ICE Totally Gaming, held last month in London, is known as a primarily European show, but for several years now its Tribal Gaming Exchange has offered high-level discussions on doing business in Native American gaming. This year, Charles Anderer, executive editor of Casino Journal, sat in on a discussion that was led and moderated by Victor Rocha, owner and editor, Pechanga.net. The panelists were Marco Sala, CEO, International Game Technology PLC (IGT); Mark Frissora, CEO, Caesars Entertainment; James Maida, CEO, Gaming Laboratories International (GLI); and Edith Atwood, president, Pechanga Development Corp. What follows is excerpts from the discussion:
ROCHA: What did it take for your respective organizations to be successful in Indian Country?
SALA: It’s a long-term relationship that started at the very beginning of this business. IGT has historically been a partner of tribal casinos. We invested in tribal gaming and over time provided games, systems and financing of $1 billion. It has been a great investment for us. We have a relationship now with over 500 tribal casinos in the United States and we offer the entire range of our products and services; core games, premium games and systems.
ROCHA: Our sister tribe, the Rincon, signed a management contract with Harrah’s and when that happens it’s usually five years with a two year extension and then the companies are gone. And yet [Caesars Entertainment] has these long-term relationships with Rincon, Eastern Band of North Cherokee and Ak-Chin. Could you tell us how those relationships happened and how you maintained them?
FRISSORA: Long-term relationships are the way forward with tribes. We’ve been very successful in having a long view, investing in facilities, and continuing to grow with Total Rewards. That’s always been a successful formula for us; to know your customer and your community as well. Thinking about what’s good for the tribe and the local community has been important to the way we thought about strategically partnering with each tribe and giving our brand name and brand awareness together with Total Rewards and everything we know from our 51 resorts to each tribe and making sure they’re growing. It has been an incredible success story for us. In each case, the business has doubled and tripled from what it was originally. We have a 20-year history with three tribes in four locations, all of them doing very, very well and continuing to grow outsized to how the industry is growing.
ROCHA: James, you’ve had a long experience in Indian Country. Can you tell us how that started and what you’ve learned along the way?
MAIDA: My experience started in 1988 when I got the call from the Shakopee Mdewakanton Sioux Community which was in really brutal negotiations with the state of Minnesota. I got to spend two weeks and learn everything about the tribes there. The Shakopee concluded one of the best compacts in the U.S.; it goes forever and there’s no revenue sharing.
From that very first time we realized there needed to be great regulation. To the tribe’s and their regulator’s credit, they realized that people were just waiting for a problem in Indian Country. We had a strategy in 1988 that for every tribe getting a compact we would be there at the table helping as an independent party. The testing got done and everyone throughout the process had an incredible commitment to ensure that Indian gaming was regulated just as well as commercial gaming.
I and my staff has had the privilege of driving the U.S.—we call it windshield time—to visit every tribe and talk to regulators and get them up to speed. Today, I can say Indian gaming is so well-regulated that many people do not know when they’re in an Indian casino whether it’s an Indian casino or a commercial casino. The regulation feels the same and it’s done at the absolute highest level. So it kind of drives me crazy when I hear people say things like, “Oh, that’s an Indian casino and that’s not regulated well,” because in some cases, Indian casinos are regulated in a much tighter fashion because it’s a closer-knit group of people and everybody knows each other.
We test approximately 90 percent of the games on Indian reservations today, and the way we’ve been successful is to have a one-on-one relationship with each gaming commission and have that face time to work with them. Education, world-class regulations, making sure there’s never a problem and always being the first call if there is a problem and jump right on it are keys to our success.
ROCHA: Edie was on the gaming commission when we opened at Pechanga in 1995. In the meantime she got her MBA and now she is the president of the Pechanga Development Corporation and we just did a major expansion that she oversaw. When Indian gaming got successful we had a lot of people beating a path to our front door. This was very unique for us because nobody wanted to knock on our front door for the longest time; they couldn’t find it. What do you look for in partners? If someone comes to you with an idea and they’ve never worked in Indian Country, what kind of advice would you give them?
ATWOOD: That’s a very good question. It’s difficult to build relationships in a five-minute contact. Most successful businesses have integrity and a commitment to work with a certain population, like the tribes, and I think, in the long-term, a good reputation. When we meet somebody for the first time, we find out about them, who they work with and what their reputation is in the industry.
