American Indian tribes are expanding and renovating casino and hotel facilities in an effort to bolster a lethargic tribal gambling industry that for many indigenous communities is the primary source of government services to their citizens.
Much of the expansion involves non-gambling amenities such as hotel rooms, parking garages, movie theaters and restaurants, all intended to help tribes cope with a seven-year cycle of uninspiring revenue growth from the casino floor.
Tribal casino operators also are implementing operating and design efficiencies and improving player marketing programs to increase their gambling income.
Meanwhile, the internet and social media, combined with contemporary entertainment offerings, is increasingly becoming a tool for reaching a relatively untapped market of younger gamblers who, unlike baby boomers, are not enamored with buffets and slot machines.
“The trend I’m seeing is the creative use of facilities and the social media to reach out to new and younger market segments,” says Steve Rittvo, chairman and CEO of the Innovation Group, an international gambling and hospitality consulting and management company. “Part of the reason we’re seeing a decline in casino revenue is the gaming customer is aging. We’re not seeing the younger clientele coming to the casino. Slot machines are not holding people’s interest. At least, not the way they were.”
The industry trends are a reaction to a maturing and sluggish Indian gambling market limited by federal law to largely rural reservations often inaccessible to potential customers. The nation’s 450 tribal casinos are also hindered by tribal-state regulatory compacts restricting the scope of gambling on Indian lands.
Revenue from tribal casinos in 28 states finally reached $28 billion last year, according to the National Indian Gaming Commission, a modest 0.5 percent increase over 2012 and a continuation of a slow growth trend that began in 2007.
The annual double-digit growth ignited with the passage in 1988 of the Indian Gaming Regulatory Act (IGRA) crawled to a halt in the last seven years, during which it has not exceeded 4 percent, says economist Alan Meister, author of the Indian Gaming Industry Report.
Kevin Washburn, the Interior Department’s assistant secretary for Indian affairs, in July told a congressional committee the stagnant gambling industry is of great concern to tribal leaders. Gambling revenues are a crucial resource in providing education, health care, housing and government infrastructure to Indian Country.
“Indian gaming remains a very, very important part of the picture on Indian reservations,” Washburn told the Senate Committee on Indian Affairs, generating 10 times the tribal budget of Interior and the Bureau of Indian Affairs. “The sad thing is Indian gaming revenue has really plateaued.
“I don’t anticipate dramatic future growth,” Washburn told the senators. “That means we’re going to have to learn to live with the existing amounts of revenue.”
Senator Al Franken, noting the federal government’s failure to adequately fund its trust responsibility to tribes, asked Washburn what impact gambling’s demise would have on indigenous communities.
“I shudder to think what Indian Country would look like without the revenue that comes in from Indian gaming,” Washburn said. “No one believes we have enough money to fulfill our trust responsibility to Indian tribes. Indian gaming, much more than our own appropriations, has underwritten tribal self-determination and tribal self-governance.”
Gambling Remains A Vibrant Industry
The seriousness of the industry slowdown is subject to debate.
Jason Giles, executive director of the National Indian Gaming Association, the industry’s trade organization and lobby, says Washburn is prone to exaggeration.
“By no means have we accepted that we’ve flatlined, that we’ve plateaued,” Giles told attendees of the recent Global Gaming Expo in Las Vegas.
“We reject that out of hand. We still believe Indian gaming will continue to grow. As the national economy recovers, Indian gaming will continue to grow.”
The figures belie Giles’ optimism.
“Since 2009 we’ve seen three straight years of growth, but still a very modest growth, below the pre-recession growth rate,” Meister says.
“We had already begun seeing a slowdown before 2007,” he says, “due in part to maturation, though not necessarily saturation, of the Indian gambling market.”
New casino development has become a thing of the past.
“We haven’t seen as many new projects. There have been a few mostly small ones,” says Charles “Chief” Boyd, principal of Thalden Boyd Emery Architects, a Native American-owned firm.
The company’s last greenfield project was Indigo Sky, a Wyandotte, Oklahoma, casino opened two years ago by the Eastern Shawnee Tribe.
Despite the lack of revenue growth and new casino construction, most believe tribal gambling remains a vibrant industry.
