The glitz, the stuffed buffet tables and even the thrilling clang of jackpots can’t disguise one thing: Local casinos are taking a hit.
Because of the recession and a general malaise in consumer confidence, gambling revenue at local tribal casinos is down, said Jason Dickerson, gambling policy analyst for the state.
“After a decade or more of strong growth in the industry, customers have pulled back on gambling,” said Dickerson, who works for the state Legislative Analyst’s Office. Dickerson said the local cutbacks are following a trend of “sharp retrenchment” statewide, nationally and even globally. “We’re finding that gambling is ultimately an entertainment product, and there’s been a broad pullback in consumer discretionary spending.”
The four tribal casinos in the Sacramento region — Jackson Rancheria Casino & Hotel, Cache Creek Casino Resort, Thunder Valley Casino and the recently opened Red Hawk Casino — won’t say if revenue has fallen, but said no layoffs are scheduled. But some casino officials admit at least a flattening in demand.
Financial records at tribal casinos are confidential, but Dickerson doesn’t doubt the slowdown in Indian gaming revenue. Even the governor’s budget reflects smaller contributions from tribes with casinos. With demand and revenue shrinking, tribal casinos are likewise halting or scaling back lavish expansion plans and beefing up marketing efforts to ride out the tough times.
In Southern California, employees are being laid off because of reduced revenue and traffic. He hopes it proves that Californians shouldn’t rely on tribal payments to state coffers.
“Some have thought that tribal payments would be a panacea, a great source of growth for many years, and we’re seeing that that’s flawed, that casinos are susceptible to economic conditions and are not going to grow infinitely,” he said. “Casinos will never solve our budget problems, it’s a miniscule component of our budget.”
Expansion on hold
One of the most visible examples of the downturn in gambling is at Thunder Valley in Lincoln, where construction on a planned ambitious expansion stopped in November. Thunder Valley spokesman Doug Elmets said the tribe, the United Auburn Indian Community, originally planned to add a 23-story hotel, nine-story parking garage, performance venue, childcare room and video game arcade.
“They put the expansion on hold three to six months to reassess the scope, given the uncertain market demands,” Elmets said. “They’re looking at whether they need as many square feet, number of suites and parking spaces as was originally planned.”
Elmets said the reassessment of the expansion is not a result of competition from the newly opened Red Hawk Casino on Highway 50 in Shingle Springs. In fact, he said, the hoopla surrounding Red Hawk’s Dec. 17 grand opening and advertising for the new casino has strengthened the regional gaming market overall. Still, he said the flagging economy has impacted Thunder Valley’s bottom line.
“The economy is affecting casinos,” Elmets said. “Casinos are not immune to what is happening in the general economy. We find the same number of customers are coming to Thunder Valley, but spending less than last year.”
Strong regional market
Elmets pointed out that even though visitors might be more frugal, the Sacramento gambling market is “ripe for maturity,” since 5 million people live within a 100-mile radius of Thunder Valley and Red Hawk, and 60 percent of the residents in the market area are adults over 21.
“All the reports we’re hearing is that the gaming market in Sacramento has been one of strongest investments in the U.S. for decades, because Sacramento has historically been one of the biggest feeder markets to casinos in northern Nevada,” Elmets said.
Rich Hoffman, chief executive officer of Jackson Rancheria in Amador County, said Red Hawk’s opening caused a brief bump in business at the older foothills casino, thanks to overall awareness being raised by the extra advertising. Hoffman said 2008 gross revenue at Jackson Rancheria was up about 4.5 percent over 2007, but when the cost of living and increased expenses were factored in, “it’s pretty much a push.” The casino historically has seen steady growth, so he characterized 2008 as a “slowdown for us.”
“I feel good about that when I think about where some our colleagues in the state are,” Hoffman said. “Many casinos are seeing double-digit drops in revenue, so I feel very fortunate. Especially in more mature markets in Southern California, they’re taking a beating.”
Building a destination
Cache Creek Casino Resort in Yolo County is also feeling the pinch of consumers spending less.
“The slowdown in the economy has had some impact on our business, as it has on every other business in the country,” Cache Creek general manager Randy Takemoto said in a prepared statement. “We have found we have slightly fewer customers than in prior years, though there has been a noticeable drop in spending.”
That pinch, however, hasn’t dampened Cache Creek’s plans to expand. Takemoto said the tribe re-evaluated plans for its “destination resort project” and found it still made sense. The expansion will include a spa, golf course, additional restaurants and entertainment venues.
Yolo County supervisors are challenging the project because of environmental concerns, including increased traffic on Highway 16. The tribe and the county recently went to arbitration over the disputed expansion project.
Takemoto said the Cache Creek expansion would create 1,000 new jobs at the casino, to add to the 2,500 current positions, “as well as hundreds of construction jobs in the heavily impacted building industry.” Cache Creek spokesman Bill Schreiber said Yolo County’s unemployment rate is more than 9 percent, and the proposed expansion could infuse $95 million into the local economy.