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Tribal casino closes due to poor economy

ONAWA, Iowa – Visit the Web site of Casino Omaha, and it appears like a grand place for gaming fun and entertainment. As of press time, the site even heralds the facility as “the Midwest’s most exciting gaming and dining experience.” Just one problem: the casino, owned by the Omaha Tribe of western Iowa and northeastern Nebraska, shut down June 30.

Gaming and financial experts say the casino is one of the first tribally-owned gaming facility casualties of the steep economic downturn the industry has faced in recent times. And some are worried that more tribal casinos could suffer a similar fate.

“It saddens me to see so many tribes burdened by the downturn of the economy,” said Bill Lomax, Native American Finance Officers Association president.

“The Omaha Tribe is not alone in its struggle to turn around its casino; many other tribes are facing serious difficulties.”

Kathryn Rand, co-director of the Institute for the Study of Tribal Gaming Law and Policy, noted that besides layoffs and postponement of expansion plans, there have been hiring freezes, shortened hours – a whole range of “tightening the belt” responses – at several tribal casinos in recent months.

“There is no doubt that the gaming industry, including the tribal gaming industry, is feeling the pinch of the recession.”

What’s so scary about the Omaha Tribe’s situation, gaming experts said, is how quickly the tide turned. In fact, not too many years ago, business was booming.

Jim Hunt, the casino’s general manager, recalled that the casino was a strong performer after it opened in 1992. It provided revenue to support various tribal projects, and ended up employing about 185 tribal members.

When the doors recently closed, most of the tribal members – and almost everyone else, besides Hunt and a couple of other employees – lost their jobs.

Bill Eadington, director of the Institute for the Study of Gambling and Commercial Gaming, said casinos in rural areas with a lot of nearby competition could soon find themselves in similar positions to that of Casino Omaha.

“Some small commercial casinos under those scenarios have been forced to close,” Eadington said. “It’s just a really difficult situation, and the downturn of the economy has made it all the worse.”

Hunt said that competition and the rural location of the casino were less of reasons for its closure than its need for a substantial remodel and update. When the casino closed, he noted, it still featured coin-operated slot machines, which pale in comparison to newer, ticketless technologies.

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He said the tribe is working to find a business partner to help them finance a deal to refurbish the facility, although one has not been found. He added that the tribe expects the casino to re-open within months.

“Once we get the casino restructured, it will be a much stronger revenue resource for the tribe for years to come,” Hunt said, adding that it will be a much more streamlined operation.

Will Cummings, a gaming expert who has done research for the Iowa Racing and Gaming Commission, said Casino Omaha’s closure is not terribly surprising, considering that the gaming market in Iowa is already very competitive – and more casinos are expected to open soon.

“The facility had fallen behind the others,” Cummings said.

“You have to be able to keep up with the competition. And that can be exceptionally hard to do in this economy.”

Cummings said he didn’t know how realistic it would be for the tribe to turn this situation around in the current economy.

With the economic pressures of late, Lomax said an increasing number of tribes will find themselves having to buckle down. He doesn’t necessarily believe there will be many closures of tribal casinos, but he said there are a number of tribes that will need to undertake a restructuring of their debt and seek to streamline staff and other expenses.

“Several tribes are nearing or currently facing default on their loans,” Lomax said.

“This is a new situation for Indian country and will require those tribes that do default to enter into negotiations with their creditors to work out new loan arrangements. This process may in some cases be complicated by tribal sovereignty issues and the fact that it is unclear whether the bankruptcy code applies to tribes.”

For its part, NAFOA has developed a “turnaround management” seminar focusing on tribal enterprise restructuring to be held at the NAFOA Annual Conference, scheduled for Sept. 8 – 10 at the Tamaya Resort at the Santa Ana Pueblo in New Mexico.

“As tribes look to restructure their businesses, they need to look at debt load and payment structures, food and beverage, retail attractions, marketing budgets, enhanced marketing efforts, and staffing,” Lomax said.

“Hard choices and sacrifices will have to be made but by working proactively, I believe that most of the tribes that are currently struggling will be able to bring their operations back to profitability. Let’s hope we see some recovery in the economy soon.”