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Up, Up and Away – Maybe

The revenue crisis in Macau seems to have ended.  Gaming revenues have been rising for nine months after plunging for twenty-six months.  Until May 2014, casino revenues in Macau had increased month over month for ten years, peaking at $45 billion.  Up to that point there seemed to be no limit on gaming’s growth in Macau.  And then seemingly out of the blue, China decided to rid itself of corrupt officials.  Instantly, casino revenue started to fall as the high-rolling gamblers from Mainland China disappeared.  In retrospect, it seems Chinese government and business officials had been taking illegally gained money from the mainland to gamble in Macau.  To make matters worse, the Chinese economy which had been growing nearly as dramatically as Macau’s gaming economy stalled.  The downward spiral in Macau continued until August 2016 and then as abruptly as the trend began, it stopped and started to reverse directions.

Revenue has risen every month since last August.  At first, no one was willing to say the downward trend had stopped.  However, with each passing month casino operators, professional analysts and government officials have gained confidence in the upward trend. Nobody has been more confident than Lawrence Ho.  He thinks gaming is coming back, all the way back to 2013 levels. Recently Ho said, “Definitely within the next five years, it will grow back to a $45 billion gaming market.  And that’s just the gaming alone, because the non-gaming part is significant.” Ho is the chairman of Melco Resorts, a former partner of James Packer and the son of Stanley Ho, the grandfather of casino gambling; he also has two sisters with senior management positions in Macau.  Ho is Chinese and grew up in Macau and in gaming; he was there when the Macau reverted to Chinese control and he was one of the first recipients of the new licenses in 2003. All of that makes him an expert on gambling in Macau, so it would be foolish to dismiss his opinion offhand.

However, not every experienced observer and insider sees the same rosy future as Ho.  Pansy Ho, a sister, has some grave concerns about an industry built increasingly around non-gaming tourism.  Besides President Xi of China’s policy to eliminate corrupt officials, his government has been adamant that Macau must move past gambling and become an international tourist destination.  To meet that mandate all of the casinos currently under construction and those finished in the last three years have spent billions of dollars each on creating full resorts with hotels, convention facilities, a wide range of restaurants, entertainment and special tourist attractions.  Pansy says making those amenities pay for themselves is not easy.  One of the companies with which she is associated, reported significant losses in its hospitality division.  Ms. Ho thinks the city will to need to find “its own methodology” in diversification because the current one is not working.

The worst part of the campaign against corruption is probably over.   However, there are some dangling issues that connect the current situation to the crackdown and suggest it is not over yet.  In April, a former mainland provisional governor named Chen was removed from office.  The prosecutor in the case used language that suggests there is an unstated political agenda involved in the process.  The prosecutor said “Chen was politically climbing to power, economically insatiable and morally bankrupt. Even after the 18th CPC National Congress, he still showed no sign of restraint and [his wrongdoings] were of a grave nature.”  It is the kind of demonizing language that characterized the purges of Cultural Revolution.

Another indicator that all is not well beneath the surface can be found in the activities of the Commission against Corruption.  The commission has become very visible; in every meeting of officials in Macau a commission representative is present; including meetings with Chinese officials, international tourism gatherings and local cultural functions. There is a press announcement, at least weekly, concerning a new or an ongoing investigation into wrongdoings. I do not know what that means, except it seems like an implied threat.  Reading between the lines is a highly specialized skill in China.

Zhang Dejiang, the Chinese official responsible for oversight of Macau and Hong Kong, was in Macau in  early May.  Zhang stayed three days and made a number of appearances, making a speech each time.  He had one very constant theme saying over and over that government officials and lawmakers needed to commit to the “One Government, Two Systems” policy.  He suggested a loyalty pledge is in order and reiterated that all concerned should become more familiar with the meaning of the policy.  Attempting to read between the lines, it sounds more like a threat, a promise to punish misbehavior rather than a pat on the head for a job well done.  Regardless of the true meaning of his words, he had an instant impact on gaming.  Analysts gave Zhang credit for a decline in revenues during his visit.

