Tribal governments venturing into commercial gaming continue its upswing and show no signs of slowing down. The San Manuel Band of Mission Indians of California purchased the Palms and Seminole Tribe of Florida acquired the operations of the Mirage, both in in Las Vegas, while tribes have bought casinos off their reservations in other states as well.
The subject was tackled in G2E session “Indian Gaming Goes Commercial,” moderated by James Klas, founder and principal of KlasRobinson Q.E.E. It featured Erin Copeland, chief legal officer for the San Manuel of Mission Indians of Southern California, and Bobby Soper, CEO of Sun Gaming & Hospitality and former president and CEO of Mohegan Tribal Gaming Authority.
“It has been a remarkable evolution through the past 36 years since the Indian Gaming Regulatory Act,” Klas said. “Early on, the relationship between commercial and Indian gaming was oftentimes adversarial and rarely cooperative and friendly. Then there were periods when tribes engaged with commercial casinos to manage and brand their facilities.”
“That worked well early on and still does in a few cases, though at other times it has faltered a little bit,” Klas said. “The relationship has improved over the years and both sides have learned to live and work with each other. There’s still competition in a number of markets, obviously here in Las Vegas, and Indian gaming is a major competitor. The thing that has changed more recently is not that commercial companies are bringing their capital, brand, and expertise to Indian Country, but Indian Country has been bringing its capital and brand and expertise to commercial gaming.”
Klas called it a fascinating trend that’s moved in the direction of more opportunities for tribes rather than less. About a dozen commercial casinos in the U.S. are owned and operated by Native Americans.
“That’s a significant amount of gaming – 17,000 machines, 1,000 tables, and over 7,000 hotel rooms and more are coming,” Klas said. “The new Hard Rock will open on the Strip, and elsewhere in the U.S., other projects are going on in commercial markets that are tribally owned. It’s not just the U.S. Projects in Canada, the Caribbean, and Asia are commercial markets owned or operated or both by Native American tribes. This is a significant trend.”
Soper said the Mohegans made a decision in the early 2000s to diversify off the reservation and focus on gaming since that was their core competency with their flagship property in Connecticut.
In January 2005, Mohegan Sun acquired the Pocono Downs Racetrack in Pennsylvania from Penn National Gaming for $280 million and ultimately expanded into Canada and South Korea with gaming facilities. It was the casino operator at Virgin Hotels Las Vegas from the time it opened in March 2021 until the tribe pulled out earlier this year.
“Twenty to 25 years ago, there was far less willingness from tribes to relinquish sovereignty by diversifying commercially outside the reservation. My position as a tribal member and proponent of diversifying has always been that subjecting yourself to another jurisdiction isn’t relinquishing sovereignty,” Soper said. “Today, we’re seeing tribes more willing to do it.” By diversifying off the reservation, a tribe has the opportunity to collateralize assets that lenders feel comfortable with, Soper added.
“That has allowed my tribe to grow. As more assets come online, there’s more collateral they can use to the point that our tribe is able to do that in Asia,” Soper said. “We would never have been able to do that 10 to 15 years ago, because we didn’t have those balance-sheet assets.”
Copeland said that during the early 2000s, San Manuel wanted to diversify and invested in non-gaming hotels. In 2019, they formed an entity to engage in off-reservation gaming, but had no idea where at that time.
“What had been occurring over the many years prior was that you began to see an influx of talent coming from Las Vegas into Indian casinos,” Copeland said. “That influx was impactful, because the tribe began to learn from many former Las Vegas operators and gave them a real appreciation for the education of gaming executives.”
A $9 million contribution to UNLV for its hospitality and law-school programs led to a connection to Las Vegas and set the stage for the Palms acquisition, Copeland said.
Tribes aren’t looking for a quick return. Rather, they have a long-term perspective, taking into consideration their future generations.
Soper said there’s no exit strategy for tribal properties on a reservation and one reason he’s a proponent of commercial diversification is the opportunities for an exit strategy.
“We purchased a professional sports team 20 years ago, the Connecticut Sun in the WNBA, and paid $10 million,” Soper said. “Today, the team is worth $80 million to $100 million.”
Klas said diversification isn’t always easy or successful and asked the two for advice for tribes considering going off their reservations.
“It’s clear, having worked with San Manuel on the Palms, that geography ended up being everything,” Copeland said. “Having tribal leaders in southern California and so much talent at the tribal government and (our Yaamava Resort & Casino in California) needed to provide support services to the Palms was really key. Timing was also a big factor. If you look at the timing for the Palms, it wasn’t ideal, but that’s probably why it became available. We were still in the midst of COVID and the tribe was working on and completing a major renovation and expansion at Yaamava.”
The Palms reopened four months after the transaction with Red Rock Resorts was completed for $650 million in December 2021 and Copeland said they’re still dealing with the consequences of rushing to open for the NFL Draft in April 2022.
“I don’t know that, even in retrospect, we would call it a mistake, but it was certainly a problem and a challenge,” Copeland said. “Set realistic goals of what your team can accomplish.”
In his final advice, Soper concluded the session saying it’s not only important for tribes to diversify, but “it’s going to be a necessity.” A primary reason is that the gaming landscape will look different in the next 10 years, due primarily to igaming.
“There’s going to be a shift and casino floors will shrink,” Soper said. “The bread and butter that feeds the tribe on the reservation will shrink and it takes time to diversify. It’s extremely important for tribes to begin that now, because when that landscape shifts, you’re going to lose some of those gaming revenues from land-based operations. It’s not a question of if. It’s going to happen. You need to rely on other sources of income, whether it’s gaming or non-gaming commercial diversification.”
