Tribal operators’ international ambitions
The opening of the Palms Casino Resort in Las Vegas Wednesday (27 April) night serves as a validation that tribal gaming has reached a milestone in the US and remains a force to be reckoned with in the commercial gaming space across the globe.
The entry of the San Manuel Band of Mission Indians from Southern California to the gaming and entertainment capital that’s Las Vegas won’t be the last for tribes and reflects a culmination of how far Indian country has come in the casino industry over the last decade. In December, the Seminole Tribe of Florida, through its Hard Rock International, announced it has a deal to buy The Mirage’s operations from MGM Resorts International for $1.075bn in cash – a transaction that will close in the second half of 2022.
That pending acquisition and the Palms opening generated plenty of buzz last week among tribal leaders and others that serve tribal gaming at the Indian Gaming Tradeshow & Convention in Anaheim, California.
“This shows the maturity of tribal gaming,” says Steve Neely, general manager of the Rolling Hills Casino in Northern California. “The fact that tribes have built up their facilities and are in position to invest in other areas is a sign of things to come. I am excited for it. I think the tribes have done phenomenal jobs of building their businesses.
“They are businesspeople now, and they do great work taking care of people. That translates well into commercial gaming.”
That was echoed by Brendan Bussmann, managing partner of B Global Advisors.
“I continue to say that tribal gaming constitutes the more entrepreneurial part of the industry right now as it looks to expand across the country,” Bussmann says. “That has never been fully tested in Nevada, but with the San Manuel at the helm, things look positive for the Palms in the future.”
The San Manuel tribe paid Red Rock Resorts $650m for a casino that opened in November 2001, and has been closed since March 2020 when the Covid-19 pandemic shuttered the gaming industry in Nevada for almost three months.
While other properties reopened, Red Rock kept the Palms, which it remodelled in 2019 for $600m, on the sidelines while it channeled customers to its other Las Vegas properties that serve local residents.
“The San Manuel going to Vegas says tribal gaming is growing, is aggressive and gaining confidence,” suggests tribal casino consultant James Klas, founder and principal of KlasRobinson Q.E.D.
“I have high hopes for it and certainly have confidence in the intelligence and skills of the tribe. Vegas is a particularly tough nut to crack and historically not kind to outsiders. There’s been risk in the past, but it’s great potential for them too. It shows Indian gaming is now an accepted part of the industry as a major player.”
The San Manuel Band of Mission Indians’ acquisition of the Palms is the most recent example of tribes diversifying their business portfolios and leveraging their experience in casino operations. Many tribes have cited how they’ve maxed out on their properties expansion and how revenues have plateaued. To ensure future generations of tribal members with jobs and opportunities, health care, and other benefits, there’s a need to look outward, they say
“America’s Indian tribes have collectively recognized that while they may have an exclusive franchise to casino gaming within finite geographic regions, that period of exclusivity will not last forever,” Andrew Klebanow, a principal at C3 Gaming, points out. “By diversifying their gaming assets and adding non-gaming enterprises, they are ensuring their prosperity for future generations.”
The Mohegan Sun tribe in Connecticut was one of the first to branch into commercial gaming when in January 2005 it paid Penn National Gaming $280m for the Pocono Downs Racetrack in Pennsylvania. It expanded the property, and in November 2006 opened the first slots casino in the state now called Mohegan Sun Pocono.
The tribe, which operates under Mohegan Gaming and Entertainment, has over the past two decades expanded their portfolio of casino operations from the Mohegan Sun Casino in Uncasville, Connecticut, to seven additional properties. Besides the Pocono, MGE operates Resorts Casino Hotel Atlantic City; the Ilani Casino in Ridgefield Washington; manages the Fallsview Casino and Casino in Niagara in Niagara Falls, Ontario Canada.
MGE is also developing the multi-billion-dollar Project Inspire in Incheon, Korea though it pulled out of a commercial project in Greece. The tribe also recently celebrated its one-year anniversary as a tenant operating the Mohegan Sun Casino at the Virgin Hotel in Las Vegas where it does not own the casino.
It’s only natural that tribes like the Mohegan Sun, that opened their Connecticut property in 1996 and have more than 25 years of experience, realise that they can export that know-how to Las Vegas and elsewhere.
Joe Hasson, general manager of the Mohegan Sun casino in Las Vegas, calls it part of creating a hub-and-spoke system seen in the commercial industry, and expects to see more of it in the future among tribes.
“Having a location in Las Vegas is part of fulfilling a portfolio for all the locations whether you’re commercial or tribal,” Hasson explains. “Nevada is one of the cornerstones you want along with an East Coast presence, something in the Midwest and something in the Deep South.