In the midst of the turmoil of the last three years, several new properties have opened. The market may be expanding, but all the casinos within the market are not necessarily sharing in the good times.  In fact, recently I came upon an interesting story in the Macau Daily Times.  It suggests that for some properties these are not good times.   According to the article, City of Dreams, one of the latest multi-billion-dollar resorts to open, is having weekly drawings for free airline tickets.  Three times a week at 8 pm gamblers get a chance to win a “Travel without Limits” ticket, allowing them to travel as much as they want for a full year.  Now, I don’t know about your experience, but in mine, drawings like that take place when business is slow.  Oh, and I forgot to mention, City of Dreams is owned by Lawrence Ho’s company.   Regardless of City of Dreams and drawings, gaming revenues in Macau are moving up significantly.  The way the revenue trend in Macau reversed is very rare.  But everything about Macau is rare and different.  The gaming industry has never seen anything quite like it and today it may be up, up and away and tomorrow it could be down, down and down.

A City and an Industry in Transition

The casino industry has changed dramatically since the 1980’s when I worked at the Comstock Hotel and Casino.  In those days, Reno was a vibrant, growing and expanding casino market; it was the number three gaming market in the country after Las Vegas and Atlantic City.  The picture is very different today; most of the casinos from my day have closed up shop and the buildings have been repurposed.  The surviving casinos have one thing in common; they are now part of national corporations.  Those still open and operating are no longer tied exclusively to Reno or as Gary Carano said, “We don’t have all of our eggs in one basket.”  Carano is the CEO of Eldorado Resorts, which as of May 1, 2017, owns 19 casinos in 10 states. That corporation is a far cry from the Eldorado Casino that opened in Reno in 1973 with a few hundred slot machines and 282 rooms.

On May Day, Eldorado Resorts completed its purchase of Isle of Capri.  That purchase was the most recent in a string of mergers and acquisitions over the last few years including the Silver Legacy and Circus Circus in Reno in 2015, a merger with MTR Gaming in 2014 and an earlier purchase of Hollywood Casino in Shreveport, Louisiana.  In the process, Eldorado Resorts has risen to number six on the list of gaming corporations as ranked by the number of casinos operated.

Thirty-five years ago, the Carano brothers and I were competitors in the casino core of Reno.  There were over 20 casinos within the downtown area competing for the 5 million tourists who visited Reno annually in the 1980’s.  Each of us tried to differentiate our casino from the others with promotions, food specials and gaming tournaments.  The Eldorado concentrated on quality and targeted a more sophisticated table game and restaurant customer.  Except for Harrah’s, the other casinos targeted slot players.  The Eldorado introduced higher quality restaurants, higher limit games, upgraded hotel rooms and renewed with a more elegant décor.  Only Harrah’s competed directly with the Eldorado by offering comparable products.  Competing for those customers requires constant reinvestment. If everything is not well-maintained with the most up-to-date rooms, restaurants, slot machines and entertainment, customers go elsewhere. Long ago, Harrah’s threw in the towel as Reno was no longer worth the investment.  As to those other casinos, the slot players found a slot machine closer to home in an Indian casino.

The number of people visiting Reno has been decreasing yearly since the advent of Indian gaming.  As the number of Indian casinos in Washington, Oregon and California increased, the number of tourists coming to Reno dropped.  In 2017, that number is closer to 2 million than at the peak in the late 1980’s when nearly 6 million visitors came to town.  The result is easy to see; today there are only seven casinos where once there were twenty.  It has been clear for a long time, that if you have only one casino in downtown Reno, you probably will not remain in business.  There are exceptions in the greater metro area.  The casinos catering to local business in their immediate vicinity, such as the Atlantis, Peppermill and the Gold Dust West have done well over the years.  But Reno’s economy has also evolved.  It has moved being driven by gaming to an economy is built around technology.

The Reno casino industry has changed a great deal in the last thirty years, but the overall gaming industry has changed even more. The Eldorado succeeded by expanding into other markets.  It is the only successful strategy thus far for a downtown Reno casino; actually it is the only truly successful strategy in the country.   In today’s competitive environment, a casino company with an operation in only one jurisdiction faces a very uncertain future for several reasons.  A single event such as a flood, hurricane or regional recession can spell its doom.  Half of the casinos that have disappeared in Reno in the last 20 years did so as a result of the disastrous flood of 1997.  It was the proverbial straw that broke the casino’s back.

Additionally, there is an even larger threat, the gaming expansion in neighboring states.  An increase in casinos in adjacent states always reduces the base of regular customers.  That is what casinos in Pennsylvania did to Atlantic City and Indian casinos did to Reno.  The problem is not unique to Atlantic City or Reno; in 2017, no single jurisdiction can withstand significant expansion on its borders. The casino gaming industry is transitioning from a local into a national industry.  It is now dominated by a handful of major corporations.  Those corporations are the only ones able to survive the ups and downs of individual jurisdictions. They have ready access to financing and thus the ability to maintain highly competitive individual properties and to compete for licenses in new jurisdictions.

