In a year of significant change for commercial casinos — including the legalization of sports wagering and the continued emergence of non-gaming revenue — tribal gaming properties are facing those same challenges, plus unique competitive factors of their own.
Depending on the market, casinos on tribal lands might be competing against other tribes or a commercial gaming property. Sometimes it’s both. But no matter the competitive set, success for tribal casinos comes down to executing smart strategies for pricing, reinvestment and direct marketing, said Daniel Lofton, Director of Casino Services for Duetto.
Lofton recently gave his view of the competitive landscape for tribal gaming and pointed out how successful casinos respond to the growing pressure to increase revenue.
With more casinos, both commercial and tribal, expanding to even more states, is there still room for the gaming industry to grow in the United States?
There’s absolutely more demand. Regional demand for gaming outside Las Vegas is huge just about everywhere. The only place where it might be near capacity is Mississippi. Mohegan Sun in Connecticut and Choctaw Gaming in Oklahoma continue to expand their properties and make money. There’s really no end in sight unless it’s a really mature market like Nevada, New Jersey or Mississippi.
Tribal casinos have some inherent advantages over their commercial counterparts, in that they have lower costs to build and don’t have to pay the heavy taxes that other casinos have to pay. So why wouldn’t they keep growing?
How does that affect the competition for tribal casinos? They might be located closest to a commercial property or in a competitive tribal market like Oklahoma, but does that affect how they pick a comp set and define their strategies?
It depends on who is closest. Every tribal casino is regional and will pull in lots of locals. Outside of a few special markets, it’s about trying to get every gamer within a 100-mile radius. If you have anyone close to you — which you might not because these casinos are built on really large tribal lands — you’re competing against them. But not in the traditional sense of setting your cash rates at a premium.
It’s about how you’re competing from a marketing perspective. If you’re Choctaw Gaming in Oklahoma, you’re sending your mailers to Dallas and Oklahoma City, but your comp set is sending mail there too. It gets hard from a hotel Revenue Strategy perspective, because you want to steal some business from your competition and you’re tempted to undercut their rates by $10. I’ve seen some properties give their employees a bunch of money to go play at a competing casino, just so they can get rated and see what those offers are [at the rival property].
Find out where your gamers are coming from. Let’s target those ZIP codes aggressively. If you have a high-demand ZIP code, don’t go overboard reinvesting in that market, because those guests are coming anyway. You’ll want to target your comp rooms and F&B offers to high-worth people from other areas.
Is there a difference in the gaming offerings tribal casinos can have versus a commercial property?
If tribal casinos are competing against a commercial property on the gambling experience, they’re usually going to win. For instance, in Louisiana a commercial casino could pay upwards of 30% in taxes. But of course, tribal casinos are not subject to this tax, which gives them more flexibility around reinvestment.
So when you’re talking about what the tribal casino can afford to lose or give away, it’s a lot more. You might actually win playing at a tribal casino. I could play for six hours and get free drinks and win some money at Coushatta Casino Resort [in Louisiana]. But at some of the Lake Charles properties, I might last five minutes playing and run out of money.
However, if you have a market with a lot of tribal competition, then it’s business as usual. Look at Connecticut, where Mohegan Sun goes up against Foxwoods, or in Oklahoma where it’s pretty tough among Choctaw, River Spirit and Winstar World Casino. It gets back to targeting the customers you’re trying to appeal to, because your comp set is trying to steal those customers from you too.
Now that PASPA is repealed, should tribal properties consider adding sports books? What about online betting?
I’m no expert in that, but I would say that with online betting and sports betting, it depends.
Sports wagering is exploding in New Jersey, so it’s a competitive disadvantage not to have it. New Jersey pulls gamers from New York and Philly, and some tribal casinos like the ones in Connecticut have to compete with that. If all of Atlantic City and New Jersey offer it, the rest are at a disadvantage.
But you don’t hear sports betting come up as much in California, where it’s all tribal gaming. Sports wagering adds a whole other level of complication. The law that allows gaming on tribal lands gets really wonky when you talk about online betting. I guess it’s allowed if you’re betting online sitting in the Starbucks on the casino property, but it’s not entirely clear.
Not only that, but the whole goal of a tribal property is to bring people onto tribal lands for tourism in a micro-economy. If you push hard for online betting, people might not come to the brick-and-mortar property, so what’s the point of that? The casino is there to generate thousands of jobs.
Commercial casinos have appeared under pressure to drive ancillary revenue through things like resort fees or parking fees. Will tribal casinos face the same pressure?
That kind of strategy seems antithetical to revenue management to me, like, “We haven’t done a great job yielding rates, so we’ll tack on a fee to raise top line.” This has become very common in Las Vegas, but there’s a reason for it there. Wholesalers and online travel agencies like Expedia have exploded in Las Vegas. The resort fee is a way to steal back this revenue, as it’s not included in the margin.
When we look at markets outside of Vegas, resort fees make no sense to me. But they’re spreading, and I feel like that’s being driven by echoes of Las Vegas. Instead, just raise your rates, or reinvest less in your low-level players. Hidden fees aren’t the way to go, if they can be avoided.