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Seminole Secrets

Florida tribe has become big player in the international casino industry

Seminole Secrets

Like most Native Americans, Florida’s Seminole tribe was treated abhorrently by the U.S. government. After three wars, the Seminole tribe was down to fewer than 300 in the 1840s. For the next 100 years, tribal members lived on the fringes of society. Their reservations were placed on some of the state’s most inhospitable lands, deep in the Florida Everglades.

But in the 1950s, the tribe began to get organized, and when gaming became an option for Native Americans in the 1970s and ’80s, the Seminoles were ready. Today, the casinos and hotels owned by the tribe employ more than 10,000 people, including many who are part of the more than 30,000 Hard Rock employees worldwide.

Also like some tribes in other states, the Seminoles had little luck in convincing the Florida state government that casinos were in their best interest, so they were limited to establishing small Class II slot parlors in five locations on their own reservations. But the governor repeatedly refused to negotiate a compact, which meant the tribe could only offer Class II games. Later, the tribe joined with developers to build Hard Rock casino resorts in both Hollywood and Tampa, still limited to Class II gaming. It wasn’t until Charlie Crist negotiated in good faith for a compact, signed in 2007 and later amended in 2010, that the Seminoles were granted the right to offer table games and real Class III slot machines. In exchange, the tribe will pay Florida more than $1 billion in the first five years of the agreement.

Florida Foundation

Jim Allen was there in 2000 at the beginning of the process that resulted in the Hard Rock resorts, brought into the development by the Cordish Companies, which managed the construction process. Allen later became CEO of Seminole Gaming, and was recently rewarded by the tribe with a contract renewal (along with Hard Rock International President Hamish Dodds and CFO Brad Buchanan). He explains the separation of Seminole Gaming and Hard Rock International. (He and Buchanan are the only executives who have roles in both companies.)

“Seminole Gaming is actually the entity that is really part of the tribe itself,” he explains. “It’s the vehicle for the seven casino properties that we operate in the state of Florida. The flagships are the Seminole Hard Rock properties in Hollywood and Tampa. The other casinos are Seminole Casinos, including the facility that we’ve completely expanded and renovated up in Coconut Creek, and then the Seminole Casinos in Immokalee, Brighton, Big Cypress, and the original Seminole property, the Classic in Hollywood.

“That really makes up Seminole Gaming. We were a licensee of Hard Rock International when we opened the Tampa and Hollywood facilities back in ’04. But in 2006 we actually purchased the Hard Rock International company. So that really is a separate LLC. It is a tax-paying entity; it is a corporation here in the state of Florida that owns and operates the Hard Rock brand on a worldwide basis, excluding certain geographic territories.”

Like most tribal gaming enterprises, the Seminole operations are good for the state, as well as the tribe, says Allen.

“The tribe is one of the largest employers in the state of Florida, with an annual effect of billions and billions of dollars on the Florida economy,” he explains. “All of the dollars that we make on a net income basis, whether it be at Seminole Gaming or Hard Rock International, stay in the state of Florida. When you combine Hard Rock International, which is a company that’s in 55 countries around the world, and Seminole Gaming, there are revenues in excess of $4 billion. That company’s also based here in the state of Florida, with the worldwide headquarters for Hard Rock International in Orlando.”

The recent flirtation between the state of Florida and commercial gaming companies came to an end in the 2011 legislative session when proposed bills were tabled for lack of votes. Allen and Seminole tribal officials reminded the state of the benefits brought by the tribal casinos that would be diminished if not eliminated by the introduction of integrated resorts. Allen says the tribal casinos were targets.

“We certainly recognize that our success has created interest from all over the world,” he says. “Obviously, our friends at Genting probably will receive the most publicity about potentially doing something here in the state. But at the same time, the compact is a document that the tribe fully intends to honor, and we are hopeful that the state of Florida will. And that has some very specific language in it. That’s a public document, so everybody’s aware of it; there’s no secret here.”

The consequences are far-reaching, should the state decide to expand gaming.

“If the state decides to expand gaming, we’ve mapped out a very definitive course on what happens if there’s an expansion outside of Miami-Dade or Broward, what happens if there’s an expansion inside Miami-Dade or Broward, what happens if table games potentially are offered to the parimutuels, and the list goes on and on,” says Allen.

“The compact addresses all these possibilities. And if the state of Florida feels that they want to create an environment where there is gaming all over the state, then obviously the revenue share that comes from the tribe would be deemed illegal by the United States, by the Department of Interior, and we would no longer be paying any revenue share to the state. And whether or not that works for the philosophy of the state of Florida, frankly I think that’s something for the elected officials of the state of Florida to address.”

Florida Market

Allen believes that the state has some concerns about the kinds of visitors that expanded gaming may attract.