The Eldorado survived the decline of Reno and joined the ranks of the big guys.  It survived because it expanded, but also because in Reno it maintained its commitment to quality.  The Eldorado continued to reinvest here while the rest of us failed to do so.  Maybe it was because we did not have enough cash flow or maybe it was because our vision was too narrow.  Today, the Comstock has no casino, no restaurants and no retail, just condominiums. But, if you want to invest in Reno, I think there are even a few units available or you might buy some stock in Eldorado Resorts.

The Reno-based company closed on its acquisition of Isle of Capri Casinos, adding 12 more properties to its portfolio and creating a larger regional gaming business worth $1.7 billion. Eldorado acquired Isle of Capri for $23.00 in cash per share or 1.638 shares of Eldorado common stock. Eldorado first announced its plans to acquire the company last year. The acquisition adds to a growing portfolio for Eldorado Resorts that includes properties in Nevada, Louisiana, Ohio, Pennsylvania and West Virginia. In addition to its Reno Tri-Properties, which include the Eldorado, Silver Legacy and Circus Circus, the company also owns Eldorado Shreveport, Scioto Downs, Mountaineer and Presque Isle Downs.  The acquisition of Isle of Capri further expands the list to 19 total properties in 10 states, which now also include Colorado, Missouri, Mississippi and Florida. Jason Hidalgo, Reno Gazette-Journal, 5-2-17

A Battle Begins in Earnest in Oregon and Washington

On Monday, April 24th, the Cowlitz Indian Tribe’s casino opened.  Impatient crowds chanted Open! Open! Open! during the formal ribbon cutting ceremony.  The crowds had been lining up for hours waiting for the doors to open and the state police reported an 8-mile long traffic jam of cars waiting to get into the property.  The casino that produced those crowds was not cheap to build; it cost over $500 million and was financed by the Mohegan Tribe of Connecticut.  The tribe and its backers expect 4.5 million people to visit the casino in the next twelve months.  The eager gamblers have been waiting for months, but the Cowlitz Tribe has waited much longer.  Getting to opening day took a long time. One of the tribal leaders said the process had taken 160 years; that is how long the tribe has been trying to develop a successful relationship with the federal government.

The Cowlitz Tribe claims a 12,000 year history in the area.  The tribe did have a legal relationship with the United States after 1906, but did not have a ratified treaty. The tribe received formal recognition 2000; in of 2015, its 152-acre reservation was taken into trust and construction on the casino began in December.  Even with recognition and a reservation, the Cowlitz still had to fight a series of legal battles.  The nearby town of La Center, the City of Vancouver, Clark County, the Confederated Tribes of the Grand Ronde and a group called “Citizens Against Reservation Shopping” filed a lawsuit to appeal putting the land into trust.  The suit claimed that because the tribe was not recognized and did not have a reservation in 1934, it was not eligible to establish a reservation for the purpose of operating a casino.  A federal judge disagreed.  The plaintiffs filed an appeal, but lost.  At that point, most of the litigants withdrew, but the citizen group persisted until the case ended when the Supreme Court refused to hear it.

The opponents based their claims on the question of the tribal legitimacy.  In their argument, the Cowlitz Tribe was just shopping for a place to put a casino and had no ancestral claim to the region. And besides that the casino would harm the card rooms in La Center and Grand Ronde’s Spirit Mountain casino across the border in Oregon.  The card rooms are hardly big business, but they are important to the budget of the town, contributing $3.1 million to the city annually.  Two of the city’s four card rooms have closed already and the other two are not optimistic about their futures.  La Center is worried about its ability to fund basic services without the card room cash.

The impact on the casinos in Oregon is expected to be much larger.  Spirit Mountain has projected a $100 million revenue loss due to the new casino.  Chinook Winds, operated by the Siletz Tribe of Oregon, will also be impacted by the Ilani Casino.  Chinook Winds and Spirit Mountain have shared the Portland market for over twenty years.  Spirit Mountain is the closest to Portland and thus generates more gaming revenues. But the loss to Chinook Winds will still be significant. Both tribes are heavily dependent on casino revenues. In addition to those two, the Oregon Lottery is also projecting a $100 million revenue loss, primarily from its VLTs.  That revenue loss will be very important to everyone in the state.  Next to income tax, the lottery is the second largest source of revenue for Oregon.  So, while the crowds outside of Ilani were chanting Open! the management teams in the card rooms, casinos and lottery were wiping away their tears and getting to work on their marketing plans.