Reputation and relationships are very important to us. I remember when I first got into gaming, in 1994 before we opened our casino, I was part of the team that developed regulations without any gaming experience. I read a white paper in the late 1990s about doing business with Indian tribes and how we put more value on our friendships than we do the bottom line. At the time, I was really upset with that person’s opinion because I thought, we’re good business people, we care about return-on-investment and the bottom line. But as time went on and I thought about that again coming to speak here, partly that’s true. The integrity of the individual and the company and the trust that’s built is just as important as the product, the pricing and the market that we’re looking to go into. So we look at the total picture and the relationships that we’ve built.
We have the largest casino floor in California currently and the largest casino hotel. We couldn’t have done that without great partners. We depend on them.
ROCHA: There’s a tendency to talk about Indian Country as a homogenized entity. But there are about 265 tribes with gaming facilities. What distinctions do you see between tribes?
MAIDA: Our view is that every tribe has a history and a track that they’re moving on. For instance, at Pechanga, you had this terrible process to get a compact, multiple votes in which the state of California tried to overturn it. I remember the first time I went to Wisconsin since I have a funny little story about pronouncing people’s names. I went to Lac Courte Oreilles (LCO) tribe, which was the first tribe that was asked to negotiate with the Governor, and I met the chairman of the tribe. His name was Gaiashkibos. When we were talking privately, I asked him if that was his first name or last name. And he looked at me and he said, “It’s my name.” And I realized then that I had a lot to learn. The LCO tribe is much different than the Forest County Potawatomi or any other tribe within Wisconsin; they all have different needs. When you go from the north to the south, the Seminole Tribe of Florida has a long and different history than tribes in the Sioux, or Iroquois or people in Washington State or in California.
So our process is very simple: we have to understand what their compacts are, where they are with their development and what their ultimate goals are. And remember, the primary goal of tribal gaming is to raise money for the tribe; that’s why we call it non-commercial gaming. We actually have people who are experts in each of the tribes so we can understand what’s going on.
FRISSORA: When we look at the different relationships we have, much like what James just went through, we have a similar customization. Each tribe has its own charter and understanding what that is. In all cases, what we see is that sense of community and reinvestment and to the extent that we can, together with the tribe, work on investments long-term. I think one failing we’ve had with tribes is not doing enough long-term planning. We didn’t think about the growth as much as we should have and laid out a map or a master plan for the next 15 or 20 years, not the next three or four. If we had done that better, some of the growth would have been easier if you will.
SALA: Even though I don’t have such a long experience with tribes, I started visiting resorts three years ago after the acquisition of IGT when I went to Washington State and the eastern part of the country. Let me tell you that I was impressed and surprised. I was impressed because of the people. I mean you have first-class resorts, but I was more impressed by the motivation and the dedication of the people. For me it was something new to understand; that it was not just running the property but creating a fund to invest in the community. I never saw something to that extent—understanding that the people are running the business well in order to fund education, health care and pensions. For me as an Italian, we always believe that we lead the way in terms of the importance of the family… I realized that there is a next level.
ATWOOD: I want to share with the folks out there who maybe want to work with tribes for the first time, something to remember is that each tribe has their own government structure. And each tribe that does gaming has their own regulatory structure; it’s part of the National Indian Gaming Commission’s requirements. So you have to figure out who to speak to within that tribe. Sometimes it’s the Council, sometimes it’s the Gaming Commission. They can be called a regulatory authority or a regulatory board, but those are the folks who you usually need to meet with once you’ve made your initial contact to find out specifics for doing business within that jurisdiction.
ROCHA: James brought up something; not all mistakes are bad, some are learning experiences. So what’s your favorite mistake?
MAIDA: Before 1989, I had never been on an Indian reservation before and I think that I did have some preconceptions because of what you read in the news. So my biggest mistake probably was showing up in Minneapolis in the fall of 1988 and not even understanding how to get to the tribe. I rapidly needed to learn not only what was happening in Minnesota, so over the next three years I literally went from tribe to tribe. Compacts were going into place almost every month. So my biggest mistake was really not getting up to speed enough early on. I really had to take time out of the business in order to learn, and then realizing that when you went from one state to the next, all the actors changed; even the state’s feelings toward the tribes changed. I remember sitting on a panel in Arizona in 1995, when the head of the state’s Gaming Board said something so outrageous about tribes and he was sitting right next to me; I was trying to figure out how to get the heck off the stage. He was anti-gaming, anti-tribal gaming and he was the state’s lead negotiator.