“The growth of the industry has slowed, obviously,” says Dike Bacon, principal of Hnedak Bobo Group architects, “but it’s still a $28 billion industry. It’s not stagnant. It’s pretty healthy.”
Economists are hopeful an improved economy, Obama administration policies, tribal-state compact negotiations, advances in slot machine technology and other factors will speed gambling growth in Indian country. (See related story, right.)
But industry observers believe it is crucial that tribes expand and improve existing facilities with non-gambling amenities.
Commercial casino companies generate 65 percent of their revenue from non-gambling sources, says Knute Knudson, a vice president of IGT, the nation’s largest slot machine manufacturer. But only 11 percent of revenue from Indian facilities is driven by amenities off the casino floor.
That percentage will likely grow.
“You can’t walk down a hallway occupied by tribal entities without hearing talk about a new hotel, additions to a casino, remodeling restaurants, planning for entertainment ventures,” Knudson says.
“Not all of these projects are going to happen. But some of them will.”
Building Beyond The Casino Floor
Non-gambling projects in Indian country are, indeed, numerous.
• New hotel towers and parking facilities at the Chickasaw Nation’s WinStar World Resort in Thackerville, Oklahoma.
• A $100 million hotel tower and 584-space parking garage at the Chumash Casino in Santa Barbara, California, owned by the Santa Ynez Band of Indians.
• A 242-room hotel tower, events center and restaurant at the FireKeepers Casino Hotel in Battle Creek, Michigan, owned by the Nottawaseppi Huron Band of Potawatomi Indians.
• A parking garage, golf pavilion and spa at the Sandia Pueblo’s Sandia Resort & Casino in Albuquerque, New Mexico.
• New restaurants and a 715-space parking garage at the Seneca Nation’s Seneca Casino in Buffalo, New York.
• New hotel towers, parking garages and convention facilities at Ho-Chunk Nation casinos in Wisconsin.
• Hotel towers, parking garages and restaurants at three Alabama casinos operated by the Poarch Band of Creek Indians.
“Tribes are looking at more amenities,” says James Klas, founder and principal of Klas Robinson Hospitality Consulting. “This means conference space, water theme parks, movie theaters and bowling alleys. Retail is finally moving to the forefront.”
Rather than building new facilities, tribes are expanding and renovating existing operations.
“A lot of the early properties need to refresh their image,” Boyd says. “After five or 10 years you need a new feel or look. We’re seeing a lot of that.”
“A facility wears out. It gets old, dated,” Bacon says. “There’s a need to constantly refresh, renovate and refurbish.
“We’re not seeing the greenfield, $200 million project, but there are substantial casino renovations and amenity additions and improvements. There’s a lot of that.”
Boyd designer Nick Schoenfeldt says tribes are drawing on their culture and traditions to distance themselves from commercial operations.
“The effort now is how to make the place unique,” Schoenfeldt says, which includes design elements depicting tribal heritage and traditions. “It’s their way of saying, ‘We are not a commercial gambling place. We have a heritage. We have traditions.’”
Consultants such as Klas Robinson and the Innovation Group work with architects to ensure the amenities are economically strategic and geared to generate more revenue from the casino floor.
The convenience of a garage parking space, for instance, can mean $22 a day in the casino. An expensive, land-intensive golf course, on the other hand, might generate a 7 percent return on investment.
“Parking garages have a huge impact on the gaming floor,” Boyd says. “Golf courses are way down the line.”
“Tribes have learned you’ve got to spend the money where it counts,” Bacon says. “The investments are extremely strategic. You’ve got to spend the money in the right place to get the best return.”
The best use of facility space is also an issue. Rather than building a nightclub or ultra-lounge that goes unused much of the day, thought may turn to a multi-use nightclub and meeting room.
“No one wants space they’re only using on the weekends,” Schoenfeldt says. “They want a space that is more productive.”
Movie theaters can be profitable, as the Confederated Tribes of the Umatilla Indians found out when they built the five-screen Cineplex at the Wildhorse Resort & Casino in Pendleton, Oregon.
“They were skeptical at first, but they’ve been extremely pleased with the results,” Boyd says, particularly in that it drew more families to the resort.
