What will 2014 mean for American businesses and their customers? Only a month in, the US is already experiencing economic uncertainties, scandals and closures, although Wall Street investors enjoyed a soaring stock market in 2013. That is good news for publicly-traded gaming companies and their investors.
However, other key indicators and public polling about the future reveal the American people aren’t buying the major recovery line that Washington is selling. In fairness, conditions have definitely improved in specific sectors like housing, but the public’s unease fills the air.
Since the 2008 economic downturn, consumers have adjusted their lifestyles and spending by deciding they could not only forego the extra clothing or jewelry, but could do without that night at the casino. Gaming has always been an elective leisure activity.
This scenario is played out everywhere, from the smallest to the largest gaming states. For official reporting purposes, Nevada only tabulates casinos statewide that earn more than $1 million annually. In 2013, those 263 properties again lost money for the fifth straight year. Revenues dropped by 11%-or $1,348,992,937-from 2012. The Las Vegas Strip casinos suffered the greatest decline, but surrounding suburban areas’ profits offset those losses.
Elsewhere, in New Jersey, Atlantic City’s annual revenues dipped below $3 billion for the first time in years. Pennsylvania’s 12 casinos’ $3.1 billion is a first-time decline since opening in 2006. Table games were up…slots were down. Officials cited neighboring competition, something I predicted months ago. Unfortunately, slots pay disproportionately higher taxes over table games, costing the state treasury.
This year, more consumer dollars nationwide will pay for higher taxes and Affordable Care Act (Obamacare) premiums and payments. Obamacare’s uncertain ramifications are confronting businesses of all sizes. White House gurus who repeatedly change the rules have hampered critical decisions. No one knows what to do, nor can anyone predict the final version. There is no way to define how businesses should plan or consumers should spend.
Add in potential payroll uncertainties. For years, President Obama has beat the drum about “income inequality” and achieving “social justice.“ What exactly does that mean? Of course there is income inequality in the U.S. or any capitalist country with variable compensations for those who may work longer hours at tougher, more demanding jobs that require more defined skills and talents. Casinos are the ultimate examples of laddered pay scales.
I exclude Hollywood types or athletes, whom I rarely believe are worth their salaries. But, in a free market they can earn whatever the market will pay.
Every businesses within gaming should prepare for another political battle… the national minimum wage, currently at $7.25 per hour. With Obama’s approval, the U.S. Senate is attempting to raise that to $10.10, expecting the extra money will generate more consumer spending.
Advocates call this a “living wage” necessity. 21 states, like my home state of New Jersey with its $8.25 rate, currently have higher rates, often tied to inflation.
At a fraction of the workforce, the Bureau of Labor Statistics estimates 3.6 million (almost 5%) of all hourly employees earned payments at or below the 2012 federal minimum. That includes thousands of gaming employees.
Will raising the rate impact smaller operators and suppliers’ profit margins? Will that initiate layoffs or cutting hours? Much will depend on a company’s size and income. Significantly higher expenses could force employers to cut back on workers’ hours or eliminate their jobs. But, an extra few bucks in everyone’s pocket could also spur more spending.
One group will lose the most. Tipped workers, a gaming staple, presently earn at least $2.13, plus tips. However, their income is inconsistent, thanks to some generous customers and others who are cheapskates. Think of the housekeepers, cocktail servers, dealers, etc. who rely on tips to supplement their incomes.
Senate Democrats hope this issue will get voters to the polls in November. Democrats’ nationalized plan would also eventually raise a tipped worker’s minimum to $7.07 an hour.
Who is right? Both sides have merit, so time will have to provide an answer.
As Internet gaming expands in 2014, New Jersey’s program is moving along. But, fueled by an obsessive media, so is a scandal involving Governor Chris Christie’s administration.
What will that mean for New Jersey and its casinos? We’ll also need time to see how it plays out. The good news is that Atlantic City‘s new mayor is earning rave reviews.
More on this next month as new details unfold. Never a dull moment.