The Huge Profit Loss of North American Land-Based Casinos

The year 2020 was arguably the worst year for the gambling industry as various casinos across North America have reported major profit losses. These losses were due to the lockdown protocols that have been implemented by state/provincial governments in these regions. While it was known to be detrimental to these businesses, it seemed to be a necessary evil that had to be executed to help curb the infection rate of the COVID-19 virus.

The Ripple Effect of Profit Losses

While many could attempt to argue that casinos are not an integral part of a local economy, the profits of casinos are heavily taxed (sin tax) by local governments. This allows them to contribute more to important sectors in the economy, namely social welfare, healthcare, infrastructure, and education. With casinos in an idle state, they’re not generating any profits, which means that there’s a massive hole in the budget of the government. This creates a ripple effect that ultimately affects all sectors and everyone working in them. Many people have also lost their jobs, which means that there’s more pressure on the social welfare sector to provide for them.

Profit Losses in the USA

The American Gaming Association has reported that the industry has seen its lowest profits since 2003 as revenue took a 31.3% dive ($30 billion), due to the pandemic. Since 2014, this is the first time that gambling revenue has seen a drop as U.S casinos across the country from California to Iowa have been forced to relinquish 27% of their operating hours due to hard lockdown protocols that were implemented to meet the guidelines of the CDC. Each state had reported major losses with the biggest decline in revenue coming from Nevada with a plunge of 79%.

This also resulted in a major shift from land-based to online casinos due to the closure of the former. States such as New Jersey saw major betting handle in December, with bettors spending $996.3 million, which is an all-time record for one state. States such as Colorado, Michigan, Tennessee, Illinois, Montana, Virginia and Iowa have legalized sports betting which helped to generate much-needed tax revenue.

Maryland Lottery and Gaming have reported that six casinos in Maryland have collectively generated $126,208,025 in revenue during February 2021. However, this total remains 16.6% lower than the previous year as this was before the pandemic hit. Four casinos in the state are currently operating at 50% capacity, with the Horseshoe Casino and MGM National Harbor operating at 25%. While there are casinos that are quickly making a steady comeback, profits remain down when looking at it from a year-over-year perspective.

Casinos such as the Ocean Downs Casino are down by -2.8% (-$169,345) compared to the previous February, and Hollywood Casino is down by -5.4% ($362,425).  The AGA has also stated that these profit drops were larger than what was seen during the period of the Great Recession that took place from 2007 to 2009.

Profit Losses in Canada

The Ontario Lottery and Gaming Commission has reported that the annual income for gambling in 2020 came in at a measly $200 million, which is a major decrease from $2.3 billion in 2019. The gambling revenue seemed to be the only industry in Canada that had taken a major loss as the tobacco and alcohol industries held their own with the cannabis industry flourishing.

While the gambling industry provides an important source of tax revenue, other ‘sin taxes’ have come through as the cannabis industry seemed to have picked up a lot of the slack with a revenue of $48 million. However, online gambling has become extremely popular among Canadian players during this period, with the Canadian government having a more relaxed approach when it comes to this part of the industry.

While online casinos are prohibited from being based in Canada, there’s no law that states that citizens aren’t allowed to gamble at offshore casinos. The only issue is that this is tax revenue that’s lost, which is why the OLG has attempted to set up an online casino that provides citizens with a safe platform. Hopefully, it’s able to recoup what was lost and users will continue to use the local platform.