Penn Entertainment (PENN +0.66%) is a casino operator with 43 properties in 20 states. The gambling industry is evolving quickly, however, and that's showing up in the company's customer base. Although there's still a very large number of older adults who gamble with Penn, there's also a notable shift toward younger players. Here are some important figures to keep in mind.
Penn is not about "old people" at slot machines
When you look at Penn Entertainment's customer base, roughly one-third is aged 65 and over. That's by far the largest group, so older adults are still very important for the casino operator's business. But there's an interesting trend here, in 2019 this age cohort made up 42% of the company's customers. So there's been a roughly 9.6 percentage point drop from pre-coronavirus levels. That's a nearly 23% change, which is pretty notable over such a short period of time.
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Adding to the intrigue here, the number of 55- to 64-year-olds who frequent a Penn-operated casino didn't change. It is still 27%. All in, older adults, lumping the two age groups together, make up roughly half of the business. That's largely in keeping with the historical view of casinos.
But there have been big changes in the lower age group cohorts. And they aren't necessarily an accident. For example, in addition to the 43 casino properties Penn operates, it operates online sports betting in 17 jurisdictions and has digital casinos operating in five jurisdictions. These business lines will both likely attract more younger customers.
It's also worth noting that Penn recently inked a deal with Disney's (DIS 2.13%) ESPN, which is perhaps one of the best-known sports brands in the world. The company will have exclusive rights to the ESPN Bet brand for 10 years and will rebrand its own offering to ESPN Bet. This partnership, which includes a marketing component, is likely to further enhance Penn's customer base at the younger rungs of the age spectrum.
What are the trends among the "young?"
So where did the 9.6 percentage points from the 65+ age group go? The 25 to 34 age group was roughly 3% prior to the pandemic and is now at 5%. While that 200 basis point increase isn't a lot on an absolute basis, the customer group increased by 66%! Of course, that's off of a small base, but it is still worth monitoring, given the recent ESPN tie-up.
The 35 to 44 age group increased from 10% to 13%. So there are another three percentage points. That increase is around 30%. The 45 to 54 age group, meanwhile, increased from 18% to 22% -- the final four percentage points and a roughly 22% jump from pre-pandemic levels.
NASDAQ: PENN
Key Data Points
This shift down in age is very good if you look at Penn Entertainment from a long-term perspective. The company needs to constantly find new customers. And since the 55 to 64 age group didn't budge between 2019 and 2023, the size of younger age groups increasing suggests the future could be bright for the company's gaming operations.
But there's also a risk. Older adults are generally expected to have more discretionary cash and time to spend on entertainment. If there's an economic downturn, younger consumers -- many still supporting families and larger homes -- might pull back harder than older adults. So Penn's results could be even more economically sensitive, given the shifts taking place in its customer base despite the benefit to the company's long-term prospects.
Penn is changing with the times
The good news here is that the changes Penn Entertainment is making appear to be working and broadening its appeal among consumers. The bad news is that the shift is so new that it is hard to know how it will impact the top and bottom lines when the next recession hits.
Penn could, indeed, be a more volatile business going forward. So if you own Penn or are looking at it, don't think about "old people" blindly pulling one-arm bandits -- that's increasingly a passe view of what Penn is aiming to become.
