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Was it a good year? How to benchmark your tribal casino’s performance.

Jul 06, 2022

When tribal gaming leaders look back at their 2020 financial plans and predictions, there’s no question: Their actual numbers were off by a long. The industry was on a steep ascent at the start of the year, followed by an abrupt shutdown, and lots of fits and starts in between.

Because the industry went from thriving to closed, practically overnight, tribes lost billions of dollars in revenue. That meant less funding was available for healthcare and other essential services on reservations. Thousands of people lost their jobs. 

Tribal leaders also lost an important tool for strategic and financial planning. How can leaders make plans when the key inputs — their financial performance figures — are full of outliers?

Benchmarking gives casino operators a wider view of performance. By comparing performance data against similarly sized or located casinos, operators can start to get a sense of what’s now “successful” or “normal.” From there, they can steer strategic planning efforts toward a realistic recovery.

What’s a good comparison?

Indian gaming operations typically have higher net profit margins than commercial casinos, so it’s important to compare tribal results against other tribal-run organizations. Even then, there are key differences that can sway the numbers.

Look at the financials a few ways. Compare your operations against:

  • The tribal gaming industry as a whole. This gives you a big-picture view of where you fit in the industry — but it may be less helpful in guiding strategic decisions about line-level expenses, like security or wages.
  • Prior year performance for the entire industry. From here, you can gauge whether a change was typical across the industry and determine whether you fared better or worse.
  • Tribal casinos with roughly the same revenue. This helps you find “normal” performance for an organization that’s similar to yours in terms of staffing, square-footage or other factors.
  • Tribal casinos in the same region. Different regions responded to COVID-19 differently, and with different health and safety measures and timelines. You may also find discrepancies between rurally located casinos and those near cities.
  • Tribal casinos with similar property types. For example, casinos that operate hotels have different revenue streams and expenses than gaming operations without overnight accommodations.

Find your apples-to-apples casinos so the benchmark numbers are truest to your situation and, thus, more applicable.

How do you measure up?

Once you have a peer group (or groups) identified, pick a few key performance indicators (KPIs) to focus on.

  • Average total revenue is a good place to start because it measures all the money the casino brought in, before payroll or direct expenses were taken out.

    Total revenue was lower across the board in 2020 due to shutdowns — but the percentage varied by region, size and other factors. For example, casinos that Wipfli classifies as “high profit” saw average revenue decrease less than 20%, while casinos outside that category saw average revenue drop around 37%.

  • Revenue streams add context. For example, in 2020, slot revenue was only slightly down, on average, compared to 2019. But food and beverage revenue was much lower with large variances on the size of the facility. Here, tribal leaders can see where peers generated the most revenue from gaming and non-gaming operations and examine revenue differences between properties with and without hotels, among other factors.

  • Net profit margin indicates profitability; i.e., how much money the casino makes after paying its business expenses. Benchmarking net profit margin can help you gauge how efficiently your casino is running compared to peer organizations.

    In 2020, urban casinos achieved average net profit margins that were twice as high as rural casinos. Casinos that brought in less than $15 million in total revenue had the lowest average profit margins — 6%, compared to nearly 18% for all casinos and 37% for operations that bring in $100 million to $200 million.

  • Operating expenses break down exactly where revenue was spent. For example, in 2020, high-profit hotels spent more on repairs and maintenance than in prior years; and rural locations spent more on labor and wages. Marketing and wages are important line items to compare against peers, as long as you note regional and location-based differences.

Start benchmarking

While the economic recovery continues, peer rankings may be more useful to tribal leaders than data from prior financial periods or even short-term financial plans. Use benchmarking to evaluate performance, set new targets and pave the road to full recovery. 

Wipfli collects and calculates the financial data tribal leaders need to benchmark their operations. The Indian Gaming Cost of Doing Business Report includes financial data from more than 115 tribal gaming organizations — and it’s the only industry report that quantifies the financial performance of Indian gaming facilities.

Download the report. Then, pick peer groups and KPIs, and plot your performance against industry-wide averages.  To participate in next year’s report, reach out to Nikki Pfrimmer.

Author(s)

Grant Eve, CPA, CFE
Partner
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Suresh Geer
Director
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