The Mashantucket Pequot Tribal Nation’s Foxwoods Resort Casino is iconic in the world of Indian gaming. Beginning as a high-stakes bingo operation in 1986, it evolved seven years later into the biggest, wealthiest, glitziest gaming facility in the country. The Nation’s rags-to-riches story was reflected in an early marketing slogan: The wonder of it all. Earning a billion-plus a year in revenue, Foxwoods has poured more than $3.7 billion into state coffers since opening. Along the way, the Nation has fought some major legal battles and forged new paths for Indian country. Among other things, it was the first to deal with labor disputes under the National Labor Relations Act and the first to face enormous debt and restructuring. It successfully changed a federal law to allow long term leases on Indian land to encourage investors, and most recently, it fought a tax issue lawsuit that it won in federal district court only to be reversed in an appeals court. Today, with casino earnings down and regional competition increasing, Mashantucket Pequot Chairman Rodney Butler talked to Indian Country Today Media Network about Foxwoods’ past, present and future.
Is the golden age of Indian gaming over?
There are only so many people with so many hours, and so first movers like Mashantucket and Mohegan had an advantage in the late 80s with bingo and in the 90s with gaming. We had an untapped market with tremendous potential. As time passes and more competition comes into the market you don’t necessarily see growth overall, you just see the spreading of the pie to the other facilities. In the last five years with Rhode Island, Connecticut, New York and Pennsylvania, the overall gaming market’s grown less than 10 percent yet the number of facilities has grown tenfold. I think the overall market will still grow, but as far as Mashantucket goes, our peak earning days for the single property are most likely behind us.
So what’s ahead?
But that doesn’t mean our overall earnings potential isn’t there in the future and we will continue to focus on growth – we’re just not going to see that growth come out of the New England gaming market.
But it’s still okay?
Yeah, it’s still a good business. You don’t realize how exceptional it was until those times are gone, but when you sit back and say ‘We still have a billion dollar market here’—that’s not bad! And it could be worse—there are tribes out there who have never had and probably will never have this opportunity.
The new Casino City Indian Gaming Report shows an increase in revenues of 2 percent to $27.1 billion for 2012. And Indian gaming is now 43 percent of the casino industry in the U.S. What do you think of that?
The overall U.S. gaming market including lottery and race tracks was $92 billion in 2007 and it recovered back to $92 billion by 2012 after substantial decline, even after all the new product in the market. If you look at casino gaming only, the US market was $64 billion in 2007 and now $65 billion in 2012. Same point, essentially flat revenue with a lot of new product in the market making every dollar of revenue that much more competitive. This is why we need to reinvest our current earnings wisely to preserve our economic independence for future generations. It’s absolutely incredible that Indian gaming is 43% of the casino market but I put out a cautionary tale: Let’s celebrate it, but let’s realize that we don’t want to see that peak at 43 percent and keep the party going as we’re down to 30 percent and 20 percent. We have to truly reinvest in our facilities, reinvest in our properties and make sure that we’re being very fiscally responsible as well with those earnings.
Were you not fiscally responsible earlier? Is that what caused the need to restructure $2.3 billion of debt?
I don’t think we were as fiscally responsible as we could have been. We made incredible investments in Mashantucket and our citizens – our college graduation rates are through the roof by any statistics, our employment statistics are continually growing, and the quality of life is exceptional because of those reinvestments so those were the good investments. But we also made some poor decisions on distributions and on investments that were completely unrelated to gaming and outside of our understanding, so we got burned on a lot of those investments.
What are your new investments?
We opened up a gas station last November which was instantly one of the most successful in the country from a volume perspective. All of our patrons drive in so they need to get gas and it’s a perfect connection. So we’re looking at other amenities that correlate with driving and gaming markets and one of the biggest is retail—a national pastime. People love to shop. We have a lot of people visiting here. Why not give them what they want? And we were fortunate enough to partner with one of the best outlet developers in the country—Tanger Outlets. It will open in May 2015 in 300,000 square feet and feature more than 80 leading brand name upscale fashion outlet discount stores.
How does the partnership with Tanger work?
We set up a leasing structure. Seven years ago we were instrumental in getting the first long term [Indian] land lease law passed. Previously, 25 years was the cap on leases to non-Natives, which wasn’t enough time for a third party investor to get a return on his investment. We were successful in getting that extended to 75 years. That was a specific law for Mashantucket but it was a framework that was later use to extend it for all of Indian country.
Talk about your online gaming site.
Foxplay is our online gaming initiative. We wanted to do two things: get our site here at Foxwoods up and running and go out and sell that service to other Indian and commercial gaming companies interested in getting into online gaming. We’ve seen an incredible amount of interest. We’ve had north of 20,000 active accounts signed up, close to 200,000 visits to the site and here’s the interesting thing—it’s actually for free play yet people buy online credits to play the game. So we’ve done a substantial amount of sales—not in the millions but to the tune of several hundred thousand in online credits. So not only does it make a bit of money but the tremendous marketing value and data collection that you can get from the players that you can integrate into the resort is second to none. We think everybody should be in the same position of getting your presence online established now in play for free as quickly as possible and work out all the bugs so that when real money gaming comes, you’re ready to go, you just flip the switch.
What are the rewards and challenges of being the largest, most successful Indian casino?
We’re facing many of these issues because of our success. It says we were and have been and continue to be successful and there’s a tremendous reward in that. And being able to break the mold—at first, you’re thinking how to make it better here at Mashantucket, but knowing that once you break through it sets the pace for the rest of the nations – that’s extremely rewarding. The challenge is when you’re facing something that’s pioneering, nobody’s ever been there before so there’s really no reference point. So we do a lot of analysis here, a lot of legal work and just gut- and brain-storming and try to find simple approaches as we go through the unchartered waters. 0