Introduction
In this paper, the casino industry in the United States will be analyzed using the Porters Five Forces model. In this process, the attractiveness of the casino industry in the United States will be established. The casino industry consists of firms that deal with gambling, and games, and at the same time providing hotel services to the clients. The firms that do not deal with gambling have not been included in the analysis and industry analysis.
Casino industry analysis in the US
Internal rivalry
In the United States, the casino industry has become hyper-competitive. It is because of the trend that most of the hotel-casinos overly depend on revenues from rooms and convention guests. At the moment, the supply of rooms is seen to be more than the demand for hotel rooms. It pushes the prices of hotel rooms down significant levels. There has been a 4.5 percent decline in the rates in which rooms are occupied while at the same time, causing a decline of price by 22 percent. There are many new start-ups that are being created in the United States that makes the competition even harder (Assaf, Cvelbar, &Pahor, 2013). Most of the new competition bring in new services, like the service of table games being offered. It makes the competition tougher for most companies. Each and every day, must companies to be creative and have ways in which they can offer services to the customers who are not offered by other competitors.
Taking one company, Las Vegas Sands, the competition that it is facing, even with its many branches that they have opened makes it hard to have the same market that they have enjoyed. New competitors like Sands-Bethlehem make the competition for the casino industry tough. The growth of gaming revenues has been seen to be on the rise. The growth of the casino industry is shown best in Las Vegas. Macau is shown to be the source of most of the revenue source for Las Vegas Sands. It has been growing steadily in the market and made the profitability of the industry to be easily achieved (Hsu, 2014).
Entry and exit
The exit and entry forces are seen to be the most restricting for firms and players in the casino industry. Thereare high regulations and taxes that are imposed for the casino industry. The government officials in US are seen to be a key player in the success and failure of casino businesses. It is hard to enter the casino industry without a gaming license and land concession. Most of the casinos that are found in the United States operate with licenses for gaming. Most of the states have the gaming control board which control the operations of the casinos in the states. It makes it hard to control the operations of the games in the United States. The decisions and the take of the US government on licensing and the approval of new services, like table gaming, is a significant role that affects gaming (Walker, & Calcagno, 2013).
Another issue of concern for most of the casinos in the United States is the cost of operation. There is a high cost of operations for the casinos and it affects the operations of the casinos and how they undertake the business. Most new casinos will require billions of dollars to build and operate. Also, when a casino is to be closed, it will cost a huge financing. It is because of the need to look for a buyer with such high value. It will make it hard to have an investor with such a high capital.
Supplier power
The suppliers in the casino industry have been seen to be with limited power because of the high competition that is seen to be found in the market. It is because of the powers of supply and demand that defines price. It is simple to supply things like game tables, casino furniture, slot machines, and betting chips. There are many suppliers who can supply the needed materials in the casino industry in the United States. The competition for the suppliers is intensive. The main suppliers in the casino industry are the land suppliers who supply the land on which casino business is built. Normally, the license providers are state officials, for example the state gaming board who will supply the license for gaming operations for the owners of the casinos. Also, there are situations in the US, where the government will have control over land.
Buyer power
It is evident that buyers have some power in the casino industry. They have the power to exert pressure on the prices of rooms in the market. Also, the preference of buyers have the power to determine the attractions to the industry. An example is that attractions like shows, and entertainment is influenced by the preferences that the buyers have in the industry. It makes it easy to show the preferences and the aspects of the needed attractions for the suppliers. Also, the competition of the casino providers is proof that there is power to the buyers (Narayanan, & Manchanda, 2012). Every casino company tries to outdo their competition in terms of the services that are offered in the industry. In the United States, there is competition that make the provision of these services expensive and competitive in the industry. Most of the services that have been offered are offered because of the competition that is offered by the competitors. In terms of gaming, there is minimal buyer power in the United States. There is no company who has used buyer power to outdo their competition in terms of the gaming services.
Substitutes and complements
There are substitutes for casinos and resorts. Some of the substitutes include online gambling, state lotteries, and smaller lotteries that are offered in the Native America. Another competition is the tropical resort destinations. It is an alternative option because many people go to casinos for the resort aspect of the services. There are many types of alternatives that are seen to be emerging because of the different gambling types that are being licensed by the state and federal governments by the day. In the future, consumers will not be willing to travel to the US, for those from outside US, to access casino companies like LVS (Vogel, 2010). They will be accessing the services from the casino companies from their localities. Most of the attractions to casino companies is affected by the infrastructure. Most of the expensive casino companies in the United States have good and well-developed infrastructure which makes them good sites of attraction.
Conclusion
Casino industry is becoming dynamic and affected by the internet. Gambling is being licensed in different states in the United States. It makes it easier to expand the industry and provide services to the population. It is an industry that is seen to be affected by the preferences and power of the buyers. With the growth of the internet, the services will now be offered online, which will drive competition to be now offered online.
References
Assaf, A. G., Cvelbar, L. K., & Pahor, M. (2013). Performance drivers in the casino industry: Evidence from Slovenia. International Journal of Hospitality Management, 32, 149-154.
Hsu, C. H. (2014). Legalized casino gaming in the United States: The economic and social impact. Routledge.
Narayanan, S., & Manchanda, P. (2012). An empirical analysis of individual level casino gambling behavior. Quantitative Marketing and Economics, 10(1), 27-62.
Vogel, H. L. (2010). Entertainment industry economics: A guide for financial analysis. Cambridge University Press.
Walker, D. M., & Calcagno, P. T. (2013). Casinos and political corruption in the United States: a Granger causality analysis. Applied Economics, 45(34), 4781-4795.