 The result of those marketing plans will be a serious battle for Portland’s gamblers.  Portland has a population of 600,000 and is Oregon largest city, just a touch smaller that Washington’s largest city, Seattle.  A city of that size can support a considerable amount of gambling, but there is a limit and most observers believe the new casino will bring the total casino capacity to that limit.  It will be a long time before we can fully assess the impact of Ilani on the market.  But using the numbers projected by the lottery and Spirit Mountain, one might speculate that the market will have reached saturation, in fact surpassed it.  If that is true, the lottery and the existing casinos will be very hard pressed.  In the worst case scenario, the new casino will also suffer.  Like any casino, Ilani must generate enough cash to service its debt. That might be easy to do if there were less competition, or even if the competition were less well-heeled.  However, that is not the case.

At the end of a recent column I used the phrase, “the process of market adjustment will begin in earnest.”  I meant by it, that when a market reaches saturation a very painful process of market adjustment must take place.  Think about Atlantic City over the last ten years. At first the casinos just downsized, reducing the number of slot machines and employees and cutting any other expenses they could to match cash flow.  When that failed to solve the problem, some managed to find new buyers with more cash to invest, while others were forced to close.   Spirit Mountain and Chinook Winds have the cash to invest in improving their casinos to fight marketing wars.  The Oregon lottery can add more units and at the same time upgrade its product.  Unlike an Atlantic City casino that fails, they will not close their doors.

The only operations that are likely to fold are the two remaining card rooms in La Center.  They are just too small to fight the 500-pound gorilla; the others will fight back with whatever resources they can muster.  That effort will force Ilani to spend more on marketing and promotions thereby reducing the cash available for debt. It will be a vicious cycle; none of the opponents will surrender as a conventional casino might.  The situation will be worth watching because it will give us a glimpse of the battles that are coming in other jurisdictions.   As casino gaming continues to expand, most jurisdictions are nearing saturation.  At that point, when there is more casino capacity than a market can support, a war will ensue.  In those wars, casinos will fight each other in a very expensive battle for every gaming dollar.  As Atlantic City has demonstrated, not every casino will survive the fight.

An Update on the Current Status of Gaming Expansion Legislation

With one quarter of 2017 in the books, it is a good time to look at the state of gaming expansion in the country.  As of the middle of April, eight states – Pennsylvania, Alabama, New Hampshire, Illinois, Connecticut, Florida, Texas and South Carolina have bills or initiatives to expand gaming. The bills vary a great deal and the prospects of a bill passing into law are very different in each state.  Often the most relevant fact in forecasting a bill’s chances of succeeding is the history of gaming legislation in the state.  Texas, South Carolina, Arkansas, Alabama and New Hampshire are states with a long history of failed gaming legislation and conflicted views of gambling in general.

In New Hampshire, the house has rejected a casino bill 19 times.  But, Senator Lou D’Allesandro, the sponsor of this year’s bill, has hope because bills allowing for keno and online purchase of lottery tickets did pass recently.  He believes the people of the state fully support his proposal to permit two casinos and he thinks it’s possible that the state legislature might also be in favor.  After all, if you can buy a lottery ticket or play keno, why shouldn’t you be able to go to a casino?

Texas is much like New Hampshire in one sense; bills to permit gambling in the Lone Star State are as common as prairie dogs.  But Texas is very different in another way.  Except for the lottery, Texas does not have gambling, it just isn’t legal where the stars at night are big and bright.  The most common form of illegal gambling is slot machines – in Texas called eight-liners.  There are thousands and thousands of them scattered around the state, but the only time they make the news is when a county sheriff arrests an operator and confiscates the machines. There can be as many as 200 or 300 slots picked up in one of those raids, more than in some casinos in South Dakota and Colorado.  There are also the special cruise ships – not the big, fancy international kind that ply the high seas – but ships specially designed as casinos to operate off the coast of Texas. Over the weekend, the newest one off Galveston ran into a buoy; fortunately the damage was mild and there were no injuries.  The bill under consideration in Texas this year deals with fantasy sports, nothing very controversial, but it is still likely to run into the moral objection: “Gambling is not allowed deep in the heart of Texas, no siree.”

