As inflation begins to bite in Western economies, reaching 10% in many European countries, many questions are lingering regarding the future of certain industries. While some industries are better equipped to deal with price rises, others will struggle immensely to keep afloat.
In particular, industries such as the food industry are suffering disproportionately. This is one of the driving forces behind such a high inflation rate. They are seeing monumental and unprecedented rises in their supply chain costs.
It is a term that is frowned upon in economics. Still, a small number of industries are considered “recession-proof” due to the realms in which they operate. For some analysts and economic experts, the gambling industry is one of those industries.
How Does The Industry Prepare For Uncertainty?
Despite recent economic uncertainty regarding the inflation rate, as well as other factors causing market uncertainty, the gambling industry still sees investment flow from large institutions such as investment banks and hedge funds.
This is not a new trend. The big casino operations and gambling companies have long been on the books of Wall Street’s biggest investors. You’ll rarely see these huge investors get it wrong, and they will not likely be getting it wrong by backing the big gambling companies.
However, that isn’t to say they will continue to make gigantic profits hand over fist, and there will likely be some retraction. Especially if the economies in the West enter a recession. This scenario is considered very likely by the end of this year. This has already been hinted at by leaders across the G8. Joe Biden has referenced it several times over the past few months.
As the gambling industry is shifting its focus online, it is obtaining larger profits. This is because it can open its casino floors up digitally to gamblers from all over the world. Such profit margins in the gambling industry will aim to buck the trend and continue growing, irrespective of a recession or a global inflation crisis.
One way they will be able to brace themselves for the upcoming economic risks is to tighten their belts and manage their finances and profits accordingly. In the gambling industry, this may look like a further movement towards online-based casinos and a shift towards operating solely in the digital space, offering a wide variety of online slots.
Casinos and gambling operators may close physical bookmakers to manage fixed costs such as rent and electricity prices. They would likely look to absorb the cost into other sectors of their businesses.
Some companies already have this business model, which has operated largely successfully in the past few decades. External factors have been favorable to allow these industries to flourish. The main driving force has been good global market conditions. As well as the rise of the tech sector and central government allowing regulations that ensure these companies can continue to operate online and in a physical casino.
How Will Casinos Meet The Consumer Demand?
Just because there is a recession and an issue with inflation doesn’t mean people will not want to gamble. Many people have a modest bet at the weekend, which is usually factored into their budget. They may need to scale down slightly, but plenty of high rollers frequent online and land-based casinos to keep their head above water.
The gambling industry will be thrifty with their profits during this period. They may even look to invest the money into inflation hedges such as gold to mitigate some of their losses.
If their business account is stagnant with the same balance, inflation will eat into this. These companies are managed by huge specialist accounting firms and financial advisors. They are getting top advice. They will likely already be moving toward a strategy where they are fully prepared for inflation issues.
The gambling industry is a small fish regarding economic policy and currency being exchanged in the hundreds of billions of dollars daily. However, their business model and how they operate mean they stand in a much better position. This becomes more apparent as a host of other companies may not survive the next 12 to 18 months.
It’s difficult to see a situation where the gambling industry will struggle to come out of the other side in any global downturn or recession.
Yes, the profits will fall, but due to so much gambling on mobile phones, external costs are minimal for both business and customer. This is a solid footing to start on with limited overheads. Especially if you don’t want to be hit by the consequences of a recession and high inflation.
The gambling industry will be more concerned about legislation that limits them from operating in the way they do. They are operating with successful profit margins at the moment. Unless regulation comes into play, they will likely stay in the green.