Tribal gaming will start 2024 in a strong position
While casino profitability has slipped a little since 2022, balance sheets are still strong — and tribal gaming leaders have more ways to address economic uncertainty, regulations and changing consumer preferences.
Gaming machines continued to be the primary source of gaming revenue and drove the majority of profits, according to Wipfli’s Cost of Doing Business Report on the state of tribal gaming.
Marketing, promotions and wages were some of the most significant expenses, showing a slight increase because casinos of every size spent more of their money on employee benefits and incentives as expected with the talent shortage and competition for key talent.
The job market was slightly easier to manage in 2023, but operators can’t ease up on talent. Recruitment and retention will be ongoing issues, and operators need creative incentives to hire and retain the best workers. From housing to healthcare, everything is on the table and being considered within the industry.
Balance sheets are strong at most casinos, but operators worked hard for every dollar. Inflation shrank profit margins at most casinos, and operators saw heavier competition for discretionary dollars. Big spenders buoyed revenue in some casinos, which helped them overcome a lower spend per trip by most customers.
Last year, tribal casinos continued to put more Class II gaming machines on the floor as technology and the experience advances. So far, they’ve met expectations in most cases. In some states, they’ve even outperformed Class III machines. The state compact fees for Class II machines vary by state, so leaders in some jurisdictions need to budget for possible cost savings from their gaming shift if this is a strategy they plan to continue to deploy.
Customer relationships and experiences are more important than ever. In 2024, casinos will need to mine their customer databases to create exceptional personalized experiences, and they need to wow new guests and convert them into loyal, repeat customers.
After years of record-high revenues, inflation, talent shortage and uncertainty, most operators are ready to settle into more typical, predictable conditions. But “normal” is unlikely with ongoing global conflicts and a presidential election ahead.
Luckily, flexibility is a strength among most tribal casinos. Operators that focus on these three priorities will be ready for the next big opportunity.
2024 priorities for tribal gaming operators
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Automation
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Cybersecurity
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Forecasting and analytics
Holding onto cash is one way to build resilience. But so is investing in time- and money-saving tools. Casinos need to lessen their reliance on on-premises technology and labor-intensive processes, both behind the scenes and on the floor.
Automation can help them find new ways to trim costs since they can’t simply pass higher prices on to cost-conscious consumers in the casino industry. To automate meaningful work, they need to exploit artificial intelligence (AI) and integration to their fullest potential.
AI is getting a lot of attention, but it’s still a buzzword for many casino leaders since most casino use cases haven’t been fully tested or scaled yet. In 2024, we’ll start to see how AI could impact the industry in meaningful ways. Marketing, database management, regulation and finance applications show the most promise.
As more operations become digitalized, leaders need to keep an eye on cybersecurity. Ransomware and cyberattacks on gaming and resort operations were up last year, and more will likely follow.
Cybercriminals assume that tribal gaming operations are targets to steal data and personal information from. Operators need to prove them wrong with strong defenses, detection and response capabilities.
Most casinos qualify for cyber insurance policies. These policies tend to have higher rates and deductibles than in past years, but they could be worthwhile compared to the operational, financial and reputational costs of a security breach.
As business conditions stabilize, it’s becoming easier to budget — but not easy. Casinos need the ability to adapt their projections as interest rates and other factors change.
Casinos need to evolve critical business systems so they can see and drive demand. They need the ability to see their cash position, as well as projections. And they need to be able to predict everything from revenue to traffic patterns and workforce needs.
How Wipfli can help
Wipfli’s experienced tribal gaming specialists know how to grow your assets, improve business performance, satisfy regulations and enhance your technology systems. We have the accounting, business advisory and technology consulting resources to help your tribe thrive well into the future. To learn more, contact us today.
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