Cherokee casino hits earning milestone
Harrah’s Cherokee Casino and Resort’s bottom line is improving steadily each year as the nation continues to recover from the recession and as the casino expands its offerings.
The secret to success was two-fold. A multi-year $633 million expansion elevated the casino to a destination resort. And the recent addition of table games with live dealers, such as blackjack, poker and roulette is drawing new clientele. Previously, the casino only had electronic gambling.
Although revenues at the tribally owned casino rose substantially the second half of 2012 after table games were added, the increase was mitigated somewhat by the initial cost of setting up its table games operation. Harrah’s hired and trained 500 new employees and purchased the equipment needed for the table games themselves.
“Financially, we have done well with table games, but the expense was high,” said Lumpy Lambert, a general manager at Harrah’s.
Half of the casino’s profits are paid out in dividends twice a year to tribal members. The other half goes to the Eastern Band of Cherokee Indians to fund tribal operations and programs.
Last year, dividends were around $7,700 for each of the tribe’s 15,000 enrolled members.
That amount will go up thanks to table games coming on line, but due to start-up costs, the increase will seem more modest at first, Lambert said.
Tribal members will get the first of two dividend checks for the year on June 3 — $4,023 (before taxes) compared to $3,785 last June.
“It may not seem as dramatic as everybody wants,” said Tribal Council member Bo Taylor of Big Cove. But, Taylor pointed out, the amount is up 6 percent from the previous June.
The tribe is anticipating a more considerable increase during the second half of the year from the table games.
“We are looking at a pretty good increase, double digit increases,” said Adele Jacobs-Madden, director of finance at Harrah’s.
Casino profits declined when the recession hit and Americans cut back on leisure spending and travel. If the financial prediction holds true, casino earnings in 2013 will finally return to pre-recession levels — plus some.
After this year ends, however, the initial bump from table games will start to level off, and the casino will eventually go back to seeing organic growth of 2 to 4 percent a year, Madden said.
The casino dividends tribal members get in June are based on earnings from the second half of last year — and table games hadn’t fully ramped up for most of that period. They launched in August, but weren’t at full tilt at first.
“(We) really didn’t promote the product to make sure we could meet the demand,” Lambert said.
It began its big advertising push, aimed at gamblers within a 150-mile radius, in October.
“We have hit it hard,” Lambert said.
Harrah’s has 124 table games and plans to add 10 or 12 more tables by Memorial Day weekend.
Harrah’s profits declined for three years during the recession, bottoming out in 2010. Since then, they have come back — a rebound no doubt due partly to the economy in general but also partly to the new undertakings at the casino.
Harrah’s gaming revenues increased by 8 percent in 2011, compared to a 11 percent decline in revenue over 2009 and 2010, according to an annual study by an industry trade group that analyzes tribal casino market trends nationwide. The Casino City’s Indian Gaming Industry Report ranked North Carolina fourth out of 28 states for gaming revenue growth rate in 2011 — a big jump from just the year before when it came in 23rd and saw negative growth.
There is no one or two reasons why a casino sees a jump in revenue, while another sees a decline.
“There can be a variety of reasons,” said Alan Meister, author of the industry report and an economist with Nathan Associates.
The report tied an overall national rise in gaming revenue in 2011 to an improving economy, witnessed by increases in gross domestic product, disposable personal income and employment.
And things were only expected to improve in 2012. However, industry-level data for that year is not available yet.
Early performance numbers and anecdotal evidence for 2012 suggested that revenue numbers kept rising as the economy got better, as tribes invested in their casino operations, and as casinos expanded their gaming options.
Adding live table games, for example, can draw a new type of customer, broadening a casino’s revenue base.
“There are some people who really enjoy the social environment and interaction with the dealers at live table games, and you cannot really get that at electronic table games,” Meister said.
Although table game players tend to throw down the most money during a visit, table games are not the biggest payoff for tribally owned casinos.
“Slot machines generally generate the vast majority of gaming revenue at Indian gaming facilities,” Meister said.