The hardest part is getting up to speed. You always feel when you’re meeting a tribe for the time it’s like you’re drinking water from a fire hose because you realize state-to-state, tribe-to-tribe, everything’s different and the relationships are different.
ROCHA: There’s quite a few tribes here at ICE and this panel has a lot of international experience. What advice could you give tribes to doing business here in Europe?
FRISSORA: There’s quite a few differences, especially with tax rates. We’re not that experienced but we do have casinos in London and Scotland, a couple in Cairo and one in Johannesburg. The casinos here in the UK are much smaller and have a high tax rate, so you have to do a lot of things differently. I’m not discouraging tribes from expanding to Europe but it’s a tougher business model. Now there are expansion opportunities, for example in Greece, where the government could potentially legalize gambling, but there is a different tax structure and circumstances that don’t apply to what we do in the U.S.
SALA: When it comes to Europe, you could consider it as Indian Country because there are many tribes with different cultures, different languages and different regulations. When you talk about gaming in Europe you have different motives. In Italy, slot machines are basically limited to bars and shops. In France, there are only casinos. In the UK, you have both distributions. Even the machines are different; in Italy, you have AWPs, in the UK, you have OBTs. So the structure of the market is very different and it’s different across the countries.
Having said that, at the end of the day, they ask for similar things: good service, a competitive price, innovation, and this is true across the globe. Of course, you can appreciate some differences based on local needs but those are the things that you have to look after.
MAIDA: One thing I’d say is that here in Europe, language in different countries is a big deal; you have to communicate in local languages. But you look at the Seminole Tribe and they are obviously very active globally outside of Florida, so I think we see tribes looking at how they can develop corporations and go outside.
It’s also very important to have local partners. You just can’t come to Europe and say, “I’m here.” We’re here in Europe almost 20 years with 390 employees, but have a Spain office and an Austrian office and a Netherlands office and a UK office because not any one group of employees can serve every country.
Doing business in Asia and sometimes in Eastern Europe, my only advice would be to do really good due diligence on who you’re meeting because it’s not always obvious.
ROCHA: The reason why I ask is, as you note, Hard Rock is an example, they’re looking at Japan…
MAIDA: Yes, and everyone in Japan has a local partner. It’s a really hard place to do business without one.
ROCHA: Getting back to the U.S., where do we think tribal gaming is headed?
FRISSORA: I believe there’s tremendous growth out there because I don’ think it’s fully developed. There are things that could yet be done in a lot of tribal nations that would allow for much higher revenue, like being connected to a system—the more customers you have the much better off you are. We look at the GGR potential in all areas and have done a fairly comprehensive study because we want to expand with tribal nations over time and we think it’s an underserved market. There are an awful lot of opportunities. A lot of it is marketing and capital investment. The tribes that we’ve partnered with have been very good partners in that they’ve kept their facilities really current and they have the cash to do so. That’s important since success breeds success. By having that partnership and continuing to invest in the facilities, use technology when it’s appropriate; even expand outside of gaming in some cases and provide first-class entertainment, that also drives people to the casino. Growth in entertainment, growth in hospitality and market penetration… those are all opportunities.
SALA: The tribes I visited all had plans to grow and invest, in new properties, new areas of the business, new ideas based on the opportunities that tribes are seeing.
ATWOOD: I would tend to agree with both of you. With Pechanga, we recently expanded and doubled the size of our hotel rooms because we were sold out every night for a couple of years. It’s something that we wanted to do, actually, before the last recession and we had to put that plan on the back-burner until the economy improved. And, when it did, we were ready to grow and fill that need in the market that we saw was available. We expanded our offerings with more shops and a two-story stand-alone spa. We have plans in the future to make it more of a full, integrated resort.
MAIDA: I’m often impressed by how quickly tribes can build new properties and get them open. You have regulations you can deal with but they are internal to the tribe. I’ve seen casinos take years and years to do builds under state government supervision. Tribes just seem to move walls and build things quicker.
The other thing I see as a technology person… if you go down to the floor here [in the UK], there is half- to three-quarters of a room of sports betting, electronic sports betting and not only betting on live sports but random number generated sports. The Supreme Court is going to make a very important decision this spring. Internet gambling still has not come to America in any real way. It’s in Nevada, New Jersey and Delaware but imagine if Internet gaming happens and tribes get that or if you walked into Pechanga or Eastern Cherokee and there’s a sports book. That whole area hasn’t even been explored yet. Or eSports. So I think when you look around the world, America has actually less technology to work with, so I see the future as rosy.