Rate of growth slowed for tribal gaming in 2006

American Indian casinos generated a record $25.5 billion in gaming revenue during 2006, but the year-over-year percentage increase was the lowest in nearly two decades since Congress enacted the law that legalized gambling on tribal land.

The annual Indian Gaming Industry Report, authored by Los Angeles-based economist Alan Meister, showed gaming revenue climbed almost 11 percent over 2005. In the prior year, Indian gaming revenues grew 14.6 percent over 2004.

The report, published by Massachusetts-based Casino City Press, will be released today.

Meister, in an interview this week, said the revenues collected by tribal casinos continue to play a significant role in the national gambling picture.

Indian casinos generated 42 percent of all U.S. casino gaming revenue in 2006. Commercial casinos, which include casinos in Nevada and Atlantic City, accounted for 52 percent of all gambling revenue. Racinos made up the remaining 6 percent.

He said the revenue could have grown more if California lawmakers had approved new tribal compacts in 2006. Several of the state's largest Indian casinos want to expand their slot machine offerings, currently capped at 2,000 machines per casino, but were held up by the unapproved compacts. About a half-dozen California Indian casinos signed new compacts in 2004 and expanded their slot machine offerings.

California, with 57 tribal casinos and gaming revenue of $7.7 billion in 2006, is the driving force behind the nation's tribal gaming economy, accounting for 30 percent of total revenue. Connecticut has only two Indian casinos -- Foxwoods and Mohegan -- but they are the nation's largest tribal gambling halls. The two facilities generated almost $2.5 billion in 2006, second only to California.

"The year-over-year increase in California of 10 percent was pretty moderate by the state's standards," Meister said. "We've seen annual revenue increases of 20 percent to 25 percent in previous years. Although there is no big change in the supply of gaming in California, it still had more gaming machines and table games than any other Indian gaming state."

Meister said the revenue growth rate has seemed to level off over the past few years. Between 1988 -- when the Indian Gaming Regulatory Act was enacted -- and 1996, the average annual growth rate was 63.9 percent; between 1997 and 2006, the average growth rate was 14.6 percent.

"I'm not sure if it's a sign of anything," Meister said. "The smaller states are growing, but the growth has slowed in some of the key states."

States such as Oklahoma, which added six gambling locations in 2006 and changed gambling laws that allow casinos to offer more traditional Las Vegas-style slot machines, increased gaming revenue almost 25 percent to $1.9 billion.

Meister said the changes brought customers from neighboring Texas and Arkansas, states without commercial or Indian gambling facilities.

"Things are evolving pretty rapidly in Oklahoma," Meister said. "You're seeing the facilities adding more amenities, such as the things you would find in typical casino resorts. That's given those locations an edge in the competition."

Florida's Indian casinos, which are dominated by the two Seminole Hard Rock Casinos in Hollywood and Tampa, grew their 2006 revenues to almost $1.6 billion, an increase of 21.5 percent.

"Even with the growth in those states, it's still not enough when California has a moderate year," Meister said.

However, the Golden State could see a jump this year. The Legislature is still looking at approving new compacts, several existing casinos are planning or undergoing expansions, and two small casinos have opened.

"If these new and renegotiated compacts are ultimately ratified, they would lead to a significant increase in the supply of gaming," Meister said. "The renegotiated compacts may lead other existing gaming tribes (in California) to seek renegotiated compacts as well. And this could lead to even more growth."