How is COVID-19 Affecting Gambling? The Knowledge Ep7
In this episode of The Knowledge we wanted to find out what COVID-19 means for the gambling industry, both online and offline, immediately and in the longer term. To help get some answers we enlisted the help of H2 Gambling Capital, who are monitoring where the virus and gambling meet in real time. Simon Holliday, Founder of H2 Gambling Capital and Ed Birkin, Senior Consultant join us on today’s episode. Please note that figures listed in this article and on the podcast may have changed since time of recording.
In an era of uncertainty casinos are closing their doors across the world and major sporting events are being cancelled. Operator stocks are crashing and gambling consumer behaviours are changing massively. Gambling, like most industries, has been massively affected by COVID-19.
H2 Gambling Capital (H2GC) is a leading voice in gambling data and intelligence. Their projections are well trusted and have been highly influential in shaping legislators’ and investors’ views of the gambling sector across the world. They’ve been following the virus and its implications for the gambling industry since the outbreak started. We spoke with them on today’s episode to try and find a greater understanding for what corona virus means for gamblers and the industry.
> > > Listen to Episode 7 of The Knowledge in Full:
How Has The Gambling Sector Fared with Past Health Crises?
Simon Holliday, founder of the business, tells us that while he’s monitored the gambling industry during past crises, he’s never come across something as imminently damaging as the corona virus.
“I’ve been involved in the sector since the mid-90s and I have never see anything like this before, whether it be previous virus outbreaks or the financial crash. In fact, the only year over year fall we’ve ever seen in the value of the global gambling sector has been 2015 when we saw gross win globally down by 1.7%, mostly driven by travel restrictions and high roller restrictions in the Macau market.”
Holliday explains that previous outbreaks didn’t have much of a negative affect on the global gambling industry. This time there could be a conservative 50bn cost to the industry overall, as a direct result of COVID-19.
“With previous outbreaks, the sector seemed to not be impacted that much at all. One, I guess, because Ebola and MERS weren’t in areas of the world where the gambling sector has a high exposure to, and they were confined to those areas.”
COVID-19 is being compared quite often to SARS (Severe Acute Respiratory Syndrome), another virus that originated in China in 2003. While SARS had a major impact, affecting 26 countries and resulting in 8000 cases, during the height of the outbreak the overall risk of SARS-CoV transmission to travellers was low. This had a minimal impact on the Chinese gambling sector then, but it may have been a different story in 2020, says Holliday:
“Maybe if we had the same conditions today, given how the gambling market there has developed it would have had more of an impact but at the time in 2002/2003 China and the Special Administrative Regions including Macau, combined were only the 8th market in the world accounting for 3.5% of the gross win generated. Today it’s the number 2 market and they account for 16-17%.”
Global Gambling Forecast Downgraded to 11%
At the time of recording this episode of The Knowledge, H2GC had downgraded their forecast by 11% as a direct result of COVID-19. Holliday explains that this figure is changing all the time:
“In reality we are playing catchup [with the forecast] to some degree here. As soon as we account for one closure, restriction or cancellation there’s news of others. So in reality we could even be down 12.5% [at time of recording]. So what am I describing there? That’s 12.5% lower than the pre-virus forecast we had for this year.”
“At the end of January we were expecting the gross win - i.e stakes less prizes - generated globally by all parts of the sector to be around 473 billion, whereas our latest number is now closer to 420 billion. Our provisional figures for 2019 were 457 billion, so that would be the equivalent of an 8% fall year over year.
Ed Birkin, Senior Consultant, has been watching the virus and its potential implications for the global gambling industry for over 2 months. He describes the way in which H2GC has changed their tracking methods in order to keep up with the virus.
“That first downgrade seven weeks ago was driven predominantly by what was happening in Asia. Three weeks ago we published our first assessment of what was happening to the global gambling industry, and a week ago we decided to move across to a weekly tracker as the virus led to sports cancellations and closures across North America.”
Land Based Gambling to be Down 14%
Holliday explains that their projections for the land-based industry will continue to spiral downwards:
“Land based industry accounts for 87% of the business and with it being particularly hit by closures etc., as we are at the present time, we’re expecting land-based gambling to be down 14%. This is a best-case scenario now. As any of these closures are extended by a week or two weeks we will run that through the model. So this 14% fall in expectations this year is only taking account of what we know at this point. And we do expect to downgrade further as the weeks and months progress.”
Expect Online Gambling to Increase its Share of Gross Win
With self-isolation and stay-at-home orders being put in place throughout the world, H2GC expect that online gambling will account for more gross win globally as a result of COVID-19 than they previously projected, explains Holliday:
“We were expecting online to account for 13.2% of gross win globally. Already when we run the numbers we are expecting it now to be close to 15.8% of gross win. So definitely if I’m a land-based operator I’d like to be one with online exposure. I’d definitely want to have some online gaming, although I think we’ll see a ramp in virtual or eSports as well. So online operators are definitely going to be better insulated from this but the fact that sports are cancelled will have an impact.”
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