South Carolina is another conflicted state, gambling is illegal, but existent in the form of slot machines in backrooms.  Without even a nod toward those illegal slot machines, regularly some lawmaker will propose allowing full-fledged casinos within his/her constituency to solve some particular budget problem.  This year the problem is crumbling roads, but the rest of lawmakers, like their counterparts in Texas, will likely effect disdain for the sin of gambling.

Arkansas also belongs to the small group of states that pretend gambling is unfit for polite society, but of course permits it to exist.  Horse racing is very popular in Arkansas and people like to make wagers on the outcomes.  However, legalizing any other form of gaming in the state is very difficult. So far this year the attorney general has rejected four petitions that sought to place the issue on the ballot in November.  Alabama is also not likely to pass any gaming legislation this year, even though it has a new governor. The lieutenant governor became governor when the “love gov” was forced to resign.  Neither the former nor the present governor supported any expansion of gaming. Although a bill authorizing fantasy sports has just passed the House of Representatives.

Connecticut, Florida, Pennsylvania and Illinois are debating legislation to expand the casino industry currently operating in the state.  These issues are not moral, simply monetary.  In both Connecticut and Florida the issue is more complex because it includes Indian gaming.  Due to competitive pressures from Massachusetts, the Pequot and Mohegan Tribes, each of which operates a casino in Connecticut, have joined forces to open another casino near the border with Massachusetts.  Their legislative efforts fueled a discussion to open the process to other bidders for a license; in particular, MGM wants to be allowed to bid.  As MGM is the proximate cause of the tribal effort for a third casino in Connecticut, the waters have become quite muddy.  The tribes pay the state 25 percent of the their slot revenue and no one wants to lose that money, but they also do not want to miss out on the potential for a significant license fee from MGM.

Florida has yet to renew its compact with the Seminole Tribe and lawmakers are using the opportunity to push additional gaming that is important to their constituents.  As is the case in Connecticut, the existing Seminole casinos are extremely important to the state financially.  At the point the compact had expired, the Seminoles had paid the state a billion dollars for the exclusive privilege of operating table games.  For the lawmakers to protect the Indian casino revenues while satisfying the non-Indian casinos is not an easy proposition.  And, they have only three weeks before the end of its session to reach a compromise. At the very least, one might expect some agreement on a compact with the Seminole Tribe will be reached before the lawmakers leave town.

That leaves us with Pennsylvania and Illinois; both states have budget deficits and are motivated to find new revenue sources.  Pennsylvania is exploring online gaming, slot machines in a variety of locations and fantasy sports. The additional money from new gambling sources is already written into the budget, so one can anticipate something will pass.  The question of course is what?  That question is extremely important to the twelve casinos operating in Pennsylvania.  Online gaming might benefit the casinos, but slot machines certainly will not.  However, the health of an already over-taxed industry is not at the heart of the matter.  Money is all the lawmakers and the governor are measuring at the moment.  Rather short sighted in my opinion; some forms of expansion are more likely to reduce the revenue the state currently receives from gambling than increase it. But then, no one in Pennsylvania asked my opinion.

And then there is Illinois, a state with a two year-old budget stalemate and an insatiable appetite for cash.  In the past, every time the governor of Illinois decided he needed more cash for his agenda he looked to gambling.  The most recent was the addition of VLTs intended to provide $50 billion for major construction projects.  The law passed in 2012 and the growth of the number of establishments, VLT units and revenue has been astonishing.  In March of this year, 5,932 establishments with a total of 25, 911 VLTS generated $119.2 million in revenue – just $11 million shy of what the state’s ten casinos generated in the same month.  The proposals on the table now are for fantasy sports and more casinos – possibly as many as five.  Chicago is one of the sites being suggested; it certainly would be a plum for the company that got the licenses, if a private company does.  The city of Chicago wants to keep that license for itself and that would create an interesting dilemma.  A casino license in Illinois is expensive.  First there is a flat fee of $100,000 and then $30,000 for each gaming station.  If the city of Chicago received a license would it be exempt from those fees?   That money would be an important part of the picture, but the bigger issue is the casino tax.  The state’s tax rate is high, short of Pennsylvania’s 55 percent, but still larger than other states.  The effective rate in Illinois is probably closer to 45 percent, but that is still a hefty burden for a casino operator to bear. It becomes much heavier if more casinos are permitted, further dividing the gambling pie, which has already been halved by the addition of the VLTs.  But, who cares as long as the state makes more money, right?

