Report says tribal casino revenue-gains slows

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ESCONDIDO, Calif. (MCT) - Like the rest of the nation, tribal casinos are feeling pinched by a weakened economy, according to an industry report released Aug. 19.

They also are feeling increasingly squeezed by regulatory restrictions.

The state;s 60 tribal-owned casinos generated $7.8 billion in 2007, according to the report. That's just 1.6 percent more than the $7.6 billion generated by the casinos in 2006 - a trend that is likely to continue through 2008, according to the study's author.

And that compares to the 20 percent growth that the industry experienced in 2005, according to Alan Meister, an economist with the Analysis Group, a Los Angeles-based consulting firm. Meister wrote the Indian Gaming Industry Report, which he updates annually.

Not all of that drop can be attributed to customers weary about rising gas prices and falling home values, Meister said. Another and possibly more important reason was the restrictions put on the industry, such as the number of slot machines that tribes can operate, he said.

''It's definitely slower growth and part of that is the economy,'' Meister said. ''But the economy explains only part of it. There's something that I really think is more pervasive and that is public policies that are designed to restrict Indian gaming.''

The state's gaming industry nearly tripled in size in the last decade, from about 20 small casinos and bingo parlors in the late 1990s to 60 casinos last year, including some that rival Las Vegas gaming resorts in size, amenities and games.

But the rate of revenue growth in California has fallen off in recent years, from 27.5 percent in 2003 to 9.2 percent in 2006. Limits set on the industry are largely to blame, Meister said.

Under the original agreements negotiated with the state in 1999, tribes were limited to no more than 2,000 slot machines each. A handful of new agreements renegotiated in recent years have allowed some tribes to eliminate the cap in exchange for larger payments to the state.

Those agreements, some of which were approved as recently as February, may have come at a bad time, Meister said.

Though the report did not break down revenue by individual casinos or by county, there are signs of trouble in the local market.

San Diego County has the highest number of tribal casinos in the state, 10, including five in North County.

The Santa Ysabel tribe, which owns a small casino near Julian, struggled to make its payments to the state and the county earlier this year. Those payments helped increase the number of law enforcement personnel in the area and pay for programs for people with gambling problems.

Most recently, one of the region's largest casinos, the Pechanga Resort and Casino near Temecula, reduced its staff of more than 4,000 employees by 400. Pechanga was one of the tribes whose new agreement was approved in February under a statewide ballot initiative.

The casino was legally limited to 2,000 slot machines, but added 1,300 of the 5,500 additional machines allowed by Proposition 94.

Jacob Mejia, a spokesman for Pechanga, said the slowdown in the industry is a sign of the times, but not one that is likely to last.

''The old axiom that gaming was immune to recession has been turned on its head,'' Mejia said. But, he added, ''This is nothing more than a pebble on the road.''

Nationwide, the tribal gaming industry fared a little better. The country's 425 Indian casinos experienced a 5 percent growth in revenue from $25.3 billion in 2006 to $26.5 billion in 2007, according to the report.

That compares to a smaller gain of 2 percent by commercial casinos, such as those in Las Vegas and Atlantic City, which earned $32.2 billion in 2007.

In 2007, there were 66,115 slot machines and 2,066 table games in California's 60 tribal casinos. Those casinos generated nearly a third of all tribal gaming in the United States.

Meister said the downward trend in revenues would likely continue in 2008 due to the struggling economy. However, he added that this was not a sign that the tribal gaming market in California was saturated, especially in Southern California.

''You're going to see the growth come back,'' Meister said.

Southern California tribes share their customer base with Las Vegas, and millions of residents in Los Angeles, San Diego, Riverside and Orange counties.

''They are people that like to gamble, and if tribes can capture a fraction of the market, it will be great for them,'' Meister said. ''As long as there are people going to Las Vegas, there's potential for growth [in tribal casinos].''

In the meantime, tribes will have to try harder to keep customers coming, said Doug Elmets, a spokesman for the California Tribal Business Alliance, an industry group that represents several gaming tribes, including the Pala and Pauma bands in North County.

''The gaming industry, like the rest of the economy, is feeling the effects,'' Elmets said. ''Nevertheless, it is healthy and it is resilient.''

Copyright (c) 2008, North County Times, Escondido, Calif.

Distributed by McClatchy-Tribune Information Services.