“All of those locations provide diversity and convenience of guests who often find their way to locations that are iconic like Las Vegas. I think what tribes are doing right now is no different than what commercial companies have done for a long time. We provide a familiar brand name on the East Coast to people who find their way to Vegas once, twice or three times a year.
“The benefits they earned in Connecticut, New Jersey, or Pennsylvania where the Mohegan do business, are portable to Las Vegas to the Mohegan brand here.”
That’s what the Seminole Tribe of Florida will do when it takes over the operations of The Mirage where it will invest $1.5bn in the property, with plans to build a guitar-shaped hotel tower along the Strip.
The tribe operates six casino properties in Florida and in 2007 acquired Hard Rock International, growing that iconic brand globally to a portfolio of properties that includes over 200 Hard Rock Cafes, hotels, and casinos.
They continue to grow their casino portfolio with the recent opening of the Hard Rock Casino Northern Indiana and the Hard Rock Casino Rockville, Illinois.
The tribe has 11 casinos in the US, one in the Dominican Republic, one in Vancouver and another it plans to open in Canada in Ottawa.
The Hard Rock is also considering three sites for a casino in Manhattan.
There are plenty of other tribes following their trail, ranging from smaller to larger operators.
Last week, the Eastern Band of Cherokee Indians, which has two tribal casinos in North Carolina, announced plans to branch out its casino operations in the state and give it a 44% stake in two commercial gaming holdings at a cost of $25m. The details have not been made public. In August, the tribe purchased Caesars Southern Indiana for $250m.
One of the highlights last week on the tradeshow floor stage featured Stephanie Bryan, tribal chair and CEO of the Poarch Band of Creek Indians in Alabama. The tribe of about 3,000 members has been quite active on the commercial front since its sovereignty to operate in Alabama, where it has three tribal casinos, continues to be threatened. This is down to it not having a compact with the state government that sets the conditions of an operation.
In 2018 when the tribe announced it was acquiring the Sands Casino Resort in Bethlehem, Pennsylvania, for $1.3bn, there were questions raised whether a small southern tribe could manage a commercial casino. Now renamed Wind Creek Bethlehem, 80 miles from New York City, it has been deemed a success.
The Poarch Band of Creek Indians became federally recognised as a tribe in 1984. After Congress passed the Indian Gaming Regulatory Act in 1988, which paved the way for tribal gaming across the US, the tribe opened a small bingo hall.
In 2007, the tribe received financing to build a casino hotel in the middle of what had been an Alabama cotton field at one time. By 2014, the tribe developed a strategy to diversify its gaming interests outside of that state.
“As my grandmother used to say, you never put all of your eggs in one basket,” Bryan said last week. “We saw that was true if we wanted to continue to grow our revenue.”
In 2017, the tribe acquired casinos in Aruba and Curacao in the Caribbean. It has received approval from the Illinois Gaming Board to build a casino hotel in suburban Chicago, where in a few weeks it will break ground on the project.
“Our revenue plateaued in Alabama, and the tribe had to make some tough decisions,” Bryan said. “Commercial gaming has been really good for the tribe because we never know what will happen in Alabama. We need revenue to grow benefits, and for a quality of life, we need to make investments outside the tribal organisation.”
Bryan added the tribe hasn’t ruled out going international with a casino project at some point in the future and applauded the move by the San Manuel tribe going to Las Vegas.
“Several years back their Chairwoman Lynn Valbuena asked to come to our tribe and see our diversification and now years later these guys are operating the Palms,” Bryan said. “It’s always a goal to expand our footprint in other states and places. I am so proud of my friend Lynn. The sky’s the limit for Indian gaming. I’m definitely looking forward to seeing tribes as they grow and diversify and take advantage of these opportunities.”
Victor Rocha, chairman of the renamed Indian Gaming Association’s conference in Anaheim, says the fact tribes are talking about overseas expansion says a lot about their confidence and capabilities.
“When they say we can go to Europe and be a player and seeing the Mohegan in South Korea and the Hard Rock all over the world, says where we’ve come from over the last 30 years,” Rocha says.
“The fact that this little tribe from Alabama just won a big deal in Illinois shows we can be global. Fifteen years ago, we wouldn’t have thought about it, but now here we are.
“When you go to ICE London, you see a lot of Native Americans. The tribes have the expertise. The world is smaller now because we’re getting bigger. Our opportunities and ambitions have grown.”
Rodney Butler, chairman of the Mashantucket Pequot Tribal Nation in Connecticut where it operates the Foxwoods Resort Casino, calls what’s happening with tribal gaming “fantastic and inspiring”.
“The more tribes that can do that reinforces the legitimacy of tribal gaming that we are phenomenal operators and that we can compete with anybody outside of our jurisdiction because we have that experience and capability,” Butler says.
