Tribal casino operators see an opportunity in Las Vegas

The Las Vegas market is proving to be attractive to tribal game operators.

In October, Mohegan Gaming & Entertainment became the first tribal company to receive approval to operate a casino in the corridor of the Las Vegas resort. Seven months later, the San Manuel Band of Mission Indians announced plans to buy Palms for $ 650 million. And Hard Rock International, owned by the Florida Seminole tribe, has expressed an interest in moving to the Strip.

“I think (the palm sale) has tribes across the country thinking of Vegas,” said Josh Swissman, advisor at The Strategy Organization. “This is just a random time for these strains (to hit market) given their performance over the years.”

A “natural evolution”

US tribal gaming has been around since the 1970s, but activities were small initially and consisted mostly of small bingo halls and gaming facilities.

When the Indian Gaming Regulatory Act was passed in 1988, which created a regulatory structure for tribal games in the United States, the tribal game was valued at approximately $ 121 million.

According to a report by the American Gaming Association, the company had grown to a segment of more than $ 32 billion by 2017 and generated nearly half of all US gaming revenue from operations in 28 states.

Over the years, tribal casino operators have sought to expand into markets beyond the tribal country. For example, the Hard Rock brand operates nine casinos in the United States, only two of which are in Florida.

“This really is a natural development,” said Katherine Spilde, a professor at San Diego State University who has done extensive research on tribal gaming. “Once you’ve built your own property and maximized what you can do in the market you are in, we see tribes looking to commercialize a casino that is not on tribal land.”

Macquarie analyst Chad Beynon attributes the growth of tribal operators to “strong operational acumen, healthy reinvestment and capital preservation.”

“With tribes considering ways to grow their cash flows and dividends, we think expanding into places like Las Vegas makes a lot of sense,” he said in an email. “Many of these tribes have larger regional integrated resorts that enable the operational transition from Las Vegas to a seamless learning curve.”

A Las Vegas asset enables operators to show off 42 million tourists each year and can help establish a so-called “hub-and-spoke” model in which customers play in regional casinos and save or save on vacation trips to Las Vegas can qualify for it.

Entry into the Las Vegas market can also support further expansion opportunities into other jurisdictions and prove that operators have what it takes to meet the “gold standard” of Nevada gambling regulations.

“To say that you work in or near the Las Vegas Strip is a vote of confidence and a great sign of credibility,” said the Swiss. “All three (tribal owners would) benefit from this association.”

And while the strip market has struggled under the weight of the pandemic and limited travel for the past few months, the city is quickly returning to its former glory.

“I feel good to know that all three have a lot of emphasis on Las Vegas and really see the potential for the future of what Las Vegas has to offer,” said Swissman.

Laurens Vosloo, CEO of the California-based San Manuel Band of Mission Indians, said the tribe had been looking for diversification opportunities for about 20 years but had “settled in” in Las Vegas in recent years, partly because of its proximity and the familiarity of its customers with the market.

“Who doesn’t want to be in Las Vegas?” he said. “It’s the world’s gaming mecca and the place to be. … It is a natural and good opportunity for us to have an asset there to send our customers to, contribute to this economy, and be part of the Las Vegas community. “

Hard Rock and Mohegan Sun, who opened the first Native American casino in Las Vegas in March, declined to comment.

In a January statement, Joe Hasson, general manager of Mohegan Sun Casino in Las Vegas, said the opening of the casino marks a “new era in Las Vegas.”

Different incentives

Spilde said there are “many differences” between tribal operators and typical commercial operators.

On the one hand, tribal operators are regulated by Tribal Gaming Commissions in combination with the National Indian Gaming Commission, a federal agency. Depending on the state, state supervisory authorities may also have supervisory authorities.

The second difference: where the sources of income end up.

“The income from the game is specifically intended to be reinvested in the tribal community,” said Spilde. The main purpose is to improve the lives of the tribal citizens and the surrounding communities. … They all view gaming as a way to invest in social good. “

Lael Echo-Hawk, a tribal attorney with two decades of gambling, government and economic development experience and currently a principal at MThirtySix, PLLC, said this revenue stream model gives tribal operators a greater incentive to perform well.

“It builds houses for tribal members, it looks after the elders, it makes sure that children can go to school,” she said. “It’s different from a company with shareholders answering them. … When (tribal casino operators) make bad decisions, it hurts their community. It hurts their uncles, aunts, nieces and nephews. “

Impact on Las Vegas

The focus on giving back can already be seen in Las Vegas.

Even before the Palms sale was announced, San Manuel had donated $ 250,000 to eight Las Vegas charities: the Public Education Foundation, the Las Vegas LIFE Mayor’s Fund, Southern Nevada Catholic Charities, The Shade Tree, Noah’s Animal House, Make- A- Request from Southern Nevada, Nevada Public Radio, and the Smith Center for the Performing Arts.

The tribe also has sponsorship deals with the Vegas Golden Knights, Allegiant Stadium, and the Las Vegas Raiders, and a combined $ 9 million gift in 2020 to William F. Harrah College of Hospitality and the Boyd Law School of the UNLV, the largest outside the USA. Government philanthropic gift to an educational or health institution.

“If you look at San Manuel in the community and how they have a legitimate interest in the community, the tribe wanted to do the same in Las Vegas,” Vosloo said. “We want to make sure everyone knows we’re committed to the community and people in Las Vegas before we do business there. That’s just one way the tribe does business. “

Echo-Hawk expects this generosity to continue from tribal owners in Las Vegas.

“What you will see with tribes is that they invest in the community around them. We know that these partnerships with our local jurisdictions and our neighbors are really important and that investment increases tenfold that way, ”she said. “You have people in the community who support you.”

Spilde expects Las Vegas to benefit “a lot” from having tribal operators in the city.

“I think they bring a very different perspective on how much a casino can add to society,” she said. “There is a public good that can be achieved based on your values, your organizational structure and the way you invest the proceeds back into the community, rather than distributing all the proceeds to the corporate shareholders.”

In addition, new entrants – whether tribal or not – should support the competitive landscape along the tourist corridor.

This is good news for customers, according to industry observers.

Take E. Abouzeid, president of consulting firm LaunchVegas, said the best environment for consumers is one where both businesses and independent operators compete for their business. Swissman added that new operators will be able to bring in “new eyes” and different operating philosophies.

“They are going to get these smaller operators to use other ways to approach gaming and hospitality and dining on and around the Strip,” said Swissman. “I think these operators could lead some of the incumbent operators on the Strip to improve their game.”

Contact Bailey Schulz at [email protected] Follow @bailey_schulz on Twitter. Review Journal contributor Mike Shoro contributed to this report.

Comments are closed.