Feb. 16, 2010--Since it opened in 1997 Harrah's Cherokee Casino and Hotel has funneled $1.2 billion in gambling profits to the Eastern Band of Cherokee Indians.

Now, even as its gambling business is wilting, the tribe is investing $633 million in the idea that it can transform the state's only casino into something even more profitable: a classy resort where visitors can not only gamble, but golf, visit a spa and shop.

"People who are interested in gambling know us," said Darold Londo, the casino's general manager. "I don't think that's our opportunity."

The risks and rewards are great, particularly for an Indian tribe that has come to rely heavily on casino profits to pay for government services and provide annual income for its more than 13,000 members.

Attendance at the Cherokee casino is down 15 percent since the recession began. About 100 casino jobs have been cut as a result.

"As long as it comes back in 2012, we'll be fine," Londo said of the economy. "We've got a pretty conservative business model."

The $633 million project is one of the largest hospitality expansions under way in the country. It will double the size of the casino floor and add 532 hotel rooms, a 3,000-seat events center and a spa as well as restaurants and retail stores.

But for it to succeed, the tribe will need to win back gamblers it has lost during this recession and attract conventiongoers and groups that have not visited before. The goal is to expand the casino's appeal beyond the 3.5 million gamblers who now visit annually from Atlanta, Asheville, Charlotte, Knoxville and other cities.

The Triangle, 300 miles east of Cherokee, is among those markets in which the casino thinks it can make inroads. Londo said the casino plans to market heavily in the Triangle as it gets closer to completing the expansion in 2012.

The expansion is being paid for using traditional bank financing, which the tribe secured in July 2007 before the credit markets froze.

The tribe pays a 5 percent management fee to Harrah's, the Las Vegas-based gambling giant. The remaining casino profits are used to provide government services on the reservation and are paid to individual tribe members, who receive checks twice a year. Only about 390 of the casino's 1,600 employees are tribe members.

Casino profits total more than $400 million a year, Londo said. Last year, individual tribe members received checks totaling about $9,000, down roughly 10 percent from the previous year.

The Cherokee casino relies heavily on turnaround trips, meaning customers who visit for the day, and those trips have fallen off substantially during the recession.

Evelyn and John Wyatt's Mocksville company, EzWay Travel, has been running bus tours to Cherokee since the casino opened.

The company used to make 12 to 15 day trips a month, picking up between 50 and 55 people on the drive from Winston-Salem to Cherokee.

"Now we're not doing any turnaround trips at all," Evelyn Wyatt said. "In fact, we just sold our bus."

The Wyatts plan to lease a bus for the handful of overnight trips they now make each month.

"That's going to really be nice," Evelyn Wyatt said of the casino's expansion. "It's just that we're slowing down because our economy is slowing down. If [people] don't have a job, they're not going to take their money up there and play it."

It's a lot like Las Vegas

Michael Pollock, managing director of Spectrum Gaming Group, a New Jersey company that tracks the gambling industry, said Cherokee's strategy to thrive isn't much different from what Las Vegas has been doing for the past two decades.

"The casino is the engine that drives much of the other amenities that you have on site," he said. "Having the casino on site allows you to price all your other amenities -- from hotel rooms to your banquets to your restaurants to your entertainment -- at a more value-oriented price."

Cherokee has already added two key amenities in recent months: golf and alcohol.

An 18-hole golf course opened in September, and the casino began serving beer, wine and spirits on New Year's Eve. The decision required the Eastern Bank of Cherokees to approve alcohol sales in a June referendum.

"It's an absolute game-changer for us," Londo said of its passage.

The casino hopes that its new amenities, combined with an expanded gambling operation, will allow it to compete against posh resorts like the Grove Park Inn Resort & Spa in Asheville and Chateau elan in north Georgia.

Cherokee sits in Swain County at the entrance to the Great Smoky Mountains National Park, 50 miles west of Asheville. The unemployment rate in Swain was 14.5 percent in December, compared with 11.2 percent for the entire state.

Little competition

The Atlanta area is the casino's biggest source of customers, accounting for 35 percent of all visitors.

Cherokee benefits by being in a region with little competition, said Steve Rittvo, chairman of The Innovation Group, a Colorado casino consulting firm. Georgia and Tennessee do not have gambling operations, and neither appears likely to add them soon.

"That facility happens to be in an area that is significantly protected," he said.

The biggest threat to Cherokee's ambitious plans could be the unemployment rate. If it remains stubbornly high, gambling revenues are likely to be slow to recover.

"People have to be working," Londo said.

And, after the collapse of the markets, casinos such as Cherokee also need to hope that the recession hasn't reduced the desire to gamble permanently.

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