More tribes are also exploring “flagging” or contracting regional and national restaurants and partnering on entertainment projects. Hard Rock has been extremely popular in Indian Country.
“You’ve got to reach down to a younger demographic,” Rittvo says. “The facility has to be a little more club-centric and a little less baby boomer resurrection entertainment.
“You’re not seeing the old bands coming in. The industry is taking more of a risk with younger bands, younger entertainment.”
There is no universal trend in a nationwide industry that varies dramatically from one state or gambling market to the next.
“In Indian Country there is not a settled opinion on things,” Klas says. “There are tribes that adamantly want nothing to do with kids and families. Other tribes do want kids and families.
“Some tribes are totally open to alcohol,” he says. “Others are grudgingly allowing it but have a history of not being excited about it.”
Casinos are increasing reliance on social gambling internet sites to reach out to a younger clientele.
“These sites are relatively inexpensive to implement, and tribes are finding they are driving more traffic to the brick-and-mortar facilities,” Rittvo says. “The premium rewards are linked to the casino, whether it’s a meal, or a night stay or just picking up a prize.”
Operators are also making better use of premium player databases.
“Tribes have very sophisticated databases, marketing teams and operations people,” Bacon says. “They’ve gotten very savvy relative to understanding customer demands and targeting customers they don’t have.”
Cause for Optimism in Indian Country
Unlike commercial gambling, American Indian casinos are subject to a myriad of federal and state regulations and political issues.
“As we have seen in tribal gaming since the very beginning, regulatory issues have been overwhelmingly significant,” says Knute Knudson, a vice president of slot manufacturer IGT.
Nearly 240 of 366 federally recognized tribes in the lower 48 states operate casinos, according to the National Indian Gaming Commission. About 60 other tribes share in the revenues.
With some 450 casinos restricted by the Indian Gaming Regulatory Act to tribal trust lands, the market in most states is nearing saturation.
Tribes can only operate casinos in states where they are legal, and only Texas remains a potentially lucrative market.
“There haven’t been a lot of new markets opening up,” says James Klas of Klas Robinson Hospitality Consultants. “There are not a lot of places that don’t already have tribal gaming.”
Yet Klas, Knudson and others believe there are paths to future growth in Indian gambling.
Obama administration policies, future tribal-state compact negotiations and improved slot machine technology are pathways to industry growth.
“I think there is opportunity in the future,” Knudson says.
The U.S. Department of the Interior has lifted what was a virtual moratorium on land/trust applications for casinos. The department also is proposing revised regulations on recognizing indigenous groups as tribal governments.
There are 19 current applications from tribes seeking trust land for casinos. And the revised regulations for recognizing tribes could also result in at least a small increase in tribal casinos.
“You can be sure there will be additional tribal casinos because of regulatory issues,” Knudson says.
Economist Alan Meister, author of the annual Indian Gaming Industry Report, says despite a nationwide flattening of gambling revenue there was growth in 22 of 28 states with Indian casinos.
“Many of the markets where tribes are located are not, by any means, saturated,” Meister says.
Unfortunately, he says, the growth took place in relatively small markets in Wyoming, Montana and North and South Dakota.
IGRA requires tribes seeking to operate Nevada-style casinos to enter into tribal-state regulatory agreements, or compacts, with officials of the states in which tribes are located. Many of these compacts require revenue sharing and limit the scope of gambling.
Tribes may fare well in future negotiations. Improved technology in Class II bingo-style machines that do not require compacts may give tribes leverage in the talks, particularly in California and Florida.
Class III, casino-style compacts in states such as Alabama, with exclusively Class II gambling, also could significantly impact tribal revenues.
Meanwhile, improved performance of slot machines is expected to increase the bottom line for a number of tribal governments.
“You will see new stuff this year that takes it all up a level, all designed for performance on the casino floor,” Knudson says.
The cause for optimism is welcomed in Indian country.
But Kevin Washburn, Interior’s assistant secretary for Indian affairs, remains troubled.
“The next 25 years for Indian gaming I believe is uncertain,” Washburn said in July testimony before the Senate Committee on Indian Affairs.
“Nothing lasts forever. No great economic resource lasts forever. I’m concerned where we will be in another 25 years.”