Indian gaming revenues may have dropped for the first time in more than two decades in 2009, but they rebounded the next year by slightly more than one percent, outperforming commercial casinos. Indian gaming generated revenues of $26.73 billion in 2010, a 1.3 percent increase over the previous year’s $26.4 billion, with nongaming revenues from food and beverages, hotels, entertainment and shopping increasing 0.3 percent, to $3.15 billion.
These are just some of the findings in the 10th and most recent edition of Casino City’s Indian Gaming Industry Report by Alan Meister, an information- and data-packed study that is sure to appeal to lovers of statistics. Published by Casino City Press, the independent study is based on the calendar year and uses data from tribes, Indian gaming facilities, gaming associations and gaming regulatory agencies.
The bottom line is complex.
Meister, an economist with Nathan Associates Inc., presents the data from a number of different angles—like a cubist painting—and illustrates it with dozens of charts, graphs, tables, maps and 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, a historical perspective on Indian gaming and an examination of the reasons for Indian gaming’s recent slowdown and recovery. 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 the future for Indian gaming.
As stated, even though the 1.3 percent growth in Indian gaming’s 2010 revenues constituted only a modest turnaround, that sector’s growth outpaced that of commercial gaming. Altogether, Indian gaming constituted a whopping 44 percent of total market share, just shy of commercial gaming’s 45 percent. Commercial gaming was down by a slight 0.1 percent from $27.9 billion in calendar year 2009 to $27.87 billion in 2010.
The U.S. gaming industry generated total revenues of $90.43 billion in 2009. Broken down by segment, revenues and market share, the statistics are as follows: commercial casinos, $27.9 billion or 30.9 percent; Indian gaming, $26.39 billion, 29.2 percent; lotteries, $20.87 billion, 23.1 percent; racinos $6.4 billion, 7.1 percent; pari-mutuel wagering $2.83 billion, 3.1 percent; charitable gaming $2.07 billion, 2.3 percent; card rooms $1.21 billion, 1.3 percent; other gaming (including cruise ships, convenience gambling and non-racino video lottery terminals), $2.75 billion, three percent.
With its strong showing in the overall gaming industry, Indian gaming “is poised to overtake the commercial casino segment in the near future,” Meister said.
Meister acknowledged that Indian gaming’s modest recovery in 2010 was a far cry from the sensational growth experienced over the two decades prior to the Great Recession of the late 2000s. From the time the Indian Gaming Regulatory Act was passed in 1988, Indian gaming revenues grew from $121 million to an astounding $26.7 billion in 2010. From 1988 through 1995, Meister notes, they grew at an annual rate of 72 percent. Then, “starting in 1996, Indian gaming slowed down from this blazing pace…and hovered around 15 percent per year from 1995 through 2005.”
After that, from 2005 through 2010, the average annual growth rate was approximately three percent, Meister’s study shows. Lower consumer confidence and higher unemployment in the pre-recession years resulted in decreased spending at gaming facilities, but other factors entered the picture.
In part, Meister reports, public policies restricted the supply of Indian gaming: “These public policies have included proposed and enacted legislation and regulations, as well as judicial decisions and tribal-state gaming compacts.”
Additionally, some experts believe that the recent slowdown of Indian gaming is a sign that its markets have become saturated. “After all, Indian gaming’s historical growth pattern may seem to comport with what we generally know about product/market life cycles,” Meister writes. “In their introductory and growth stages, a product/market tends to grow more rapidly than when it is reaching maturity. But when nationwide Indian gaming growth is broken down by state… we can see that there are a host of different development scenarios playing out across the country.”
Meister’s report documents how widely the growth rate of Indian gaming revenues has varied across the states. Of the 565 federally recognized tribes, only 239 operated 448 casinos in 28 states in 2010. “This means that 58 percent of federally recognized tribes are either ineligible to engage in gaming or do not have a location that would sustain a viable gaming operation.”
In 2010, growth rates in Indian gaming revenues ranged from a high of approximately 61 percent in Alabama to a low of nearly minus-seven percent in North Carolina. Of the 28 states with Indian gaming, 19 (68 percent) experienced positive growth in 2010, with nine states (32 percent) declining in revenues. “On the whole,” the report notes, “these figures indicate a movement towards recovery within Indian gaming.” The number of states with positive growth rates was 15 in 2008 and 12 in 2009.
Few new casinos opened in 2010, and with the closings of old ones, there was a net gain of only two new casinos across the nation in 2010, the study says: “Restricted lending and more-costly financing resulted in fewer casino developments (e.g., introductions of new facilities and major expansions and renovations of existing facilities) as compared to previous years.”