By the end of the current legislative sessions, I think that Pennsylvania, Connecticut, Florida and possibly Illinois will pass legislation to expand gaming in some form.  As the industry reaches full maturity and even saturation, the positive impact on national and regional markets will get smaller and smaller, while the negative impacts get larger.  The expansion will continue until there are no more opportunities and then the process of market adjustment will begin in earnest.

And, It Has Only Been Thirty Years

Indian gaming is big business and getting bigger every year.  According to the annual Casino City Report by Alan Meister, the 474 tribal casinos generated $30.5 billion in gaming revenue in 2015, an increase of 5.5 percent over 2014.  By way of comparison, non-tribal casinos and VLTs produced $35.9 billion.  Since, 1990, commercial gaming has grown dramatically, but not as fast as Indian gaming in its relatively short history.  February 25th was the thirtieth anniversary of one of the most important events in the history of casino gaming in the United States.  In 1987, the Supreme Court ruled in favor of the Cabazon Band of Mission Indians in California v. Cabazon Band of Mission Indians.

In the mid-1980s, following the lead of other tribes, the Cabazon tribe turned to high-stakes bingo as a revenue generator.  The state of California objected, claiming gambling was illegal in California.  The case eventually reached the United States Supreme Court.  California argued that its constitution prohibited gambling and the tribe’s bingo was in violation of state law.  The court found that California did permit horse racing, poker and “casino nights” for charities.  The court determined that California did not prohibit gambling, but instead permitted and regulated it.  And therefore the court ruled the Cabazon Tribe and other Indian tribes were free to offer gambling without interference from the state.

That decision would have opened the door for unlimited Indian gaming.  But, the decision did not stand as written because Congress rushed to pass the National Indian Gaming Regulatory Act.  The intent of the act was to compel Indian tribes to negotiate the terms of any gambling activity with the state wherein the tribe’s reservation was located.  The subsequent agreement is called a compact and every tribe wishing to engage in a gambling enterprise must have a compact signed by the tribe and the governor of the state.  Compacts determine the types of games allowed and the rules and regulations for each game. Additionally, compacts cover whether or not the state receives any fees as mitigation for state and local services.  The states cannot tax tribes, but the agreements frequently include some type of payment and it is often a percentage of revenues.  In Connecticut for example, the tribes contribute 25 percent of their slot machine revenue to the state’s general fund.  In Florida, the Seminole tribe paid the government for exclusivity, a sum that amounted to $200 million a year until the present compact expired.

In April, WinnaVegas Casino in Iowa celebrated 25 years.   The casino in Iowa, belonging to the Winnebago Tribe of Nebraska, illustrates the importance of gaming to tribes.  The Winnebago tribe claims to have immigrated to Kentucky in 500 B. C., two thousand five hundred years ago.  It only moved into its little corner of Nebraska and Iowa two hundred years ago.  However, like most tribes, it had lost its traditional source of sustenance.  Indian gaming offered the Winnebago tribe what it offered to most tribes, a source of funding to maintain and strengthen its culture.   Just after the Cabazon decision, the tribe started to think about the possibility of opening a casino. The tribe did what many tribes were doing; it went to visit Indian casinos in other states.  They took what they learned and returned home to open a temporary facility cobbled together from prefabricated pieces and trailers.  Today, the tribe operates a 55,000-foot casino with a hotel, restaurants and convention space.  It is not huge, but it is a success for the tribe.

Also in April, Foxwoods Casino in Ledyard, Connecticut celebrated its 25th anniversary.  Unlike, the Winnebago or the Seminole, the Mashantucket Pequot Tribal Nation did not have either a large enrolled tribal membership or much land.  The tribe had existed in the region for hundreds of years, but by the end of the 20th century, it was a tribe slipping slowly into extinction.  The tribal membership had dwindled to a couple of hundred, but visionary tribal leaders thought gaming might save the tribe. The Pequot Nation did as other tribes were doing; it started with bingo in 1986.  Bingo was successful and the tribe wanted to move into casino gambling, but financing was difficult to find.  No conventional financing institution was loaning money to Indian tribes for casinos.  But eventually the tribe found a Malaysian casino operator, Lim Goh Tong.  He quickly recognized the potential of the location.  The casino which opened in 1992 was an instant success and began a two decade long series of expansions.  Today, Foxwoods Casino has 9 million square feet, 4,700 slot machines and 2,266 hotel rooms.

