Making the News

Casino Journal

Originally Published:Tuesday, September 1, 2009
http://www.casinojournal.com/articles/cover_story/bnp_guid_9-5-2006_a_10000000000000673358

Toughing It Out

By John Grochowski
Casino Journal

At the giant Mohegan Sun casino in Uncasville, Conn., Chief Executive Officer Mitchell Etess reflected on the recession that has rocked American business, and its effect on Native American casinos. "I thought by now, frankly, we would have seen the decreases go down," Etess said. "But I'm not really comfortable that we've seen the bottom of the impact on our business. Even if the recession is over, it's going to take some time for us to see the rebound. Honestly, I have not seen any signs. It's basically survive and advance, and we're trying to take it one day at a time."

So it goes in much of the tribal gaming world, with casinos shelving or reducing expansion projects, reducing salaries or laying off staff, pruning spending and trying to find the right marketing push to keep the customers coming while waiting for the economy to improve.
The struggles are shared across the United States:

  • The New Mexico Gaming Control Board reported a decline of nearly $2.5 million to $173.4 million in the first quarter of 2009, despite two new tribal casinos coming online.

    Seneca Gaming Corp., which operates casinos in western New York, reported second quarter 2009 revenues of $141.3 million, down 8.5 percent from second quarter 2008.

    In June the Colusa Casino Resort in Colusa, Calif., was forced to lay off 42 employees from its full-time staff of 480. Meanwhile, Red Hawk Casino in Placerville, Calif., reported an 11 percent revenue decline in the fourth quarter of 2008 and reduced staff from 1,750 full-time equivalents to 1,500.

    Thunder Valley Casino in Lincoln, Calif., was forced to scale back expansion plans, revising a project that was to include a 23-story hotel, nine-story parking garage and a performing arts center to a 15-story hotel, a seven-story garage and a multipurpose meeting and entertainment room.

    At Mohegan Sun, a $740 million expansion project that was to include 1,000 new hotel rooms was put on hold. The Casino of the Wind portion of the project, with expanded gaming space, was opened in August 2008, but the hotel project was halted that September.

    And yet, through the recession, there have been hopeful signs:

    The Nottawaseppi Band of the Potawatomi was on track last month to open its new FireKeeper's casino in Battle Creek, Mich.

    In July the Eastern Band of Cherokee Indians broke ground on a 532-room hotel tower, part of a $633 million expansion at Harrah's Cherokee in North Carolina.

    The National Indian Gaming Commission in June released its annual survey of tribal gaming revenue, showing a 2.3 percent gain in 2008 to $26.7 billion. Some of that, particularly in the fast-growing Tulsa (Okla.) and Oklahoma City regions, reflects an increase in the number of gaming operations. It includes also declines in some areas - 5.6 percent in the Sacramento region (Northern California and northern Nevada), 3.5 percent in the Phoenix region (Arizona, New Mexico, Colorado and southern Nevada).

    And the full set of figures come with a caution from NIGC Chairman Phil Hogen.

    "The reports we get are based on tribal fiscal years, not on all the same calendar year," he explained. "While 40 percent of those have December 31 as the end of their fiscal year, more than 50 percent of them have September 30. We don't include in those numbers the last calendar quarter of 2008. As the recession deepened, that was when the biggest hit would have been reflected. So before anybody jumps to conclusions, saying the Indians are doing a lot better than anyone else, they were up while everyone else was down, not quite so fast."

    At the National Indian Gaming Association, the principal federal lobbying organization for tribal casinos in the United States, Chairman Ernest Stevens acknowledges the pain many tribes are feeling through the recession, but says economic difficulty is one thing Native Americans are well-equipped to handle.

    "On the overall we're surviving this thing," he said. "I've made some speeches to different folks, and I've said, 'America, welcome to our world.' Indian Country, as long as we can remember, has had to make adjustments. We didn't have anything, and then it got worse. So we have continued to struggle with the economy, with budgets, with dollars and cents, in order to meet our governmental responsibility to our children, to our education, to our health care. So this is not something that's new to Indian Country. It's not a big shock to Indian Country. As we make those adjustments it's kind of heartfelt that we have to work hard and be concerned about those tribes that are in tougher situations than others. ... That's kind of the emotional side of it. But overall I think we're doing better than some of our counterparts in the non-Indian gaming side, and I think that we're surviving this in part because we're kind of a local, customer-driven market, and we're kind of a drive-to customer market."

    Working together, he says, is the key to survival.

    "We just restructured what we call our American Indian Business Network. We're calling on our Indian businesses to collaborate with one another and unite. And we're calling on our non-Indian folks to stand with us in supporting this. What we've said to these folks is that in this industry the bottom line is about building Indian economies."

