Similar to cannabis legalization, many U.S. states are legalizing casino gambling to generate tax revenue needed to fill gaps in their budgets and fuel local economies, both of which suffered from the COVID-19 pandemic-induced economic downturn.

The U.S. casino gaming industry’s total 2023 gross revenue totaled $101.4 billion, but its economic impact was $327.6 billion, according to research by the American Gaming Association (AGA). Casino gambling supported 1.8 million jobs and generated $52.7 billion in taxes and tribal revenue share.

The most recent states to legalize casino gambling were Virginia, Nebraska and Arkansas, bringing the total number of states with some form of casino gambling (tribal or commercial) to 44) plus Puerto Rico. These three states recently opened casinos and more are planned, and several states where it already is legal recently approved licenses to add more casinos, including New York and Illinois, which currently has 15 authorized casinos operating throughout the state, according to the Illinois Gaming Board.

John DeCree, CBRE head of research for Global Gaming, notes that state legislatures in North Carolina, Georgia and Texas also are considering legalizing casino gambling, but it often takes years to pass legislation legalizing gaming and then develop casinos.

The legalization of casinos has opened the door to a broader group of investors, developers and globally recognized casino brands that seek to create casino destinations in key U.S. markets, notes Rob Masi, principal and expert in Real Estate – Strategy and Transactions at the global accounting firm EY (Ernest & Young). “These brands and investors are often looking to create dedicated casino-hotels that offer Las Vegas-style entertainment and amenities,” he says.

Masi suggests that casinos also drive occupancy at all hotels in the vicinity, especially during peak tourist seasons, providing additional opportunities for investors. “Not all new casinos being constructed feature a hotel component, so the impact on the performance of nearby properties will depend on the extent to which hotel rooms were included in the casino project,” he says.

Masi advises, however, that in existing casino markets with unlimited gaming licenses or where casino licenses are still available, the opportunity for investors is dependent on local market considerations, existing inventory, and the opportunity to differentiate a new product.

He also cites another potential opportunity for investors. “We also have observed a significant increase in the number of transactions involving the sale and leaseback of casino real estate, which separates the real estate ownership from operations,” Masi adds, stressing that this trend is expected to continue as new casino-resorts are developed and stabilized.

The number of casino hotel resorts is increasing in step with casino legalization and expansion in licensing. Over the last year, the number of U.S casino hotels increased by 6.2 percent, bringing the total to 375, according to IBISWorld. Over the last three months, nine new casino hotels opened nationwide and 25 more are underway and/or scheduled to open this year, according to the World Casino Directory.

Decree says that Las Vegas remains a hot market for casino hotel growth to meet rising demand from both tourists and growing local populations migrating to the city and other parts of the state, as well. “Las Vegas continues to attract large convention crowds and is gaining market share in the large U.S. convention and event business, which increases visitation, particularly midweek, driving up occupancy and the need for incremental hotel supply.”

He notes that major entertainment developments, including the opening of the MSG Sphere, a unique music, entertainment and sports arena that offers interactive and immersive sensory experiences, and arrival of professional sports teams, the Las Vegas Raiders and Vegas Golden Knights hockey team, attract additional visitors.

New casino-hotel designs call for unique dining and food and beverage options and other entertainment amenities, including high-end fitness/ sports facilities and spas, event spaces, theaters, and subsequent programming of events, to drive traffic.

The first new casino hotels in two years to open in Las Vegas came online in December 2023: Fontainebleau Las Vegas, city’s tallest hotel, the 67-story, $3.7 billion, 3,344-key Fontainebleau Las Vegas hotel-resort, featuring 550,000 sq. ft. of convention space; a 55,000-square-foot spa;14,000-square-foot fitness center, and 30 bars and eateries, including a nightclub, day club and food hall, and the $780-million, Durango Hotel & Resort, which has 209 rooms and suites, 11 bars and restaurants, a food hall, 20,000 sq. ft of meeting space and 24-hour indoor-outdoor sportsmen’s lounge.

Additionally, two casino resorts are under development: the $550-million, 19-story, 526-room Dream Las Vegas casino resort, which is scheduled to open in July, features a roof-top pool deck with bar/lounge and seven dining and nightlife venues, and Houston-based Fertitta Entertainment is developing a 43-story, 2,420-room, upscale hotel-casino, with 90,000 sq. ft. of meeting space that will open within the next two years.

Outside of Las Vegas, new urban casino-hotel markets experiencing success include Boston, Chicago and greater Baltimore-Washington, D.C.- metro area (Virginia, Maryland and West Virginia). New York also is in the process of issuing casino licenses for up to three full-scale casino resorts in the New York City metro area and is expanding several existing commercial casinos.

