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Best of Ken Adams

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Bits and Pieces from Indian Country - June 2008

1 July 2008

As the rest of the gaming industry goes, so goes Indian gaming – or at least in the most mature markets. Customers at Indian casinos are paying more for gasoline along with everyone else. And as important, Indian casinos that need to borrow money, borrow it from the same places and the same people as any other casino. And no one is finding it easy to borrow money. What the announcement about FireKeepers does not say is that they have been trying for five or six months to arrange the financing, and the terms and conditions reflect May 2008, not May 2007. That means it is much more expensive to finance if you meet all of the conditions the lenders are demanding today to protect themselves.

"If you don't have a substantial track record in the geography where you want to build and raise capital, the rates are going to be prohibitive," said Bill Lerner, a Deutsche Bank gaming analyst. "It is still a very risky proposition to develop in this sort of climate." (Arnold Knightly, Las Vegas Review-Journal, 6-2-08)

Full House Resorts announced today that on May 6, 2008, the FireKeepers Development Authority closed on a $340 million Senior Secured Note due 2015 financing and a $35 million F&E facility to fund the FireKeepers Casino project in Battle Creek, Michigan. Full House owns 50% of the joint venture Gaming Entertainment Michigan, LLC (GEM), which has been and will oversee on behalf of the Authority the construction of the facility and will have full responsibility for operations upon opening. (Business Wire, 5-7-08)

Projects that just a year ago seemed certain are now being questioned and cut back. A year or two ago, a new Indian casino or an expansion of an existing one in California were slam dunks. Today they are subject to the same questioning process one sees in Atlantic City, Gary, or Detroit.

The economic downturn has Win-River Casino looking at downsizing its $90 million expansion. If approved next month by tribal members, the Redding Rancheria would spend $50 million to $70 million on a 121-room, four-story hotel, an 800-stall parking garage and a remodeling of the existing Event Center, casino General Manager Gary Hayward said Thursday. Original plans, unveiled last May, called for a nine-story, 170-room hotel, a parking garage big enough to accommodate 1,500 vehicles, and bulldozing the Event Center to build a new one. (David Benda, Redding Record, 5-30-08)

In Indian gaming, as in gaming everywhere, there are twoconditions that are making it harder to open a new casino or expand an existing one: first, the state of the general economy, and second, the specifics of the region. The twin giants of Connecticut are reporting the same declining revenue as Atlantic City, for example. They had their bond ratings reduced, have been forced into laying off some employees, and have even begun to rethink the perpetual expansion that has been in process since Foxwoods first opened in 1996. And as if there were not enough problems, unions have declared war on Connecticut casinos, even pushing the legislature to specifically ban smoking in the casinos.

Slot revenue continued its downward spiral in April for the eighth consecutive month at Foxwoods Resort Casino and Mohegan Sun. Foxwoods saw revenue from its slot machines drop 11 percent in the month of April, to $58 million from $65.2 million a year ago…Mohegan Sun slot revenue declined by 5 percent, to $70.2 million from $73.9 million a year ago. (Patricia Daddona, New London Day, 5-15-08)

A slowdown in the economy reached the thousands of slot machines at Mohegan Sun this winter, as the casino reported today a double-digit decline in earnings for the first three months of the year. (Mark Peters, Hartford Courant, 5-7-08)

All is not well in the Kingdom of Mashantucket. It's no secret that the casino business is off. Slots are down. Competition is growing. When Standard & Poor's downgraded the Mashantucket Pequots' credit rating recently, one of the problems analysts cited was the large distributions the tribe makes to its members. And with business problems, apparently, come political problems. About 190 members of the tribe, a significant portion of the total tribal membership of 800 to 900, have signed a petition, presented to the Tribal Council in March, demanding a meeting to discuss plans to cut government spending by $40 million. The cutbacks being planned by the council might please the S&P credit analysts, but they've clearly drawn the ire of rank-and-file members. (David Collins, New London Day, 5-12-08)

The Mashantucket Pequot Tribal Nation is cutting about 20 percent of its government work force through buyouts and a small number of layoffs, authorities say. About 170 employees will lose their jobs May 30. About 90 percent took a buyout package and 10 percent were laid off. (New London Day, 5-24-08)

Two of the world's largest casinos are getting a lot bigger this week, betting that they can draw more visitors by becoming entertainment destinations even as the gaming industry suffers nationally because of high gas prices and the weak economy. Foxwoods Resort Casino, run by the Mashantucket Pequots Indian tribe, will open its $700 million MGM Grand this weekend. The 30-story, two-million-square-foot property includes a new casino, hotel, a 4,000-seat performing arts theater, restaurants run by celebrity chefs, luxury stores, the largest ballroom in the Northeast and new convention space to accommodate thousands. (Associated Press, 5-17-08)

The United Auto Workers gathered near the new MGM Grand at Foxwoods in Ledyard on Saturday to kick off the first of two days of protests against what the union calls an unfair tipping policy and the Mashantucket Pequot Tribe's refusal to bargain. Union members were doing a "visibility" protest, trying to make sure casino customers and others are aware of what they say are unfair labor practices…A new policy that went into effect Saturday restructures the way tips are distributed among dealers, which the union says will decrease their earnings. (Shawn R. Beals, 5-19-08)

Indian gaming in Florida and Oklahoma is much like slot machines in Pennsylvania. The expansion in Class III gaming is still very new, and the growth and expansion reflects that and does not yet show the impact of gasoline or the credit market.

