Temporary coronavirus closures straining tribal gaming operations nationwide

Report: US Tribal Casinos Have Lost $1.5 Billion In Two Weeks

This article may be outdated. Get the latest news on Connecticut here.

There are over 500 tribal casinos in the US, almost all of which are now closed in an effort to slow the spread of COVID-19.

Meister Economic Consulting (MEC) published estimates last week for the economic impact of these shutdowns on the tribal gaming industry. By its reckoning, the direct cost over just the first two weeks was approximately $1.5 billion.

MEC estimates, updated biweekly, are freely available on its website.

Direct effects on tribal gaming

The consultancy separates its estimates into direct and indirect impacts. Direct impacts are those affecting the casinos themselves, the tribal gaming companies which operate them, and their employees.

The $1.5 billion in lost revenue covers both gaming revenue and non-gaming revenue. The latter includes things such as drink sales, on-premise restaurants and entertainment, and room occupancy.

Between revenue sharing and taxes, the cost to various state and local governments could be as much as $240 million.

MEC estimates that a total of 296,000 tribal casino employees are out of work as a result of the shutdown, resulting in $332 million in lost wages. Some casinos have continued to pay wages and provide benefits, though it’s unclear how long such support will last.

Indirect effects from coronavirus

MEC also investigated the knock-on effects the casino closures would have on related businesses. It estimates secondary impacts to the tune of $4.4 billion in lost economic activity, plus an additional 728,000 lost jobs.

That impact includes such things as:

  • Lost revenue for businesses supplying the casinos with goods and services
  • Reduced economic activity by casino employees as a result of lost wages and benefits
  • Reduced spending by various levels of government due to lost tax revenue

Those losses, in turn, naturally produce third- and fourth-order effects. Given that the coronavirus has impacted virtually all aspects of daily life, it’s hard to separate these more-removed impacts from the overall economic downturn.

Even so, MEC estimates that nearly $970 million in lost wages and over $630 million in lost government revenue are attributable specifically to the closure of tribal casinos.

Gaming is a major revenue stream for tribes

It’s not only tribal casinos that have shut down, of course.

Commercial casinos have also closed their doors nationwide. That industry generates over $42 billion in annual revenue, so a simple estimate of the coronavirus’ impact would be over $800 million per week — slightly more than the tribal casinos.

That cost is spread between those companies’ shareholders, however, many of whom have other sources of income.

By contrast, tribal gaming is a hugely important revenue stream for Native American communities which collectively have the highest poverty rate of any racial demographic in the US.

There are about 3 million Native Americans living in the US, about 5% of whom are directly employed by tribal casinos. That population includes those who are too old, too young, or otherwise unable to work, as well as those not living on reservations. Thus, the impact of the shutdown on unemployment rates on reservations will be much greater than 5%.

On many reservations, gaming employs more than one third of the workforce.

Could tribal online gambling be an alternative?

Elsewhere in the world, many gamblers have moved online as a response to casino closures. Unfortunately, the only states in which online gambling is currently legal are dominated by commercial casinos. It is therefore of little help to tribes at the moment.

In Connecticut, the two tribes which jointly run the state’s casinos recently petitioned Gov. Ned Lamont to allow them to offer online gambling. The governor responded with a quick rejection.

Lamont said that he was unwilling and unable to give such authorization without approval from the US Department of the Interior and the Connecticut General Assembly. Obtaining such approval is impossible in the midst of the ongoing crisis.

Government assistance not a full solution

Fortunately, tribal gaming businesses may be covered under the federal government’s COVID Aid, Relief and Economic Stimulus (CARES) Act. The $2 trillion package includes a $350 billion paycheck protection program (PPP) for businesses employing up to 500 people.

Qualified small businesses, including many tribal casinos, are eligible for a loan of up to 2.5x their monthly payroll (capped at $10 million). Business can use that money to pay employee wages as well as certain other costs during shutdown, such as utilities and interest on mortgages.

It’s actually more of a subsidy than a loan, as the entire amount will be forgiven so long as the money is used for those designated purposes.

The 500 employee limit means that the PPP includes many but not all tribal casinos. The largest in the US, Winstar World, employs nearly 3,000 people from Oklahoma and Texas. Medium-sized businesses such as these are not eligible for loans under CARES.

Tribes are additionally receiving $8 billion in direct relief. Though most of it goes to tribal government and health programs, it will also alleviate some of the economic burden of the shutdown.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
Privacy Policy