How Could A Recession Affect the Gambling Industry? 

There is no denying that the world is entering a tricky time financially and that there are many industries likely to be affected by this. With consumers having to make cutbacks and people worried about spending money frivolously it is likely that entertainment industries such as gambling will be amongst the first affected. The rising cost of energy bills, the Russian invasion of Ukraine and big changes within the UK Government are having a ripple effect on other parts of life & it is certainly something that businesses should be paying big attention to. It is still yet to be seen how the gambling industry and casinos with PayPal will fare if Europe falls into recession in the coming months, but that doesn’t mean we’re not already seeing some changes as we approach winter. 

Will Consumers Gamble?

History shows people tend to gamble when they are happy when they have little financial worries and feel stable. Generally, people enjoy feeling close enough to these things to be happy to have a flutter and enjoy the entertainment gambling has to offer. But recent changes in the world economy threaten to change our years of optimism. The world recently has sustained much upheaval and change; there is a fear building that Europe may be hit with a recession. There are many global reasons for this, but they have come to a head with the aftermath of the changes in energy supply brought about because of the Russian invasion of Ukraine. This has exposed vulnerabilities in the European energy supply chain. For years Europe has been heavily reliant on Russian gas for its energy domestically and industrially. Both Europe and Russia invested money in the creation of pipelines to carry Russian gas from its processing plants to Europe. These are now under threat and with them, the energy security of Europe is looking questionable. The fear of recession is high and the gambling industry is looking to forecast any impact it may feel from economic downturns in the future.

One thing that we have to keep in mind is that it isn’t just online casinos that could be affected. There are plenty of places throughout the world that bring in most of the tourist trade through people who want to visit casinos and experience the glitz and glamour that these often offer. However, if the recession affects tourism and people’s ability to travel then it stands to reason that casinos in these destinations will feel the pinch too!

What Changes Would A Recession Bring?

In a 2012 study Dutch researchers  Csilla Horváth and Richard Paa discovered that in the years from 1959 to 2010, the revenue generated from gambling was closely related to the rate of economic growth.

The research found during economic growth the revenue from gambling rises but stagnates during a recession. The study did find an outlier represented by lottery gambling which remains largely unaffected by economic growth.

Casinos and the gambling industry are far from alone in their vulnerability to the economic downturn. Travel and leisure stocks, construction stocks and home furnishing stocks all tend to underperform during economic recessions.

These consumer discretionary stocks all share one common trait: they rely on consumers spending their disposable income. When consumers are feeling skittish, they tend to hold onto excess income and wait for times to get better.

What Can The Industry Do?

With the casino industry far from the only industry affected. Businesses must start to consider how they diversify their offerings in order to keep customers interested. Although it might not be the ideal customer base, the casino industry will no doubt be aware that in desperate times people could be likely to flutter in the hope of winning big and improving their own financial circumstances.

The best thing the industry as a whole can do is keep up with customer demand and invest in technology, to make sure that they are doing what they can to offer fun and interesting games. However, it is also important to approach this in a way that is respectful, after all, encouraging people to bet money that they are unable to afford to lose is massively frowned upon and will make you unpopular. 

The Future

No one can say for sure what the future is likely to hold, but most people are in agreement that this winter is going to be a tough one – and people are already starting to consider how they can do their best to get through the colder months. The UK Government and their U-turns on various bills and decisions won’t be helping matters; as it will mean that people start to lose confidence in the advice they give – and that means consumers are more likely to be keen to hold on to their spare money rather than spend it. 

With uncertainty in the air, people are likely to want to hold onto funds and save them rather than risk them in a bet which might not show them any positive results. That said, we know that during the lockdowns and restriction periods of 2020 people turned to online betting as a way of escapism and that is definitely something that could happen.

The truth is that we simply do not know for sure what will happen, whether there will be a worldwide recession and how this is likely to affect consumer behaviour. As an industry all online casinos and betting operators can do is take it one day at a time and do what they can to ensure that their customers stay happy in the long term. 

Casinos generally have a good track record of being able to survive tricky times, thanks to their keenness to embrace technology and do what they can to keep customers satisfied. The industry will be keen to ensure that the rest of 2022 and 2023 keep up that track record, so let’s see what the future holds and how successful they are.