Hotel Online  Special Report
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American Indian Gaming Fuels Opportunities
for Hospitality Industry
by Valerie Red-Horse, June 2006

Approximately 3,000 conference participants attended symposia, workshops and roundtables at the annual meeting and trade show sponsored by the National Indian Gaming Association (NIGA) in Albuquerque, New Mexico this past April. In attendance were more than 400 exhibiting companies, including a number of companies from the hospitality sector.

As Native American Indian tribes seek to leverage the economic success derived through Indian gaming, some are finding rewards by developing lodging and leisure facilities in partnership with the hospitality industry. And as the demand for hotel rooms continues to rise, hospitality industry players are forging relationships with tribal nations that offer opportunities for building and branding new hotel product for their targeted customers. 

The Indian Gaming Industry

Indian gaming generates more than $19 billion in annual revenue, plus ancillary markets far exceeding that amount. Although a few tribes have successful oil, gas, timber and other business enterprises, the gaming industry is by far the largest income producer for tribal entities in the United States. According to the annual Indian Gaming Industry Report (Casino City Press, 2005-2006 Update) the estimated number of jobs generated in the United States from Indian gaming exceeds 545,000. In 2004, more than $7.2 billion in tax revenue was collected, and 228 tribes were operating 405 gaming facilities in 30 states. Indian gaming facilities generated approximately $19 billion in 2004 revenue, up from $17 billion in 2003. The total estimated economic contribution of Indian gaming to the U.S. economy in 2004 was $53.1 billion in output and $19.7 billion in wages.

In some states, machine limits and land restrictions have begun to stabilize the growth of Indian gaming facilities. Consequently, many tribal nations are developing expansion plans in related industries such as hospitality, real estate, leisure and entertainment. 

The business model for combining gaming, lodging and entertainment is proven. In commercial gaming settings, such as Las Vegas properties, gaming typically accounts for 50% of the revenue, with hotel, food, beverage and entertainment accounting for the remaining 50%. Conversely, in the tribal gaming arena, slots alone generate 80-90% of the revenue stream. Nearly every professional in the tribal gaming industry agrees that the concentration in slot revenue begs for diversification, and that the right amenities and attractions are what are needed to complete the economic loop.

Gaming operations must be conducted on trust land (reservation land held in trust by the federal government on behalf of the tribe), and some tribes are building hotels and resorts on trust land adjacent to casinos. But, a tribe may own or operate ancillary businesses anywhere. An off-reservation project is subject to property tax and would not qualify for certain tribal benefits, but as an investment development for the tribe, these considerations are not necessarily substantive or hindering. Some tribal nations are already involved in hospitality projects that are not located on trust land. In an effort to capture off-reservation traffic, other tribes are working with partners to develop shopping malls, industrial parks, entertainment complexes and recreational venues.
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Some of the larger more progressive gaming tribes are ahead of the curve and have already partnered in significant ways with public companies or have entered into some meaningful relationships with lodging/hospitality entities. These examples are but a few key illustrations of successful developments.

Seminole Hard Rock
The Seminole Hard Rock Hotels and Casinos in Tampa and Hollywood, Florida are powerful collaborations between the Seminole Tribe of Florida and Hard Rock International. These amazing world-class resorts are built to 4-star, 4-diamond standards, and offer everything one needs to enjoy the ultimate entertainment adventure: innovative cuisine, lush tropical pools, world-class spas and fitness centers. At the heart of each property is a world-class casino featuring the most popular gaming machines like Wheel of Fortune, Texas Tea, Little Green Men and Double Diamond. 
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Seminole Hard Rock Hotel & Casino, Tampa
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The Lodge at Chama 
Owned by the Jicarilla Apache Tribe
Nestled in the San Juan Mountains of northern New Mexico, guests will find elegance beyond expectation and location beyond comparison. Unmatched as the premier outdoor sporting destination, the Lodge At Chama is dedicated to providing unsurpassed service and personal attention to their clients. The beautifully appointed lodge provides for every comfort. By taking a magnificent 36,000 acre ranch and combining it with over five decades of innovative wildlife management programs, they are able to present some of the finest recreational opportunities available in North America. The management strategies emphasize quality not quantity. They are dedicated to preserving this unique and diverse environment for future generations and are thrilled to share it.