Celebrating a 25th anniversary, both the Winnebago and Pequot tribes illustrate just how important tribe gaming has been.  In California, Oregon, Washington, Minnesota, Wisconsin, Florida, Connecticut and Oklahoma, Indian casinos are major factors in the local economy.  But, at the same time Indian casinos represent significant competition for commercial casinos.  For example, the decline of casinos in Reno, Lake Tahoe and Laughlin can be attributed directly to the growth of Indian gaming in neighboring states.  But the real significance lies in the contribution to tribal culture.  There are literally dozens of tribes that, like the Pequot, were on verge of disappearing.  Casino revenues have helped them revive their culture and in many cases, their language.  It has only been 30 years since the Cabazon decision, but the reverberations have been huge both within Indian country and the gaming industry.


A Pig, a Panda and a Cat Rolex in Vegas

Rolex you say? Yep, “to Rolex” is when you go to a Rolex store with a sledge hammer, break the windows, take whatever you want and go on your merry way.  It happened Saturday March 25th in Las Vegas.  The store is located in the Bellagio, so even at one in the morning there were people around to witness the robbery.  Four men dressed in suits and tuxedos, wearing animal masks and armed with sledge hammers attacked the store breaking the windows to gain entrance.  One stood outside with his weapon in full view and told people to get away.  When the four masked bandits finished, they ran to their car in the parking garage.  Unfortunately their car refused to start, so they tried to car jack a ride, but failed and fled on foot.  Only the poor pig did not escape and is being held by the Las Vegas police.  He is only twenty years old and if his buddies are as young it might explain their ineptness.

On that same day, a man riding a city bus shot two people, one of whom died later. The shooter, a fifty-five year old Las Vegan said he just wanted to frighten a passenger who had frightened him.  The Las Vegas Review-Journal reported the man told police he “felt bad about what happened and reiterated that all he wanted to do was scare the large male.” On the surface, neither of these stories rises to a level of national significance, except in the 21st century all public violence has become significant.  The world has become a more dangerous place since September 11, 2001, or at least it is perceived as more dangerous.

Twenty years ago, no one outside of Las Vegas would have noted the nut with a gun on a bus in Las Vegas.  But given the context of terrorist acts around the world, anyone killing other people in public becomes national news.  Just a week before, an equally disturbed man in London drove into a crowd of people.  He killed four people and injured scores more.  There is no evidence that it was an act of terror, but the man was a Muslim and that always raises the red flag of terrorism in people’s minds.  London has had more than one of those acts of terrorism, as have Paris, Madrid and other cities in Europe.  It is one of the major narratives of the 21st century.

Because of our hyper-sensitivity to such acts, the events in Las Vegas took on a larger importance in the national press.  The world is portrayed as being more dangerous and particularly risky for tourists. In the London incident, a man from Utah in town to celebrate his 25th wedding anniversary was one of those killed and people from several other countries were injured.  In Las Vegas, the man killed was a tourist from Montana.  Immediately after such incidents the press begins to speculate on the impact of these events on tourism.  Will people stop going to see Big Ben, the Eiffel Tower or the famous Strip?  There have been no published studies on the change in visitations per year following a well published act of public violence, so the best we can do is speculate.  I do not think any of the incidents will have a long-term impact, although we all feel a little more angst when we travel these days.

The fear of terrorism is not going to abate as long as there is a force for radical change in the Middle East or anywhere else.   When the violence in the Middle East stayed there, we barely noticed; but with the destruction of the World Trade Center’s twin towers in New York the violence was successfully exported.  That was not the first time, but it was the most significant.  It led to major changes in the way we think about terrorism, violence and travel.  But in cities like Paris, London and even Las Vegas, the number of people killed is no greater than before.  Las Vegas gets over 40 million visitors a year; in any population of that size there will be many deaths from a variety of causes, food poisoning, car accidents, stabbings, suicide and yes from shots fired by a disturbed man on a bus; and of course you might even be robbed by a man in a pig, cat or even a panda mask.  We do live in a dangerous world, but not necessarily as dangerous as the terrorist narrative would have you believe.

