Sudhir H. Kalé: Startling stock reality gap

The most surprising phenomenon in 2020 for me was the elevated stock prices for casino companies. Overall, the stock market looks increasingly divorced from economic reality and nowhere is this phenomenon more pronounced than in the case of casino stocks.

After being badly hammered in March-April 2020, casino stocks have shown an amazing comeback, despite the industry being beset by severe structural problems such as crippling Chinese restrictions on the outflow of the renminbi, increased government vigilance of Chinese citizens gambling abroad, and blacklisting of casino properties abroad.
The top casino companies generate bulk of their revenues from China-facing properties. Added government restrictions on Chinese players will continue to negatively impact casino operators’ performance in 2021 and beyond.

“ Customer loyalty has taken a huge hit during the pandemic.”

Besides Chinese interference, we see a depressed global economic environment and a slower-than-expected recovery in the travel sector. Amid such negative developments, the online gaming industry in countries such as Australia has shown remarkable growth of 140 percent in 2020.
The bulk of punters who got introduced to online gambling during the pandemic will continue to gamble online in 2021. This development will cut into the casino gambling wallets of many customers, further delaying recovery in the casino sector.
As I have written elsewhere, customer loyalty has taken a huge hit during the pandemic. Casino companies will have to work twice as hard toward customer retention. Ingenious loyalty programs will have to be designed which go beyond the traditional “earn and burn” model.
Overall, the global casino industry will face a less than munificent climate not only in 2021 but maybe 2022 and beyond.

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* Sudhir H. Kalé, Ph.D., is the founder and CEO of GamePlan Consultants, a boutique consultancy that advises casino companies on matters of corporate culture and marketing. He has published around 150 articles on the marketing and management of casinos.

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