Jessica Hill / AP
Wednesday, Feb. 27, 2013 | 8:53 a.m.
HARTFORD, Conn. — Indian casinos brushed off weak consumer spending in a sluggish U.S. economic recovery to post a modest increase in revenue in 2011, an industry study reported Wednesday.
Not only did revenue rise 3 percent, to $27.4 billion, but Indian casinos are holding on to their share of total casino gambling revenue, competing closely with commercial casinos, according to the report, "Casino City's Indian Gaming Industry Report."
The revenue increase is the second in as many years following a first-ever drop in Indian casino revenue in 2009 as the worst recession in decades took its toll on consumer spending. The back-to-back increases in revenue are encouraging, the report said.
"The question is how much further can Indian gaming grow?" author Alan Meister said.
Indian gambling was slowing before the start of the recession in late 2007 due to legislation, regulations and court decisions that restricted the types of games offered by Indian casinos, the number of states where gambling is permitted and other limits, he said.
The outlook for Indian gambling now appears healthy because the economy is expected to continue improving, restoring consumer spending, Meister said. In addition, many tribes are upgrading, expanding and replacing casinos.
Indian-run casinos such as those in Alabama and Nebraska, he said, enjoy the advantage of being closer to consumers than many commercial casinos. "They're a good alternative to Vegas that's closer to home," he said.
But the long-term outlook for Indian gambling is uncertain, Meister said. Potential threats include continuing legal challenges — such as a land dispute court case in Michigan that Meister said increases the likelihood of other legal challenges to gambling projects — and state regulations that restrict Indian casinos and limit expansion. Indian casinos face "a lot more" restrictions than their commercial counterparts, he said.
"That, in some ways, holds back Indian gaming from what it could potentially be," Meister said.
Other potential challenges include increasingly saturated markets, rising competition and Internet gambling.
Indian gambling generated about 43 percent of U.S. casino gambling revenue in 2011, the report said. Revenue at commercial casinos was 45 percent and revenue from racinos — casinos that operate at race tracks — accounted for the remaining 12 percent. That's unchanged from 2010, but represents a huge gain from the Indian casino share of less than 20 percent in 1993.
Both Indian and commercial casinos could lose business to racinos, he said. State approval of gambling is easier at race tracks where betting already occurs than establishing new casinos, Meister said.
Revenue growth varied from as much as 26 percent in Alabama to minus 3 percent in New York. After Alabama, the fastest-growing states were Mississippi, Montana, North Carolina and Oklahoma.
Following New York, the steepest decline in revenue was in Oregon, North Dakota, Connecticut and Idaho.
Revenue at Indian casinos continued to be concentrated in certain states. California generated more revenue at Indian casinos than did any other state, producing $6.9 billion in 2011. Casinos in California accounted for more than 25 percent of Indian casino gambling revenue nationwide.
The top five states — Washington, Florida, Connecticut, California and Oklahoma — accounted for about 61 percent of total gambling revenue. The top 10 states, which include Arizona, Michigan, Minnesota, Wisconsin and New York, account for 86 percent of total Indian casino revenue.
Ironically, the weak economy has helped spur casino growth among states seeking more revenue, Meister said.