Are land-based casinos in NZ doomed?

New Zealand’s gambling industry is undergoing restructuring primarily due to users’ online activities and available technology. The traditional attractiveness of land-based casinos is declining because of the availability of alternative options.

Close to 30% of New Zealand adults now engage in online gambling, which considerably alters the geographical context of participation in gaming activities. Having access to smartphones and other mobile devices increases the likelihood of using gambling applications, thereby enhancing the preference for remote-facing services over physical buildings. 

Unlike traditional casinos requiring time and travel, online platforms can be accessed from virtually anywhere, providing instant access to a plethora of games at any time.

This change not only stems from ease of access. Many users are also captured in the online space due to an extended multi-gaming option, less restrictive participation conditions, and more adaptable gambling limits. The online sphere is increasingly attracting many customers who would have otherwise settled on in-person experiences, especially with live dealer functionalities and advanced mobile technology fostering similar engagement to physical venues.

With a decrease in traffic to brick-and-mortar venues, operators need to rethink their strategies. It is no longer a question of whether digital gambling is a fad, but to what extent it will disrupt the industry.

The Rise of Online Platforms and What It Means for Land-Based Venues

Digital casinos are not only gaining popularity but are rapidly preferred over physical ones. According to New Zealand Casinos, the market for online casino in New Zealand is expanding and was expected to surpass NZD 1.2 billion in 2024, with projections expecting continuous growth in subsequent years. This growth supports broader spending habits and indicates a robust shift rather than a fleeting increase.

Specialized online platforms geared towards local audiences were critical to this change by offering customized content and services specific to New Zealand. These websites assist players in navigating the online gambling space by providing step-by-step tutorials, comprehensive guides, and reviews describing bonuses and mechanics of various games. Thus, players stand to gain from more information and increased confidence in online gambling as opposed to traditional forms.

The impacts on land-based casinos are becoming more apparent. For instance, in Queenstown, the closure of SkyCity Wharf Casino in 2019 was telling. Despite being at a prime location, the casino’s long history did not help it garner sufficient foot traffic. 

SkyCity Entertainment Group’s decision to shut down was driven by dwindling customer numbers and cutting down on expenses to focus on more profitable business lines. While this decision may have seemed unconnected in the moment, it is becoming clearer that this was a strategic move that could set the course for future planning.

But this isn’t only in New Zealand. Take Sweden, for example, where state-owned Casino Cosmopol is also closing down its brick-and-mortar locations because of continual losses and high competition from online platforms. With New Zealand’s emerging trends, there is growing debate about the effectiveness of physical casinos in secondary markets.

Economic and Regulatory Pressures Facing Physical Casinos

Land-based casinos operate under an economic and regulatory dual threat. The gaming industry in New Zealand is estimated at NZD 3.1 billion annually, although the contribution from land-based outlets continues to decline. There is a considerable online gambling market, particularly through foreign websites. This trend poses challenges not only to the revenues of physical industry players but also raises concerns as to how local regulations will match up with the international rivalry.

The government of New Zealand, on the other hand, is looking to tighten control over online gambling and intends to build a licensing framework for online casino operators by 2026. This model anticipates that up to 15 operators will be permitted under strict consumer protection measures, such as age verification and advertising control, with increased scrutiny on youth access. While intended to safeguard the online consumer, these measures will complicate operations for land-based operators who wish to expand their services to the internet.

The gap between online and physical casinos continues to narrow, with the latter facing ever more strict legal requirements alongside online competitors. From a business perspective, these changes create fine opportunities; however, from a regulatory perspective, they increase scrutiny. For instance, in February 2022, SkyCity Auckland was under investigation for its responsibility practices and was temporarily closed for five days.

The same scrutiny now impacts the very structure of these businesses. Changing consumer tastes make them gravitate towards novel experiences offered by nimble online platforms, while land-based casinos must deal with stubborn overhead costs, physical footprints, and rigid competition. A digital-first approach, encapsulated by a more friendly regulatory scene, makes it extremely difficult for these enterprises.

In short, while the outlook for New Zealand casinos remains dire, there is some hope for transformation. Land-based casinos have an opportunity to survive by diversifying their offerings to include robust entertainment options like restaurants, live shows, and massive audience events, which in turn, helps broaden their appealing scope. However, those changes come at a price, one that will deeply impact existing business structures.

Equally, there is no indication that online gambling is slowing down. The trend in this sector appears to be positive, with growing consumer confidence in online platforms and the market’s forthcoming regulatory system intended to standardise and legitimizse the industry.

For the physical casinos, these challenges related to changing demand and increased regulations pose a dire threat. Not being able to adapt, while it doesn’t spell immediate catastrophe, will foster slow but certain decline in market relevance, and that risk is on the rise. It is not known whether other physical casinos in New Zealand will follow the course of SkyCity Wharf Casino, but the trend is undeniable.