“I’m not referring just to tax dollars or revenue share, but I’m referring to the social impact of gaming, the perception that Florida is a family destination state. We’ve all worked in Vegas at one time or another. Certainly Las Vegas is perceived to be kind of an adult entertainment environment. And when it did try to attract families, obviously that particular formula did not work.

“So, I think if Florida wants to be more like Las Vegas, and have casinos all over the state, the results are unknown. We can be a true destination model and draw international tourism, specifically being so close to Central and South America. But until that roadmap is written and debated and discussed between all the parties, it’s a very interesting set of circumstances.”

As successful as the Seminole Hard Rock is in Florida, the one in Tampa is even more lucrative. Allen says there are many reasons for that.

“The brand is a great attribute to the building itself, so it becomes an interest for the tourism that goes into Orlando, as well as the local residents,” he says. “There’s pretty good demographics associated with household income in that region of the state, as well as a pretty strong population base within 100 and 120 miles. And at the same time, we’re not naïve to understand that it really doesn’t have a lot of competition up there. In Hollywood, where you’ve got nine or 10 different casinos you’re competing with, and while some of them are parimutuels with only 1,000 or 1,500 games, we’re competing with casinos that give coin or free play or comps or food or tickets to a show or whatever it is. Tampa does not have to deal with local competition.”

Like Hollywood, the Seminole Hard Rock Tampa has continued to upgrade its facilities. A completely new Hard Rock Café was opened there in 2011, and last year a new Asian Gaming parlor and high-limit slot room debuted. Allen says the tribe has been very judicious with reinvesting in the properties, and it has paid off handsomely.

“We’re always considering how much we need to spend to stay current, and when you potentially over-spend then have excess capacity issues where you just can’t drive the margins,” he explains. “We talk about that on a daily basis. We spend a tremendous amount of time analyzing capital dollars return on investment, and I think there’s rarely a definitive answer.

“It’s an evolving situation, that what may have been the right decision three years ago is now the wrong decision. And certainly, when you look at the decisions that people made in 2005, ’06 and ’07 where a lot of capacity came into the gaming industry on a national basis, with multibillion-dollar projects, probably a lot of us would have made different decisions then, based upon what we know today, as far as what was happening with the economy.

“So from my standpoint, I think that is something that you always need to revisit. We are fortunate. If we see the need to enhance a particular area of the business model, we have the capital to do so.”

One of the tribe’s original facilities, Seminole Casino Coconut Creek, has been totally transformed over the last several years with new restaurants, parking, landscaping, casino space and an entertainment venue called the Pavilion.

“The place is just a home run,” says Allen. “It’s probably one of the prouder things that I’ve done in my 33 years in the industry. The numbers are really growing at rates which, candidly, we weren’t even expecting. And it’s not just a locals casino. We’ve developed a great relationship with the Boca Resort and Country Club, so we will take blocks of rooms there, and we’ll give somebody an amazing experience at the Boca Resort, and certainly when they’re ready to come over and gamble, we have a car waiting for them to come over to the Coconut Creek facility.”

Prior to the tribal-state compact, the requirement to offer only Class II gaming produced problems for the Seminoles, but Allen says that turned out to be a benefit, as the tribe’s casinos all began using a state-of-the-art Class II slot product.

“We identified new technology as one of the core values or the mission statements of the organization,” Allen says. “And truth be told, it wasn’t that we were just that incredibly smarter than everybody else in the industry; we just were forced to figure out a way to offer a device that would be entertaining, and have it be able to meet the legal definitions of Class II, as we were migrating towards a Class III environment. So, because of that, we obviously needed to spend on talent, on capital dollars, on systems, and on relationships with manufacturers and providers.

“In addition to that Lyle Bell, who recently retired with us, was also chairman of the Gaming Standards Association—Lyle and myself probably personally twisted more than a few arms, both from the manufacturers—including IGT—and even some of the operators. So we went out and solicited the manufacturers to get protocol technology developed on an industry basis, not just for Seminole Gaming, and Lyle just did an amazing job at leading that, not just for us, but on a national and international basis.”

Roger Gros is publisher of Global Gaming Business, the industry's leading gaming trade publication, and all its related publications. Prior to joining Global Gaming Business, Gros was president of Inlet Communications, an independent consulting firm. He was vice president of Casino Journal Publishing Group from 1984-2000, and held virtually every editorial title during his tenure. Gros was editor of Casino Journal, the National Gaming Summary and the Atlantic City Insider, and was the founding editor of Casino Player magazine. He was a co-founder of the American Gaming Summit and the Southern Gaming Summit conferences and trade shows. He is the author of the best-selling book, How to Win at Casino Gambling (Carlton Books, 1995), now in its fourth edition. Gros was named "Businessman of the Year" for 1998 by the Greater Atlantic City Chamber of Commerce, and received the Lifetime Achievement Award from the American Gaming Association in 2012.

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