberattacks. However, even on that front, the iGaming industry appears better equipped to defend against the danger, perhaps because it’s more immediate and obvious. The attacks on retail gambling properties have tended to exploit human weaknesses, using retail staff as an access point to digital systems through social engineering.

An attack in September 2023 caused MGM Resorts International about 10 days of disruptions and an estimated $100 million in losses. Caesars Entertainment reportedly paid the same hackers a $15 million ransom a month earlier.

Such attacks have become more frequent in the gambling industry. In addition to the MGM and Caesars, other victims of attacks in the past year include 14 Gateway casinos in Ontario, Canada, video lottery terminals run by Everi Holdings in New York, and Rivers Casino Des Plaines in Illinois.

Online gambling sites have also been targets. Yet the damage has tended to be more limited. In 2022, several operators, including DraftKings and FanDuel, were victims of cyber attacks. Around the same time, hackers also targeted the payment processing provider for BetMGM and WSOP. Unlike the collective that targeted MGM and Caesars retail properties, the DraftKings perpetrator was ultimately caught and convicted. The extent of his theft was $600,000, a tiny fraction of MGM’s retail losses or the ransom paid by Caesars.

Online Casinos Continue To Generate Record Revenue

In 2023, US online casinos generated $6.5 billion in revenue, a 22.3% increase from 2022. Pennsylvania online casinos generated over $2.1 billion in 2023, while Michigan and New Jersey sites earned over $1.9 billion.

Smaller states like Connecticut and West Virginia experienced even more significant gains. The two online casinos in Connecticut saw a 56% yearly increase, while the Mountain State operators generated 31% more than in 2022. The only outlier was Delaware, but the recent operator change to BetRivers shows early encouraging signs.

The rapid growth is expected to continue this year. In a yearly forecast for PlayUSA, Bonus Managing News Editor Alex Weldon predicts that online casino revenue in 2024 will increase by 19% to $7.8 billion. (PlayUSA and Bonus are part of Catena Media’s network.)

So far, online casinos are outperforming this forecast. Through March, iGaming revenue is up by 26%, with all states posting growth of over 20%. Next month, we will see another addition to these figures as online casinos launched in Rhode Island on March 5.

About the Author

Chav Vasilev

Chav Vasilev

After years of managing fast-casual restaurants, Chav turned his passion for sports and occasional slot wins into a career as an iGaming writer. Sharing his time between Europe and the US, he has been exposed to betting and gambling for years and has closely followed the growth in the US. Chav is a proponent of playing responsibly and playing only at legal online sites. When not writing, you will find him watching and betting on sports, especially soccer, or trying to land the next big bonus on a slot.
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