Indian gaming and beyond: tribal economic development and diversification

South Dakota Law Review, Fall, 2009 by Alan P. Meister, Kathryn R.L. Rand, Steven Andrew Light

B. GROWTH OF INDIAN GAMING

Since IGRA's enactment in 1988, the scope of tribal gaming operations has undergone an impressive transformation from small bingo facilities to largescale casinos. (36) A growing number of tribes have created resort/destination casinos with wide-ranging non-gaming offerings, including hotels, restaurants, entertainment, shopping, and much more. On a nationwide basis, tribal gaming revenue has grown from approximately $121 million in 1988 to an estimated $26.5 billion in calendar year 2007. (37) This reflects a 200-fold increase over twenty years. Even over just the past six years, from 2001 to 2007, Indian gaming revenue has more than doubled (from $13.2 billion). (38)

Also notable has been the tremendous growth of non-gaming revenue at Indian gaming facilities nationwide. (39) Non-gaming revenue rose approximately 9% in calendar year 2007, nearly double the growth rate of gaming revenue and more than double that generated in 2001. (40) These statistics reflect trends toward an increase in and a greater variety of non-gaming amenities at Indian gaming facilities, the expansion of existing facilities, and movement toward resort/destination casinos (41).

Along the path from the passage of IGRA through 2007, Indian gaming has progressed through several different stages of development. From 1988 through 1995, Indian gaming grew at a very rapid pace, with an average annual growth rate of 72%. (42) Then for about the next decade, from 1996 through 2005, the annual growth rate settled down to around 15%. (43) Generally speaking, this growth pattern comports with what is known about markets more broadly. In their infancy, markets tend to grow faster than when they are more mature.

Since about 2005, Indian gaming on a nationwide basis has started to see a noticeable slowdown. The gaming revenue growth rate dropped from 15% in calendar years 2002 through 2005 to 10% in 2006, and then most recently down to 5% in 2007. (44) That is not to say that Indian gaming has performed poorly in recent years--just not as well as it has in the past. In fact, the 5% growth rate in 2007 is still quite respectable, especially considering the state of the U.S. economy and the nationwide performance of commercial casinos, which experienced only about 2% growth in 2007. (45)

The continuing slowdown of the Indian gaming industry over the last few years largely reflects the negative impact of public policies that artificially restrict the supply of Indian gaming. (46) These public policies include existing and proposed legislation, regulations, and tribal-state gaming compacts. (47) As discussed below, this slowdown of Indian gaming somewhat clouds the short-term and long-term future outlook of Indian gaming. (48)

An important point should be made about the foregoing data, analyses, and observations regarding the growth of Indian gaming. Although Indian gaming is often talked about in aggregate nationwide terms, it is important to keep in mind that it is in fact very fragmented. (49) As noted above, there are 230 distinct tribes with 425 unique gaming facilities in 28 states. (50) Furthermore, the economic performance of Indian gaming has varied widely from state to state, tribe to tribe, and facility to facility. This wide variation has depended on a variety of factors, including: legal, regulatory, and political environments; class of Indian gaming; types of games offered; and market conditions, such as the size of the potential customer base, proximity to that customer base, patron demographics, competition, and the maturity level of the market. (51)