The Osage Nation had $222 million in total revenue last year, led by its casino business and oil and gas production. A report released Wednesday showed the Pawhuska-based tribe's revenue was 35.3 percent above its payroll and operating costs, mineral payments and vendor outlays. Million Dollar Elm Casino generated $139.6 million of that revenue at its six locations, while mineral interests accounted for another $56.3 million. (Associated Press, Oklahoman, 5-29-08)

No Hulk Hogan, no Vegas showgirls, not even a ceremonial first pull of the slots. It just wouldn't feel right at the Seminole Casino Hollywood. The formal arrival of Vegas-style slots came to the 28-year-old casino with a night directed toward the players: cake, Elvis impersonator Chris MacDonald and cash giveaways. Last week, the casino became the fourth in the Seminoles' chain to roll out Class III (Vegas-style) slots, which pit the player against the house, rather than against each other. Since April, Seminole Classic has converted 541 of its 903 machines. (Nick Sortal, South Florida Sun-Sentinel, 5-23-08)

The largest poker tournament in Florida history comes to Broward County this weekend, a tribute to the game's popularity and to the near monopoly power of the Seminole Tribe's casino empire. As many as 210 players will pay $3,000 apiece to enter the three-day event, which begins Friday at the Seminole Hard Rock Hotel & Casino in Hollywood. The entry fee and potential first prize of more than $125,000 — exact figures depend on the final player count — dwarfs what is allowed by state law at Broward's racetrack casinos and is made possible by the recent gaming compact between the tribe and Gov. Charlie Crist. (John Holland, South Florida Sun-Sentinel, 5-27-08)

But with the tribes in Florida and Oklahoma, maybe the reason for their success is also related to diversifying. Tribes in both states have moved beyond gaming into other industries, not waiting for gas prices or local competition to take away their revenues. But that strategy has not worked for all tribes. The Sault Ste. Marie Tribe of Chippewa Indians of Michigan has tried to invest in casinos outside their reservation, but thus far the effort has produced as many problems as benefits for the tribe.

The Led Zeppelin classic "Whole Lotta Love" throbs from the 1,200-watt sound system as the slick silver and white roller coaster nears the top of its serpentine track. Lead singer Robert Plant shrieks, "Woman. You need. Loooooooove ...." And as he does, riders scream as the car falls from a height of 155 feet, reaching speeds of 65 mph. Hard Rock Park is America's newest theme park and the first one built in the nation in a decade. Here the theme is not movies or fairy tales or water shows. It's rock 'n' roll. The $400 million park had a soft opening in April that it called a "sound check." The grand opening this week features concerts by the Eagles and The Moody Blues. (Bruce Smith, Associated Press, 6-2-08)

Cherokee Nation Enterprises, which operates seven northeast Oklahoma Cherokee Nation casinos, plans to diversify its casino operations and open an information technology company within the year. The company likely will launch the IT endeavor as the initial phase of a multi-tiered plan to take the talents and skills learned in gaming and leverage them in the open market, said David Stewart, chief executive of Cherokee Enterprises. Another venture could involve casino management, though the focus is to expand into more mainstream industries, Stewart said. (Devona Walker, Oklahoman, 5-8-08)

Greektown Casino L.L.C. filed for Chapter 11 bankruptcy protection late Thursday in U.S. Bankruptcy Court in Detroit and will continue normal business operations during the restructuring process, the Sault Ste. Marie Tribe of Chippewa Indians announced. (Robert Ankeny, Crain's Detroit Business Journal, 5-30-08)

The Sault Ste. Marie Tribe of Chippewa Indians is struggling not only with financing its Greektown Casino, but with internal turmoil and a deficit this year that is projected to be nearly half the tribal government's budget…The position of tribal chairman is up for grabs in a contentious election set for June 25. The tribe is embroiled in a lawsuit against its former chairman, Bernard Bouschor, over $2.6 million in severance funds he paid himself and other key employees when he lost re-election four years ago…The Sault Ste. Marie Chippewas, the largest U.S. tribe east of the Mississippi, made history by becoming the first tribe in the country to operate a commercial, off-reservation casino. The tribe hoped the Detroit casino would put millions of dollars into its coffers. A recent financial report showed the tribe expects to bring in $18 million from its five northern casinos and other businesses this year, but will spend $33 million, leaving a $15-million shortfall. The tribe had hoped to add $5 million from the Greektown Casino to this year's budget, but bankers have forced the tribe to reinvest the casino's profits into construction of the new Detroit casino. "Greektown is draining the tribe's resources," board member Todd Gravelle said in the tribal newspaper, urging that the casino be sold. "What was once someone's dream is now a nightmare." (Tina Lam, Detroit Free Press, 5-31-08)

The trials and tribulations of operating a casino anywhere in the United States, including in Indian country, are increasing as we reach the mid-point of 2008. And nothing is likely to change as long as the auctioneer is calling: "I hear $4 a gallon, $4.10, will anyone give me $5?"

But now, that is simply my opinion, isn't it?

Ken

Ken Adams

Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.
Ken Adams
Ken Adams is the principal in the gaming consulting firm, Ken Adams and Associates. Formed in 1990, Ken Adams and Associates specializes in information, analysis, and strategic planning for Indian tribes, casino operations and gaming manufacturers.

Ken spent over 20 years in the hotel-casino industry, prior to founding Ken Adams and Associates. He held the positions of: Director of Casino Operations, Casino Manager, and Keno Department Manager. During this time, he developed numerous innovative marketing and customer development programs and systems for evaluating casino performance. Some of those programs, such as slot clubs and tournaments, have become industry standards.

Ken is also actively involved in gathering and disseminating information that is important to the gaming industry. He is editor and publisher of and the Adams' Report, a monthly newsletter specializing in identifying trends in casino gaming, regulation and manufacturing, the Adams Daily Report, an electronic newsletter that provides electronic links to the key gaming stories of the day, and the Adams Review, a special report distributed by Compton Dancer Consulting that provides editorial commentary on gaming trends.