This is the Coronavirus Case Studies series. Every post in this series will talk about how the coronavirus pandemic of 2020 will affect different businesses for years to come. We’re all still processing this massive, life-changing event. This week, we talk about how coronavirus will affect the gambling industry.

What is the gambling industry?

No amount of Las Vegas glitz and glamour can ward off the coronavirus. This is for good reason, too. Most of the gambling industry involves putting people in close quarters or touching objects handled by a hundred other people that day.

Included in the gambling industry, you will find casinos, bingo halls, betting and pools, lotteries, slot machines, and arcades. The industry is pretty large, raking in $161 billion in the US in 2018. Of that, a paltry $306 million is online gambling – just a fraction of a percent.

In-Person Gambling is Risky

The Chumash Casino Resort, located in Santa Barbara County’s Santa Ynez Valley, prepares to reopen on June 10 after a three month closure due to Covid-19 as viewed on June 5, 2020, in Santa Ynez, California.
George Rose | Getty Images (Found on CNBC).

Of course, we all know what happened next. Photos like the one above show just how strange it is to gamble in the coronavirus era. Casinos and other gambling establishments involve putting a lot of people in close contact with one another while they touch commonly shared objects. On top of that, many gambling houses give their customers free alcohol.

As you can imagine, this makes gambling establishments of basically any sort risky, and not for the typical reasons! In March 2020, New Jersey shut down brick-and-mortar casinos, leading to a 61.7% drop in casino revenues that month. Online gambling, at the same time, grew 65.7% that month.

Industries the Gambling Industry Relies on are Hurting Too

A lot of the fun of gambling is the in-person experience and the instant gratification. It’s a well-documented problem with online gambling that at least partially explains the meager revenues generated by that segment of the industry. At a casino, you walk out with chips or money when you win. Online, you wait for days while your ACH bank transfer clears.

However, I feel that the existing articles online about the gambling industry are missing something obvious. Gambling, at least in the US, often requires travel. You have to fly into another city or, with many southern states, go to a Native American reservation where the laws are different.

Gamblers don’t just interact with the gambling industry. They rely upon the aviation industry to get where they want to go. In order to eat, they rely on local restaurants. To find a place to stay, they rely on the hospitality industry.

Each of those three industry are massively hurting as well, many with notable dips in their quality of service. How fun does a trip to Las Vegas sound when you have to take an inconveniently timed flight only to order take-out and eat it in your room at the freakishly empty Harrah’s?

The entire experience of travelling to gamble has been upended at every stage. Not even the best run casino can make up for the awful disruptions in customer experience.

Online Gambling is Experiencing a Renaissance (But Will It Last?)

I mentioned earlier that online gambling is a very small part of the industry. Then I went on to say that the experience lacks the excitement and instant gratification that gamblers typically enjoy.

But let’s be real with one another. Gambling is very addictive. Addicted gamblers will find a way to play.

It should be noted, however, that gambling is not as recession-proof as alcohol and nicotine. I suspect this is because you can spend less money to get the same neurological reward when gambling, but not so with cigarettes or liquor.

In any case, online gambling has already seen a massive increase in revenue. However, in the US, regulations around online gambling are fairly tight and vary on a state by state basis. Combine that with slow payment processing and it’s difficult to imagine online gambling overtaking the in-person experience in the long run.

The massive influx of new people gambling online may also change the culture of the industry as well. Early in the days of online gambling, it was fairly common for naive players to end up losing money. This is because experienced players knew how to spot new ones whose money would be easy to take.

Eventually, the culture shifted and fish stopped swimming with sharks. However, with the coronavirus forcing many people to play online for the first time, I must wonder if online gambling culture will temporarily resemble that of the dotcom era.

What’s in the Cards for the Gambling Industry Five Years From Now?

Based on my reading so far, I anticipate that in five years, the gambling industry will superficially resemble that of the gambling industry of, say, 2017. More people will play online, it’s true. However, I think that most of the desired gambling experience comes from physically being present in a gambling establishment.

That said, it’s difficult to imagine small casinos being able to stay open during protracted periods of reduced revenue. I suspect that the gambling industry is going to experience a lot of mergers and acquisitions in the next five years. For the people working within the industry, the culture is likely to change and become more corporate. For the individual players, though, it’s unlikely to change meaningfully.

What do you think the future holds for the gambling industry? Do you think this article is spot-on or off-base?

Let me know in the comments below. I’d love to hear what you have to say so we can process this together.