Masi notes that legalization of casinos nationwide has attracted traditional casino operators and developers to construct Las Vegas-style, integrated resort casinos in select new markets, particularly in markets with existing competition but limited amenities. “Las Vegas-style casino destinations incorporate a variety of unique food and beverage options, performance venues, 5-star hotels, spas, sports and recreation and retail, with an effort to incorporate an authentic local experience through local business partnerships,” he adds.

A good example are California’s tribal casino resorts, which offer modern, luxury accommodations and Las Vegas-style entertainment but also feature museums, powwows, and design touches inspired by traditional crafts, serving as a reminder of the cultural diversity of the state’s many tribes and the ongoing role of Native Americans in contemporary California life.

Tribal casinos are significant players in states that without legalized commercial gaming, like California, North Carolina, Oklahoma, and Texas, notes Masi. California has the largest number of tribal casinos, with more than 70 tribal casinos throughout the state. Oklahoma The largest concentration of luxury casino-resort hotels with Las Vegas-style entertainment are in the Southern California’s Riverside and San Diego counties. These casinos have not only benefit tribal economies, they provide a major boost to state and local economies, supporting nearly 125,000 jobs and adding almost $20 billion to the state’s economy, according to the latest report from Visit California.

“Tribal operators have been active in reinvesting in their properties to enhance service offerings to compete with other casino-resorts,” Masi continues. For example, a partnership of Hard Rock International and the Tejon Indian Tribe in Kern County, Calif., broke ground in December on a casino resort, scheduled to open in 2025, that features a 400-key Hard Rock Hotel; 150,000-square-foot casino; food and beverage options; a pool; spa; cigar lounge; and 2,800-seat Hard Rock Live event venue that will draw attractions like concert performances, comedy acts and sporting events.

Additionally, the Rancheria Me-Wuk Indians of California Indians of California recently expanded the Chicken Ranch Casino in Tuolumne County, Calif., to include a 200-room hotel with breathtaking views of the Sierra Nevada and Yosemite National Park and featuring a rooftop pool, tribal cultural center, event space, fitness center, high-end steakhouse, coffee shop, game arcade and gift shop.

Casino markets appear to have beaten the odds of inflation’s negative spin on disposable income, according to both Masi and Decree. “We have not observed inflation playing a significant impact on casino business through 2023,” says Masi. “We believe the overall casino market has continued to see strong performances, even amid inflation and economic challenges.”

In fact, gross gaming revenue for slots and table games in 2023 were up 3.8 percent and 3.5 percent, respectively, in casinos nationally, according to the AGA. Las Vegas also continued its strong performance post-COVID pandemic: visitor volume increased 5.2 percent; hotel occupancy increased 4.3 percentage points; the average daily hotel rate grew by 11.9 percent, and RevPAR increased by 18.0 percent in 2023, compared to 2022, according to the Las Vegas Convention and Visitors Authority.

While some casino markets have experienced moderating consumer demand over the last year in mature and competitive markets, Decree says that commercial casino revenue nationwide increased slightly over 2022. This is due, in part, to new casino openings reaching untapped demand and large destination, casino markets, like Las Vegas, continuing to see strong, post-pandemic demand, he adds. According to the AGA, Las Vegas reported a record 7.2 percent year-over-year (YOY) increase in revenue for 2023.

Masi says that Atlantic City and the Chicago metro area were the two top U.S. commercial casino markets outside of Las Vegas, generating a 2.3 percent YOY increase in revenue in 2024, while the other large casino market, the Baltimore-Washington, D.C,.metro area, experienced a 4.3 percent YoY decline in revenue.

Though the legalization of casinos nationally over the past couple of decades had created some competition for Las Vegas, Decree says that it also has raised awareness of casino entertainment overall, which boosted the customer pool for Las Vegas visitors. He notes that as a result, Las Vegas continues to reinvent itself, creating casinos and entertainment unlike anywhere else in the world.

"At this point, it appears regional casinos are more complimentary to Las Vegas than competitive,“ Decree continues. “After the proliferation of Native American Casinos in California over the past two decades, the incremental casino expansion across the United States is unlikely to have much, if any, impact on Las Vegas.” Masi explains that this is because the demand source for regional casinos historically has been local and regional guests, whereas Las Vegas typically draws from broader domestic and international demand pools. He also suggests that casino operators in other markets aren’t playing in the same league as Las Vegas casino-hotel operators, which have invested heavily in diversifying their entertainment offerings to continue to differentiate themselves from other casino markets.