What Is A Casino To Do When The Gamblers Stop Coming?


In every gaming jurisdiction experiencing a long-term decline in revenues, casinos are being forced to cut expenses and restructure. The way a casino approaches the problem differs according to the management, location and conditions that created the problem, but there are some commonalities. Generally, the first order of business in a downturn is to cut all “non-essential” expenses, reduce staff and hunker down until things get better. Sometimes, however, it is clear that the downturn is permanent rather than temporary. In those cases, the strategies of the casino are more drastic, such as selling or simply closing the casino.

There are many current examples of casinos closing or being sold around the country. Caesars has closed (or will close) two casinos, one in New Jersey and one in Mississippi and others are sure to follow. Reno has seen over 20 casinos close since the National Indian Gaming Regulatory Act passed in 1988 and casinos started opening up and down the Pacific Coast. The expanding competition is certain to force more closures in more jurisdictions in the near future.

Of course, those casino owners who can, would rather sell than close. Revel, the $2.8 billion Atlantic City resort, is up for sale. The price is thought to be a tiny fraction of its original value and debt. In the last five years casinos in Atlantic City have been selling for 10 to 20 percent of their original value. The value of casinos everywhere has dropped dramatically in the last five years. In fact, you can buy a casino anywhere, except on the Las Vegas Strip, for a fraction of what it would have cost a few years ago. But then, you would have to figure out how to make a profit under very trying circumstances.

Not every casino, however, has the option to close or sell. Indian casinos can’t be sold and closing is not a viable option to most tribes either. Take for example, the Dry Creek Rancheria Tribe in California that operates the River Rock Casino in Sonoma County. For years the tribe and its casino had very little competition and the casino did very well. In 2010, the casino had $124 million in gaming revenue. It was a nice little business until competition arrived. In November, the Graton Rancheria Tribe in partnership with Station Casinos, opened an $800 million monster casino in Rohnert Park, California, just down the road from the River Rock.

The Graton casino is the closest casino to San Francisco and it is causing some stress among the other casinos in the region. But it has particularly hit the Dry Creek Rancheria’s casino. The revenue figures from tribal casinos are not public information in California, but from what the Dry Creek tribe has said the impact of Graton is horrific. Dry Creek estimates its revenues are down 30 percent since Graton opened.

“It was somewhat predictable that Graton would have a significant effect on the local market, particularly because they dedicated an enormous amount of resources to their casino, and the other casinos in the general vicinity don’t have the same resources or appealing location,” said Doug Elmets, who represents five tribes, including those that operate Thunder Valley and Jackson Rancheria casinos closer to Sacramento. He said the Graton casino, which is owned by the Federated Indians of Graton Rancheria and managed by Station Casinos of Las Vegas, is able to market and advertise in a way that neighboring casinos can’t match. The $800 million, 340,000-square-foot Graton casino and resort, with its 3,000 slot machines and 200 table games, dwarfs River Rock’s 61,000-square-foot facility, with 1,200 slots and 20 tables. Santa Rosa Press-Democrat, 3-18-14

It is not a problem that will go away like a recession or a bad holiday season; Graton is here to stay. It will continue to grow its revenues and have an even bigger impact on smaller tribal casinos like River Rock. The bigger tribal casinos, like Cache Creek and Thunder Valley will fight back; they have a large cash flow to fund the fight and part of their customer base is much closer to them than it is to Graton. Those casinos will recover, but what about River Rock?

River Rock does not have a large secondary customer base or any extra cash. The Dry Creek Rancheria can’t sell the casino and closing it is not an option currently. So the tribe is taking some very drastic measures. First off, it is reducing its staff by 70 percent. And one would assume that the advertising budget would get cut, the remaining employees would have their benefits cut and all capital improvements would be stopped, including adding new slot machines. Those measures will help stop the cash drain temporarily, but they also mean the casino will be even less competitive in the future.

And the Dry Creek tribal government, which once had nearly 60 employees, is being reduced “by 70 percent,” according to Hopkins. “We’ve reduced staff down to a half-dozen people, maybe a little bit more,” he said of the tribal employees who were in public works, information technology, human resources and finance. Santa Rosa Press-Democrat, 3-18-14

Additionally, the tribe is also reducing the amount of money it distributes to tribal members by half. Traditionally, per capita payments are one of the last things to be cut. In Indian country, cutting or eliminating per capita payments is a sure way to get voted out of office. Therefore tribal councils avoid it as long as they can, but sometimes there is no choice. Members of the Mashantucket Pequot, the tribe that owns Foxwoods casino in Connecticut, had their payments reduced from an estimated $250,000 a year each to zero. The tribe resisted the elimination of per capita payments as long as possible, but eventually the debt holders forced the measure. Dry Creek did not wait, but the tribal council may have had a secondary plan to protect themselves against dissident voting members.

Tribal members and families also are seeing a hit to their income. Per capita payments, approximately $600 a month from casino profits that the tribe pays to its 640 members over the age of 18, are being reduced in half, to $300 a month. But tribal members can apply for as much as $200 monthly in food and gas allowances to help offset the cut in their monthly “per cap. Santa Rosa Press-Democrat, 3-18-14

The Dry Creek Rancheria is cutting its membership, a measure that is aggressive and much more controversial. Other tribes have “trimmed” their membership roles, usually claiming the eliminated members should never have been enrolled in the first place. The issue is very complicated and the specifics vary from tribe to tribe. But casino cash is the one common denominator.

A Bay Area Indian tribe that runs a well-known casino could take some potentially drastic action. More than 70 members could get kicked out. The tribe runs River Rock Casino. The tribe’s chairman has acknowledged in published reports that revenues are down more than 30 percent since Graton Casino opened nearby. One family KPIX 5 talked to said the ousters are not a coincidence. Stan and his brother Gregg Cordova are former chairmen and raised their families along the same road that now leads up to River Rock Casino. Joe-Vazquez, KPIX-TV, 4-17-14

Possibly Dry Creek Rancheria would have dis-enrolled some of its members under any circumstance. It might have happened with or without the River Rock Casino and its cash flow. It might have happened regardless of whether the Graton Resort &Casino was built. But, it is certain that the dramatic loss of business caused by the competition created a new level of stress on the tribe. Sadly, membership battles are one of the side effects of Indian gaming. The potential of reducing expenses by cutting the number of people receiving benefits adds a new tool to managers’ tool boxes when things get tough. When the gamblers stop coming and you need to cut expenses, sometimes you have no choice but to kick some of your friends and family out of the house.

 

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