CARS, BOATS, TEA SETS

Mike Diamond, vice president for research at Spectrum Gaming Group, a consulting firm to the industry, recently worked on an analysis of the Connecticut market that includes Mohegan Sun and Foxwoods. He points out that when business and employment contracts at the casinos there is a mushroom effect on the larger community.
"Just as when the casino market expands and hires people it brings in a multiplier effect - for every job they create there's anywhere from 1 to 1.5 new jobs created elsewhere - it has a backward effect when people are laid off. Unemployment's up, more people are on welfare, the host communities there have been impacted pretty severely, impacts that they haven't been compensated for by the state, and that's exacerbated when you have layoffs."

At Mohegan Sun, Etess says the operation has avoided layoffs, but there have been cutbacks.

"It's been a battle, of course. We've had to look at our expenses, as everybody has, and it was pretty well-known back in February that we had a salary rollback or wage rollback for everyone on the property, up to and including myself. For line employees wages were rolled back 4 percent, all the way up to 10 percent for the VPs and above. That's had an impact on our labor costs. But really we've gone line by line through the building and made adjustments where we could, really trying to ensure that we were minimizing the impact on the guest experience as much as possible. I think to that extent we have succeeded."

The recession, he acknowledges, is the major cause of the difficulty. But increased competition also is affecting existing operators. For Mohegan Sun, new casinos in Pennsylvania and the Empire Casino at Yonkers Raceway in New York have brought added competition to go with the longstanding competition from Atlantic City.

Thunder Valley Casino, owned by the United Auburn Indian Community and managed by Stations Casinos, also felt the effect of with the opening of Red Hawk Casino in nearby Placerville, owned by the Shingle Springs Band of Miwok Indians and managed by Lakes Entertainment.

"We obviously had some business disruption here at Thunder Valley," General Manager Richard St. Jean said. "So it was kind of the perfect storm as far as things that could go wrong. And then with the macroeconomic issues in Northern California in more recent months, with the increase in unemployment from year to year, the decrease in home values, which continues to spiral, and then the state furlough, which has impacted a lot of employees around Northern California, all those things collectively are obviously a negative."

While markets wait for a new equilibrium, new competitors are working at carving their own niches, like the Quapaw Tribe's new Downstream Casino Resort, which opened last year in the northeastern corner of Oklahoma.

"We have been holding our own quite well against the slow economy," spokesman Sean Harrison said. "We don't have enough history to make a comparison with last year. We opened in July 2008. But I can tell you we are pleasantly surprised. We have experienced a steady growth trend pretty much since opening day. Of course, we would like to do better, and we feel confident that we will do better as the economy improves. But no layoffs here. And no cuts in services or anything like that. ... I think the reason we are doing comparatively well is that we are the only casino resort of its kind in this region. We are an upscale Vegas-style destination resort where the guest services match the splendor of the property. We also have a unique and ideal location within our market. We are located within sight of Interstate 44, a major corridor, and right on the three-state corner where Oklahoma, Missouri and Kansas intersect."

For those not feeling the flush of early success, though, the downturn has meant a combination of coping through cost cuts and making the marketing push to keep the guests coming. Both Thunder Valley's St. Jean and Mohegan Sun's Etess note that they haven't had a downturn in attendance. People are still coming to the casinos, they're just spending less while there.

Thunder Valley has tried to add excitement through new promotions, St. Jean said.

"We have gotten very, very aggressive, particularly since first quarter this year, relative to our promotional approach, just coming out with many, many creative new promotions. We've just had to get very, very aggressive relative to our marketing strategies, whether it's day-to-day oriented or if it's just our overall macro promotions, giving away cars, boats, Sea-Dos, you name it, and everything from low-end tea sets to boats and cars."

Part of Mohegan Sun's efforts has been to join with neighboring Foxwoods to promote their home state.

"We did enter into a joint campaign with Foxwoods just to try to remind people who were going to Atlantic City that there were some really great options up here," Etess said. "We felt that people were looking at Atlantic City versus a trip to Mohegan Sun, or a trip to Atlantic City versus a trip to Foxwoods, but we think they need to look at Connecticut as a destination."

Joint efforts, within and outside the gaming industry, are important to all tribes, Stevens points out. 

"When we talk about diversifying our economies a lot of it has to do with not just building our own tribal enterprises, but it also is about empowering our members to be able to build their tribal enterprises, to be able to work in this industry, and it's also about Indians doing business with Indians. Trying to get our friends in the Seminoles at the Hard Rock and our brothers and sisters in the Great Plains who are ranchers to talk to one another. And we're doing that."

Working through the tough times together is important to everyone - in the tribes, in the host communities and throughout America, he says.

"Indian Country is really doing a lot to help America through these tough times. With our employment we're probably around 600,000 employees direct and indirect, and half or better than half are non-Indians. So it's really important for us to work our way through these things because of the impact we have not just on Indian Country but on America as a whole."

 

 

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