PLACING THEIR BETS

But what about the tricked-out, turbocharged pickup in the sedan’s rearview mirror, closing in quickly? That would be Indian gaming, which pulled down almost $23 billion in gross revenues in 2005. Numbers come from Los Angeles economist Alan Meister.

Once scorned or dismissed for running second-rate rural bingo halls inside big tents, gaming tribes in the last decade have dramatically narrowed the gap on commercial casino operators.

Revenues for Indian gaming, the upstart, grew more than 400 percent between 1995 and 2005, while the mature vehicle of commercial gaming grew by less than half that. The corporations and wealthy individuals who, 20 years ago, had little competition for the gaming dollar, today have only to glance over their shoulders to see a competitor in spitting distance.

Tribes of all stripes and sizes have jumped into the industry, with dollar signs in their eyes. Forty percent of the nation’s 561 federally recognized tribes now offer gaming in some form.

Indian casinos in 1995 grossed about a third of what the non-Indian casino industry grossed. The Indian gross in 2005 reached more than 75 percent of that for non-Indian gaming.

Despite widespread Indian success, gaming guru Frank Fahrenkopf doesn’t expect tribes ever to dominate the industry.

But Fahrenkopf, president of the American Gaming Association, does see trouble in select markets "where you have Native (American) and commercial gaming going head to head."

A prime example is the Reno-Tahoe industry versus the California tribal casinos along highways 80 and 50.

Many gaming tribes are reaping good harvests of cash. But some sow seeds of discord when they spend the money, resulting in highly publicized conflicts over both tribal membership and leadership.

Indian gaming dates from 1987, when the nation’s top court gave tribes the green light, in a landmark decision called California v. Cabazon Band of Mission Indians.

So what’s a spectator to make of the present stage in Indian gaming? Formats range from truck stops on the reservation, with only a couple rows of slots, to full-fledged resorts that boast hotels, spas, golf courses, cinemas, water parks, large concert facilities, child care for young guests and tribal museums.

"The tribes that are in big markets are really building world-class facilities," says Ernest Stevens Jr., chairman of the National Indian Gaming Association, a nonprofit trade association headquartered in Washington, D.C. Cases in point:

Foxwoods Resort Casino, owned by the Mashantucket Pequot Tribal Nation in Connecticut, claims to be the largest casino in the country. It has 340,000 square feet of gaming space divided among six "casinos" on a single resort property, with 35 eateries. It draws from New York City and its environs.

The Grand Traverse Resort & Casinos in Michigan has a spa and fitness center that occupies more than 50,000 square feet. It belongs to the Grand Traverse Band of Ottawa and Chippewa Indians.

The Viejas Band of Kumeyaay Indians has bundled an outlet mall with its Viejas Casino east of El Cajon, Calif.

"To be fair, those (large tribal resorts) are the exceptions rather than the rule" in Indian gaming, Fahrenkopf says.

Indian casinos mostly lack the concentration of facilities that makes Las Vegas exciting, he says. "There’s nothing like the walk-in traffic that moves back and forth (between properties) that is so important to Las Vegas."

But most tribes don’t want their casinos to emulate Las Vegas in all aspects, just its profitability.

"Indian gaming is distinct," says Ernest Stevens Jr., the trade association’s chairman and a member of the Oneida Tribe of Wisconsin. "The tribes weave their own unique cultures into the facilities they build and the experience that they offer to visitors. … Our special attraction for the public is that we are not Las Vegas."

FROM GRIND JOINT TO RESORT

One key Indian trend, however, mirrors Las Vegas. Tribes that started out with small, bootstrap casinos are continually reinvesting profits to evolve into what hospitality consultant James Klas calls multiple-amenity resorts. Lodging is often part of early expansion.

"The hotel is an expensive addition, but probably the single most lucrative addition" for getting visitors from farther away to stay longer and gamble more, Klas says.

Some Indian casinos will remain "grind joints," slang for a casino without lodging that caters to small play by local players, because their geographic isolation limits their market. But tribes have stampeded to add hotels since the 1990s, whenever traffic projections and the tribal budget allow.

Klas measures a 70 percent increase in tribal casino hotels in just the last five years, from 82 hotels in 2002 to 139 expected by the end of 2007.

Twenty California tribes now have hotels at their casinos. Arizona, Michigan, Minnesota and Wisconsin each have 10 or more tribal casinos with hotels, according to Klas’ Minnesota-based firm, KlasRobinson Q.E.D., which has served a long list of tribal clients.

As a template, Klas cites the growth pattern of one of those clients, Shakopee Mdewakanton Sioux’s Mystic Lake Casino near Minneapolis.

The tribe entered gaming in 1982 with a bingo operation housed in "a series of double-wide trailers that were literally welded or glued together, with the walls cut out," Klas says.

Today the Shakopee run a resort with a high-rise hotel and casino, golfing and a busy calendar of performances by outside entertainers.

TRIBES PAY TO PLAY

Fuel for the explosion in Indian gaming has been an increase in startup money. Tribes and lenders, through trial and error, found how to turn on a difficult spigot.

The first hurdle was lack of a method for lenders to secure tribal loans, since neither reservation land nor tribal reservation buildings can be used as collateral. So the parties developed limited waivers of sovereign immunity.

Ordinarily a tribe, like a state or federal government, can’t be sued. But with the waiver, a tribe agrees it will allow courts to settle specific types of business disputes.