Twenty-four states had some form of Class III gaming, with four states (Alabama, Alaska, Nebraska and Texas) operating only Class II gaming. States with the largest number of gaming facilities were California with 66, Minnesota with 37, Washington with 32 and Wisconsin with 28.
Meister offers some surprising statistics about differences in growth rates in Class II and Class III gaming. In terms of the revenues generated, Class II in the four states restricted to that type of gaming yielded a relatively modest $434.8 million. Viewed in terms of the rate of growth, however, Class II gaming in those states had a 50.7 percent growth rate from revenues of $288.5 million in 2009 while Class III revenues grew by only 0.7 percent.
As for gaming machines, their number increased by 2.3 percent from 329,031 in 2009 to 336,638 in 2010, while table games declined 1.2 percent from 8,083 in 2009 to 7,988 in 2010. California had the largest number of gaming machines—more than 67,000, a two percent increase over 2009. Alaska had the fewest, with 80.
But with an 11.3 percent increase, Alaska ranked third in terms of gaming revenue growth, after Alabama with 61.3 percent and Texas with 12.5 percent. In the state-by-state analysis, Meister notes that two tribes in Alaska operated Class II gaming facilities in 2010. One of them offered traditional bingo and pull-tabs while the other included the 80 Class II gaming machines. Meister does not name the tribes or the amount of their gaming revenue, which “had to be aggregated into the figure for ‘Other States With Indian Gaming’ due to the confidentiality of the data.”
The top five revenue-generating states in 2010 were the same as in 2009, and they produced 61 percent of the total of Indian gaming revenues. Their revenues and percentages of market shares were as follows: California, $6.78 billion, or 25.4 percent; Oklahoma, $3.23 billion, 12.1 percent: Connecticut, $2.14 billion, eight percent; Florida, $2.06 billion, 7.7 percent and Washington, $2.03 billion, 7.6 percent.
Revenues in Connecticut and California, however, continued to fall in 2010. With its 66 casinos operated by 60 tribes, California dropped about three percent from $7 billion in 2009 to $6.8 billion in 2010. Connecticut, with the two largest casinos in the country—Mohegan Sun and Foxwoods Resort Casino—saw a four percent decrease from $2.2 billion in 2009 to $2.1 billion the next year. Oklahoma, Florida and Washington continued to grow with increases of approximately four percent, one percent and eight percent, respectively. The four percent growth rate in Oklahoma reflects a continuing slowdown over time, the report has determined: “This 2010 growth rate was down from approximately six percent in 2009 and 20 percent in 2008. In fact, the growth rate in 2010 was lower than that in any other year back to 2001, the first year recorded in earlier editions of this study.”
The next five states in terms of gaming revenues were Arizona, $1.69 billion; Minnesota, $1.40 billion; Michigan, $1.39 billion; Wisconsin $1.21 billion; and New York, $1.05 billion. Washington, Michigan and New York were the only top 10 revenue-generating states that were also in the top 10 growth-rate states with rates of 7.5 percent, 7.4 percent and 5.7 percent, respectively.
Alabama, Texas, Alaska, Louisiana, Washington, Michigan, Mississippi, New York, North Dakota and Nebraska were the 10 fastest growing states in 2010, and most of them were also the fastest growing in 2009. The exceptions were Louisiana, Mississippi and New York, all of which declined in 2009. Most of the states that declined in 2009 showed an improvement in 2010 even if it was only a slower rate of decline. “Seven of the 16 states that experienced a decline in gaming revenue in 2009 grew in 2010,” Meister writes. “And of the other nine that did not grow in 2010, eight of them still showed improvement with a slower rate of decline.”
Despite the slow recovery, Indian gaming had a substantially positive impact on jobs and the economy. In 2010, Indian gaming led directly and indirectly to an estimated $86 billion in output, 706,000 jobs, $29.2 billion in wages, $12.45 billion in federal, state and local tax revenue, and $1.5 billion in direct payments to federal, state and local governments.
Meister finds hope in this mass of statistics. “In light of Indian gaming’s turnaround in 2010 and anecdotal evidence from 2011, the short-term to midterm future outlook for Indian gaming looks promising,” he suggests. “Even with only a slow recovery, 2010 was certainly something positive to build on. The economy will improve over time, bringing back consumer confidence, disposable income, spending on casino gambling and financing for future casino developments—however, maybe not all to their pre-recession levels.”
But the long-term outlook is less certain, says Meister: “Any number of things could negatively impact Indian gaming. These potential threats include both non-market and market factors. Potential nonmarket factors include legal challenges, legislation and regulations that restrict Indian gaming and limit its expansion. Potential market factors include the maturation of gaming markets and increasing competition.”