Gila River Indian Community’s Sheraton Wild Horse Pass
The resort is located in the Sonoran Desert on an expanse of rugged Arizona landscape where the ancient vistas, mountains and roaming wild horses remain untouched. A unique blend of two cultures, the resort offers the quiet serenity created by Native American tribes who found haven here. This destination resort includes two 18-hole Troon-managed golf courses, the Aji Spa, a 17,500 square foot spa with 17 treatment rooms, the Koli Equestrian Center for riding lessons, trail rides and outdoor events, and is also equipped with tennis courts and jogging trails. They offer four pools with cascading waterfalls and a 111-foot waterslide modeling the ancient Casa Grande Ruins. Guests can enjoy the 2-1/2 mile replica of the Gila River that meanders through the resort grounds with scenic boat rides to shuttle guests to the Whirlwind Golf Club and nearby Wild Horse Pass Casino. The Sheraton Wild Horse Pass Resort's professionally trained staff can plan events, for groups of ten to 2,000, in extensive function space including a 17,376 square foot ballroom and an abundance of scenic outdoor venues. 

Three Fires LLC/Marriott 
Three Fires, LLC, an economic coalition of the San Manuel Band of Mission Indians of San Bernardino, California, Viejas Band of Kumeyaay Indians of San Diego, California, and Oneida Tribe of Indians of Oneida, Wisconsin, announced in December 2004 construction beginning on a $53 million Marriott Residence Inn at 15th and L Streets on Capitol Park, (Sacramento, California) site of the California Capitol. They participated in a ceremonial ground blessing of the hotel site. The Sacramento project follows the successful Marriott International, Inc. and Four Fires LLC, financial partnership of Native American tribes, and The Donohoe Companies, which constructed a Washington D.C. project. The $43 million Residence Inn by Marriott Capitol, at 333 E Street, S.W. in Washington D.C. opened in March 2005.

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A New Era of Partnership

Building forward from the success of gaming, tribal nations are seeking to partner with developers, builders, operators, lenders and investors. Some tribes are just entering into the arena of businesses ancillary to gaming and they are looking for alliances and partners who can bring experience, financing, contacts, industry “know-how” and energy to their projects. 

Others are a fair way into the process and will require the full spectrum of professional expertise as their projects move forward. Some of the tribes that have entered into the hospitality arena are partnering with high-profile industry entities such as Sheraton, Hard Rock and Radisson for their hotel management needs (see American Indian Gaming Case Studies on page 8). 

A few notable examples: I co-managed a debt refinancing in 2004 for the Santa Ana Pueblo in New Mexico whose Tamaya Hyatt is one of the most successful in the country. Recently MGM announced a joint venture with the Mashantucket Pequot Tribal Nation to develop resort properties and Hilton Hotels has partnered with one tribal nation and is actively seeking additional franchise opportunities in the American Indian marketplace. 

Strong relationships between tribal nations and the hospitality industry (as well as other industry sectors) could define a new era in tribal economic history—an era based on mutual prosperity with the larger business community. The Indian gaming industry and the hospitality industry are both peopled with energetic, educated individuals possessing business savvy as well as specialized industry expertise. I believe both sides can work together to create an exciting and viable industry niche and define a new American economy worthy of attention. 

Valerie Red-Horse currently heads the Tribal Finance and the Tribal Asset Management Divisions of Western International Securities (Member NASD, SiPC). She previously founded two Indian owned Wall Street Investment Banks and holds six NASD Securities Registrations including the Series 24 (Securities Principal) and Series 65 (Registered Financial Advisor). Ms. Red-Horse can be contacted at Valerie@wisdirect.com.

Readers will find information on the American Indian gaming industry and its members at www.indiangaming.org, the website of The National Indian Gaming Association (NIGA).
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