Unlike commercial casinos, tribes aren’t expanding for shareholders or profit but to sustain their communities for programs on reservations, Butler explains. It all started with casinos on reservations because tribes were trying to survive as a nation.
“I have seen the market go in 30 years from maybe a billion dollars to a $40bn market equal to the size of the commercial gaming market in the US,” Butler explains. “It’s pretty impressive to see that advance in such a short period of time.”
Tribal holdings are even larger when you factor in their commercial acquisitions, Butler adds.
Tribal gaming would have been there even quicker if not for the financial fallout in 2008 and Great Recession that followed and left some tribes in debt.
The Mashantucket Pequot “put their toe in the water” looking at commercial gaming outside of Connecticut, only to have those hopes dashed by the market collapse in 2008 and subsequent Great Recession, Butler recalls.
They had gaming licenses in Philadelphia and Kansas and management agreement to operate a casino in Southern California.
“If it weren’t for the financial crisis in 2008, we would have been in commercial gaming at the time,” Butler points out.
The tribe had a deal with the Mohegan Sun to own a commercial casino in Connecticut but that project has been placed on hold for a decade as tribes focus on igaming and sports betting launches in 2021.
It’s had success. The tribe entered the commercial market by paying $10m for a small casino in Puerto Rico called Foxwoods San Juan, a property that had been closed since Hurricane Maria in 2017. It has 300 slot machines and 14 tables when it opened this year.
“We sent our players on cruises and to the Bahamas and there’s already this affinity for Northeast travelers to go to the Caribbean,” says Butler, whose tribe has one million people in its database.
“So we decided why not be a part of it instead of sending them to other properties. We can send them to our own property. We tested with players, and they love it. It’s a US territory with no need for a passport and direct flights, and the property is five minutes from the airport.”
The Mashantucket Pequot have been seeking out opportunities in Asia but nothing has come to fruition yet, he adds. It’s important to have the right partner and not go it alone.
While Foxwoods looks to export its brand, Butler said he wouldn’t be surprised if tribes look at Japan and do more expansion overseas where there are opportunities.
“We build brands that are now recognised around the world,” Butler says. “I was in Japan, and they knew the Foxwoods brand.”
The tribe is not looking at any projects to invest in the U.S. because valuation of commercial properties are so high at this time.
“It’s difficult for tribes to buy in, but this will pass too and reset,” Butler says. “When you look at the pricing on the Palms, we looked at the property a couple of times, but it didn’t make sense for us because we couldn’t leverage our database.
“They paid a fair price for the property because the San Manuel are leveraging that massive California database. All of their clients are going to Las Vegas, and if they are going away and have five million in their database, why not send them to their property there. I think it made sense for them.”
Kristi Jackson, chairwoman of TFA Capital Partners, an investment banking firm that works with commercial and tribal gaming, says prices have to “rationalise before you see a flurry” of activity again in Las Vegas.
“I know a couple of other tribes have been interested, and I fully expect that to occur,” she says.
Butler agrees that more will follow. Other tribes, especially those in California, have done enough reinvestment on their own territories with hotel and gaming floor expansions where they can go into Las Vegas and elsewhere.
“Now that San Manuel has made that move you will see more of the successful California tribes doing something similar,” Butler says. “I think it’s accelerating.”
As for the Seminole Tribe, buying the operations of the Mirage with the cash flow they are generating and can leverage that into their Las Vegas asset makes sense, Butler argues. They also have a database that works for Las Vegas.
Klas notes that not every tribe, especially smaller ones, have a desire to venture into commercial gaming. Some aren’t used to dealing with state regulators and state taxes, and if you want to get involved in commercial gaming, tribes have to deal with that and will do so.
“There’s a lot of opportunity out there, and I only expect to see it grow on a longer term basis and even smaller scale or regional type versions of it happening as market forces allow and regulatory forces allow,” Klas says. “It has happened much faster outside of gaming.
“Lots of tribes have gotten involved in other non-gaming hospitality-related business ventures off the reservation in other places, and they are having good success at it and using the experience they have gained to build upon that with hotels and restaurant chains and other types of commercial development.”
Once more tribes get settled into commercial casino ventures and are comfortable with it, there could be a changing of the guard in the industry, even in Las Vegas, Klas says.
“Whenever Las Vegas has a tough time again going through a recession, gaming is down and values are down, tribes may be in a position to start buying assets from major commercial gaming companies when they need cash,” Klas continues. “Companies like MGM and Caesars, the last time there was difficulty, bought out the smaller operations at a discount. Now they own it all for better or worse.”
Neely is looking forward to that next round of commercial casino growth among tribes.
“Hopefully, there will be more like the San Manuel, Poarch Creek and Mohegans, and we are able to continue that growth,” Neely adds.