Another piece of the solution, Klas says, was "recognition that although you couldn’t secure the building, you could secure the cash flow," as long as the lender has confidence the casino will generate cash.

The third, and most practical, reason for increased willingness to lend to gaming tribes has been their good track record of paying off loans.

To partner or go solo?

Some tribes choose to partner with a nationally recognized hotel organization. Hyatt, Hilton, Ramada and Sheraton are hotel brands that have forged ties with tribal casinos. For a price, a franchise stamps a tribe’s hotel with an image and delivers a marketing-reservation system.

Harrah’s runs hotel-casinos for tribes in states including Arizona, California, Kansas and North Carolina. Klas says the brand works for tribal resorts that want a "Mardi Gras, lively, middle-market theme."

But over the years, Harrah’s has lost contracts for tribal gaming projects or properties in Indiana, Michigan and Washington. In July it is scheduled to return operation of a casino near Topeka, Kansas, to the owners, the Prairie Band Potawatomi Nation.

As tribes gain experience and confidence, many cut loose the outside management companies they hired to launch and run the gaming side. Tribes want to decrease operating expenses and better control their own destinies, according to Timothy O’Dell, who is a partner in a Montana financial firm that does auditing and consulting for numerous tribes.

"At the five- to nine-year stage of the (tribal casino) life cycle, management companies were long gone," O’Dell says. "There are maybe a dozen management companies left, at best," due to decreasing demand from tribes for outside operators.

Seven Circle Resorts, for example, was a Swiss-owned company that built and initially operated Indian casinos for the Standing Rock Sioux in North Dakota and the Ysleta del Sur Pueblo in Texas.

The Sioux terminated Seven Circle for failure to advance tribal members in management, according to news accounts.

The Ysleta tribe bought out Seven Circle sometime before 2002, according to Art Senclair, tribal governor, when Texas forced the El Paso casino to shut down. The state argued its constitution banning gambling took precedence over the Ysletas’ sovereignty as a "restored" tribe.

Seven Circle Resorts went on to build and operate the Resort at Summerlin in Las Vegas, which failed and was sold at bankruptcy in 2001. The resort is now the Rampart Casino and the JW Marriott Las Vegas Resort, but Seven Circle Resorts has disappeared.

The perks of success

Gaming brings dollars to tribes that possess both savvy and luck. Successful casinos are paying for essential reservation services such as fire and police departments as well as housing, health care and education. The extra income unifies a tribe if "they’re using their revenue effectively, in an evenhanded manner," says Kevin Gover, a Pawnee and law professor at Arizona State University.

Once essential services are met, tribes that have bulked up with gaming-derived dollars tend to flex their business muscle off the reservation, too.

Three Fires, an economic partnership of three prosperous gaming tribes, will soon debut a Marriott Residence Inn in Sacramento, Calif. Four Fires, the same coalition plus a fourth tribe, built, owns and operates a Marriott Residence Inn in Washington, D.C., which opened in 2005 near the Smithsonian’s National Museum of the American Indian.

In March, the Seminole Tribe of Florida purchased a global hospitality empire, Hard Rock Café International, for $965 million. It already owned two casinos affiliated with the Hard Rock brand, plus five smaller gaming venues without the affiliation. The deal covered Hard Rock hotels and restaurants, but excluded the Hard Rock Hotel in Las Vegas.

A California gaming tribe is trying to buy and reopen The Roadhouse, a small casino on Boulder Highway in Henderson. The maneuver would put an Indian casino near Las Vegas, the heart of the American gaming industry. Since 1995, the Soboba Band of Luiseño Indians has run a casino on its reservation in Riverside County, Calif.

Turmoil in the teepee

But gaming also disrupts tribes, says Gover, who was assistant secretary for Indian affairs in the U.S. Department of the Interior from 1997 to 2001. In that capacity, he had contacts with numerous gaming tribes.

Disputes about who belongs to a tribe, let alone who should lead it, now get glaring media coverage.

The size of a tribe affects the size of payouts, if a tribe is distributing some of its gaming profits to individual members. About one third of gaming tribes do so, according to 2001 data from the National Indian Gaming Commission, a federal regulatory agency.

"Before, who cared what your share of nothing is?" Gover says. "I think the pace of these disenrollments has picked up."

Disenrollment is the review process by which a tribe decides that a person who has claimed membership does not qualify.

Casino tribes that have made news by disenrollments in the last several years include the Redding Rancheria tribe and the Pechanga Band of Luiseño Indians, both in California, and the Sac and Fox Tribe of the Mississippi in Iowa.

In the same vein, does gaming unify tribes or pit them against each other?

Some conflict is inevitable when tribes compete for business. Casinos in California and Oklahoma, where tribes are plentiful, periodically fight for exclusive deals with entertainers or vendors.

Tribes also wrestle for casino locations. An El Paso, Texas, tribe recently bought land in New Mexico, in a locale that was its original territory, with hopes of launching a casino. The governor of that tribe, the Ysleta del Sur Pueblo, has said it will vigorously oppose any New Mexico tribe that attempts to locate a casino in that portion of New Mexico, near El Paso, unless it has historical ties to the area.

On the other hand, some gaming tribes do joint business ventures. And when their rights come under attack, Indians generally unite, Stevens says.

"There’s a commonality of interest in terms of sovereignty and tribal self-government, that has allowed for continuing cooperation even in the face of competition."