Latest Gaming Industry Report: Indian Gaming Made Small Gains in 2011
In the slowly recovering economy of 2011, Indian gaming grew enough to rise above its pre-recession level. Indian gaming revenue increased a little more than three percent—to approximately $27.4 billion—in calendar year 2011, the latest year for which complete details are available, according to economist Alan Meister’s annual Casino City’s Indian Gaming Industry Report. It was the second year of modest growth following the only year—2009—in which Indian gaming revenues declined since the passage of the Indian Gaming Regulatory Act 25 years ago marked the beginning of the Indian gaming industry. Nongaming revenue outpaced the increase in gaming revenue, growing nearly five percent to approximately $3.3 billion in 2011 after two years of decline.
Indian gaming not only increased in 2011, it also maintained a hefty share of the overall gaming industry market, generating around 43.5 percent of all U.S. casino gaming revenue compared to commercial casinos, which garnered around 45 percent. Racinos accounted for the other 11.5 percent share of the gaming market.
Indian gaming generated revenues of $26.3 billion in 2007, $26.6 billion in 2008, $26.3 billion in 2009, $26.5 billion in 2010 and $27.4 billion in 2011. The last two years of growth are “encouraging,” Meister says, “especially considering that the U.S. economy is still in recovery mode. The question is how much further can Indian gaming grow.”
The 2013 publication of Casino City’s Indian Gaming Industry Report is the 11th edition if the information-rich study, which is based on data from tribes, Indian gaming facilities, gaming associations and gaming regulatory agencies. Meister, an economist with Nathan Associates Inc., presents the data from a number of different angles—and illustrates it with dozens of charts, graphs, tables and maps, as well a directory of gaming tribes and facilities. The report provides nationwide and state statistics on gaming and nongaming revenue; Class II versus Class III gaming; number of facilities, tribes, gaming machines and table games; market summaries; trends; and revenue-sharing with state and local governments.
The report also provides comparisons across states and a historical perspective on Indian gaming. In addition, there are comparisons to commercial casinos and racinos, an economic-impact analysis of Indian gaming’s contribution to the U.S. economy and a qualitative look at short-term, mid-term and the future of Indian gaming.
The $27.4 billion Indian gaming industry continues to make huge contributions to the U.S. economy. Indian casinos, including their nongaming operations, generated around $29.6 billion in output, supported around 339,000 jobs and $12.3 billion in wages, and paid nontribal governments more than $1.4 billion in 2011. The Indian gaming economy also spins off secondary impact into the general economy through purchases by the tribes, their casinos, and their employees as well as purchases by suppliers and their employees’ households. Meister estimates that direct and secondary impacts from Indian gaming last year were more than $110 billion as follows: $81.8 billion in output, 686,000 jobs, $26.8 billion in wages, $11 billion in federal, state and local tax revenue, and $1.4 billion indirect payments by tribes to federal, state and local governments.
There were two new casinos in 2011: the Manchester Point Arena Band of Pomo Indians in California and the Gun Lake Band of Pottawatomi Indians in Michigan opened facilities. There were 460 Indian gaming facilities operated by 242 tribes in 28 states in 2011. Twelve new gaming facilities opened in 2011, but six that were opened in 2010 closed, leaving a net increase of six casinos in 2011.
While Indian gaming revenue increased overall in 2011, its growth varied widely across the country: around 65 percent of Indian casinos saw increased revenue, but 35 percent saw declines or no growth. The growth rate varied from a high of around 26 percent in Alabama to a decline of nearly three percent in New York, where gaming revenue declined to $921 million.
In Alabama, the Poarch Band of Creek Indians continued to benefit from the state’s closure of gaming facilities operating video bingo machines under charitable gaming laws, Meister says. The Poarch increased its Class II gaming machines by around 28 percent in its three casinos to 4,200. The report, however, does not show Poarch’s gaming revenue “due to the confidentiality of the data,” Meister said. He notes that the Muscogee Creek Nation sued Poarch to stop expansion of its Wetumpka casino on Hickory Ground, the Muscogee’s historic ceremonial and burial ground.
Four of the top five gaming states saw growth in 2011: two percent in California, eight percent in Oklahoma, six percent in Washington, and five percent in Florida, but Connecticut declined by two percent. The top five states—California, Oklahoma, Washington, Florida and Connecticut—accounted for about 61 percent of total gambling revenue. The top 10 states, which include Arizona, Michigan, Minnesota, Wisconsin and New York, account for 86 percent of total Indian casino revenue. California was the top revenue generator with $6.9 billion; Oklahoma was a distant second with $3.5 billion.
Connecticut has two Indian casinos—Foxwoods, the largest casino in the country, owned by the Mashantucket Pequot Tribal Nation, and Mohegan Sun, owned by the Mohegan Tribe. The two casinos together generated approximately $2.01 billion in 2011, a decrease of around two percent from the $2.06 billion in revenues in 2010. This was the fifth year in a row of decreases for the popular resort casino destinations. The general decline in Connecticut Indian gaming has been the result of the downturn in the economy, as well as increased competition in the northeast region from commercial casinos and racinos in Pennsylvania, Indian casinos and racinos in New York, commercial casinos in Atlantic City, New Jersey racinos in Maine and Rhode Island, Meister said. And the Connecticut Indian casinos are looking at more competition in the future from new gaming facilities in Ohio, Massachusetts and New Hampshire where legalization of casinos is being considered, Meister says. But, he notes, although revenues at the two facilities are still in decline, the rate of decline has decreased over the past couple of years.
Meister notes that Indian gaming slowed down even before the Great Recession hit in late 2007 because of proposed and enacted legislation that restricted the supply of Indian gaming. But the outlook has brightened, at least for the short- and mid-term future, Meister says. He expects the economy to improve, bringing back disposable income and restoring consumer confidence, and spending on casino gaming. In addition, many tribes are remodeling, upgrading and expanding facilities and in some states there is an unmet demand for gaming.
But the long-term future is less certain. “Any number of things could negatively impact Indian gaming. These potential threats include both nonmarket and market factors. Potential nonmarket factors include continuing legal challenges, legislation and regulations that restricts Indian gaming and limit its expansion,” Meister says.
In terms of nonmarket factors, Indian tribes with gaming operations are facing mature gaming markets, increasing competition and the unknown potential of Internet gaming and how it will impact brick-and-mortar casinos.
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