I am not suggesting that we should be blasé about terrorism or any violence.  The city of Las Vegas and its casinos have to take the threat very seriously and do everything that is possible to protect those 40 million people from violence.  All of the major cities in Europe and around the world have terrorism very high on their agendas, no national or local government in the West can afford to ignore the threat.  But as individuals, we do not need to be intimidated.  In 2016, 700 million Americans flew on airplanes.  Internationally during the year there were 19 crashes that killed 325 people; that was one person out of every 10.7 million that flew.  In 2015 in the United States, 35,092 people were killed in automobile accidents while people drove 3.1 billion miles.  I don’t have the numbers of deaths for Vegas, but the ratios would be comparable; 41 million people visited the town and stayed an average of 3.4 nights each.  A very small percentage of those people were injured, killed or met a masked pig with a sledge hammer.  John Choate, executive director of security for Wynn spoke to a group of hospitality executives about terrorism and security in Las Vegas.  He concluded that Las Vegas was safer than most places and people should feel “very, very safe coming to Las Vegas.” His timing may have been bad, two days after the incidents at the Bellagio and on the bus, but he is right, Las Vegas is still a very safe city to visit.


Gambling Addiction…Who Is Responsible Anyway?

Problem gambling and addicted gamblers will always be an issue for the gaming industry.  It is an issue that catches headlines and undermines the industry credibility.  It is an issue that industry insiders should put more time and money into understanding and mitigating.  In a recent case in Nebraska a 79-year woman was convicted of embezzling $1.2 million dollars from the travel agency where she was the bookkeeper.*  The woman was a well-known customer at several casinos in Iowa; records at one casino showed she had lost $1.9 million in ten years, the most she ever lost in a single year was $250,000.  That is also the most she ever embezzled from her employer in a single year.  That may be a lot of money, but it isn’t the largest amount of ill begotten funds gambled away at a casino.  A couple of years ago a company in Los Angeles sued a Las Vegas casino over millions of dollars they say were stolen from them and spent on sports betting at the casino in Vegas.  Those cases and other like them, beg the question about responsibility: Who is responsible, the gambler or the casino?

It is not an easy question to answer.  In the 1980’s, Mike Adams was the general manager at Karl’s Silver Club in Sparks, Nevada.  He was young and ambitious with a seemingly bright future in the industry.  But he opted out of casino gaming over the question of responsibility.  Mike found from personal experience that he could not answer the question.  After his father died, Mike’s mother was lonely.  She started to go to the Silver Club every day. At first it was just to get out of house, have lunch with her son, and be around people.  But as time went on, she found she really liked playing the slot machines.  The machines and the employees became her entire world.  Sadly, before Mike discovered the problem, his mother had lost all of her savings and her home.

Mike was faced with a dilemma.  He could not blame the casino nor could he blame his lonely mother.  Who was responsible? For Mike it was a problem without a solution.  He decided on a new career, one without that kind of moral conflict and became a real estate salesman.  It was the only course of action Mike could see, but for most people in the industry that is not an option.  However, at one time or other, nearly every person involved in casino operations, and I include myself in that group, has struggled with this issue.  We have all had at least one customer who ended up in serious financial difficulties due to gambling.   Like Mike’s mother, it follows a typical pattern. At first, everything is rosy; the customer has a good time and makes new friends at the casino.  As times passes, they come more often and spend more money.  In retrospect, the managers and employees might have recognized the signs, but failed to do so.  Possibly if they had been better trained or less focused on growing the business it might have turned out differently for that customer.  It is very difficult to develop broad policies as each case is unique.

On the other side of the responsibility question, the customer too might have seen the signs and asked for help.  After all, each of us is responsible for his/her life.  If a person drinks and drives, the person, not the drink is judged in a court of law.  A person who spends more than he/she earns is held responsible by the bankruptcy court.  Gambling is not different from those examples.  The issue can and has been debated over and over and there is no simple answer.  But at some point in our business, the management and employees of each casino have to accept some responsibility and look more closely at some of the customers.  It may not be comfortable to look too closely into their private lives, but if we do not we lose a customer, a friend and at times even our own credibility.  It is incumbent on each individual casino, its management and employees to conduct the business of casino gambling responsibly.  And that means paying more attention to the people whose behavior might put them at risk and being prepared to take action. That is easier to say than do, but for the long-term health of the industry it is necessary.  And it is the responsible thing to do.

*An elderly woman pleaded no contest this week to four felony charges stemming from allegations that she stole more than $1.2 million from an Omaha travel agency — and blew it at the casinos…as bookkeeper at Travel Faire Inc., repeatedly wrote checks for cash and hid her theft as expenses…Authorities then requested and received information from a couple of Council Bluffs casinos. At one — Ameristar Casino — Carbullido had gambled and lost roughly $1.9 million since 2003. The most she lost in a single year at the casino was about $246,000 in 2012. Todd Cooper, Omaha World-Herald, 3-17-17



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