But the next age group (or cohort) isn’t playing at the same rate as the older cohort is leaving. Attrition is occurring.
Most 35-45 year olds are already dealing with their own life and financial pressures. They are still paying mortgages, raising families, and trying to invest and prepare for the future. They don’t have the time or as much disposable income as the older cohort, so gambling, as an entertainment option, is further down the list after going to the movies or dining out.
We could just wait 10 or 15 years for them to enter our audience bulls-eye but the problem is there are fewer of them. In total, even if they play at the same rate as the older group, they will not replace the revenue that is being lost through attrition. And then there’s the Oldsmobile effect. Are these folks likely to start “kicking it up” at the casino where mom and dad hung out? Maybe if we do a good job today of reaching out to them and establishing a relationship with them, yes. However, if we don’t, we run the risk of being perceived as their “father’s casino” and they’ll take their play somewhere else.
On a North America wide basis gambling penetration (defined as anyone having gambled at a casino in the past 12 months) has remained flat over the past several years. It varies by jurisdiction, but in mature markets it’s generally around 22-25%. However, this doesn't tell the whole story, as evidenced in the following chart:
The data here suggest that while interest in casino gambling has increased in the 55+ category, it has been declining in the younger categories. Therefore, the relatively flat gaming penetration just mentioned has been buoyed by a single age group; the 55+ group which we know will be decreasing in size over the next few years. This could indicate potentially lower future gambling penetration and revenues overall unless the industry can attract a younger audience.
Connecting to the Young Demo
Remaining relevant and delivering the gaming experience in ways that a younger audience can relate to is going to be critical for the future of the industry. There is ample evidence to suggest that more time and study needs to be directed here.
Jeff Corcoran, Director of Market Intelligence and Customer Insight at the Ontario Lottery and Gaming Corporation, is seeing this trend in lottery play as well. “We have seen steady decline in lottery play among the population segment who are under 30 years of age,” said Corcoran, noting, “The concept of checking a box, buying a paper ticket, waiting and then checking a number is foreign to those who do most things online. We need to address the issue of relevance for these people.”
Slot machine manufacturers are starting to look at the issue of “game relevance” as it relates to different age groups. In the past, machine appeal was thought to be homogeneous across different age groups. However, there is evidence to suggest this is not the case today.
Paul Burns, VP of the Canadian Gaming Association, talks about manufacturers like WMS who are developing games that replicate the online community many younger players are used to. These games have the ability to link to other machines being played by friends and interact in a manner similar to social community sites. Called “persistent games”, these games could even have the ability to allow players to continue playing the game from a remote location like home or a mobile device.
So how are most casino operators responding to the changes? It varies, but most are trying to manage their declining database by driving efficiencies on the cost side and taking a hard look at their re-investment formulae.
Jeff Craik, Vice President of Marketing at Casino Rama in Ontario says, “most casinos are managing the change by further segmenting their database and managing costs. Our industry is concentrating our database segments into smaller and smaller high-end segments. In short, we are focussed on trying to get one-more-trip-per-year out of each of our segments.” That is exactly what any good operator should be doing, but given what we know about the changing age demographics, it certainly should not be the only strategy operators should be focussed on.
Adapting the Casino Floor
Questions arise regarding the suitability of the physical environment in casinos and whether younger players will relate to the present environment. Is the way we currently interact with slot machines different from the way younger people interact with other entertainment devices like gaming consoles, computers, or mobile devices? It all comes down to how easy we make it for them to relate and interact in a casino environment.
Some casinos have already jumped ahead in an effort to address this issue. The Cosmopolitan in Las Vegas is a shrine to hip and cool decor, with a huge range of restaurants; from Chinese and Mexican fusion to Tapas to Sushi. Sprinkle in a multitude of bars, lounges, retail outlets, and spas and you’ll find a casino floor tucked in there somewhere too. This is definitely not your father’s casino. Is it working? The jury is still out. The property has yet to make money and revenue from alcohol is greater than from gambling.
All is not gloomy; there are winds of optimism blowing our way. The fundamentals suggest that gambling will remain a vibrant and viable industry. As Bill Silverman, a principal with DMG, a research firm with depth in the casino gaming industry, said: “Interest in gambling is not going to change – it’s always been part of human activity and a form of entertainment and it will continue to be so. What might change is how we gamble and how we access games of chance and whether we can adjust our product to appeal to new groups with different needs.”
There is more to consider. Internet gambling has been growing at an astounding rate. According to estimates from KPMG, the online casino gambling market – including poker, lotteries, bingo and casinos – has grown 42% from 2008 to 2012, from $21.2 billion to over $30 billion in 2012. Further, Onlinecasinos.com states that one of the fastest growing sectors is online casinos, which have been growing at an average rate of 15% per year since 2008.
This means gambling has not lost its appeal, and that casino games are alive and well with the younger demographic ... just in a different form.
There’s more good news. Demographers are on record as saying that over the next 20 years, we will witness the greatest transfer of family wealth in recorded history. The boomers are going leave behind savings accounts, houses that are paid for and trust accounts to their children. In many cases, the transfer will happen as their kids enter their 40s, which is great timing for our industry.
This means many recipients will not have to worry about saving as much, if any, of their salary toward their retirement, and that means everything they earn in their 40s, 50s, and onward can be disposable income.
Lastly, we are seeing an awakening by governments regarding the proliferation of casinos, and the interest to build them in major urban centres. The recent casino in downtown Pittsburgh is an example and there is talk of resort type casinos under consideration in New York, Boston, and Toronto. This gives easy access to large numbers of the population which can result in more potential players. Of course, this is contingent on the premise that operators are offering a gaming product that the younger demographic want and can relate to.
Ultimately, there is reason to be optimistic; the casino industry is one of the best in the world in understanding its customer. Few other industries spend more money or time figuring out how to make their customers happy and I am confident that we will figure this out too. The question is whether we should be undertaking strategies to address this now or if there is still lots of time to do something?
I know, let’s ask someone who used to work at Oldsmobile.
Jim Kabrajee is the CEO of Marshall Fenn Creative Communications, a full-service marketing agency with offices in Toronto and Las Vegas. Contact: firstname.lastname@example.org or (416)-962-3366.