A snapshot of Indian tribal gaming performance for FY20
How do you know when something is normal? In science, researchers and physicians collect numbers, calculate averages, and classify the results as “usual” or “within range.”
Wipfli took a similar approach to determine the financial health of Indian gaming operations. For the 23rd time, revenue and expense data were collected from over 115 Native American organizations to compile Wipfli's Cost of Doing Business Report. The findings can help tribal casino operators determine whether their performance was normal in 2020 — a time when business conditions were anything but.
For example, more than 75% of the tribal casinos surveyed were closed for part of 2020, and less than half were fully operational at year-end. Many tribal casinos reopened without traditional loss leaders, like buffets, and amid a nationwide labor shortage and rising wages. These unusual business circumstances make it impossible to fairly measure financial performance against prior years or financial plans.
Instead, casino operators can look at industry norms. Wipfli collected and calculated data to reveal how tribal casinos performed by region, location (e.g. rural or urban), and whether or not they operate a hotel. Operators can also explore average revenue streams, expenses, assets, liabilities and equity for the year.
Here’s a snapshot of what Wipfli learned about “typical” tribal gaming performance in 2020:
On average, total revenue was $54.9 million for tribal gaming operations — a decrease of about 25% compared to 2019. The top 50% of casinos revenue-wise (which Wipfli classifies as “high profit”) saw average total revenue fall around 20% in 2020. Non-high profit casinos saw revenue fall an average of 37%.
In 2020, the net profit percentage was around 18% of total revenue for typical casinos — down from almost 25% in 2020. That means 18 cents from every dollar in revenue was available to tribal governments and operations.
The typical Native American casino saw a significant increase in operating expense margins in 2020. On average, operating expense margins were 82%, up from around 73% in 2019.
Marketing, promotions and wages were the most significant expenses in 2020. That’s pretty typical. But in 2020, the cost of wages was up, while the total amount spent on wages was down. This speaks to the labor shortage and related wage hikes experienced in most regions.
Regional and location-based performance
All regions experienced lower revenue in 2020. The Oklahoma region saw the smallest decrease in total revenue (13.4%) from the prior year. The Midwest suffered the most; its total revenue fell almost 31%.
Urban casinos were almost twice as profitable as rurally located gaming operations. Rural casinos spent more on wages and less on marketing than urban casinos.
Casinos with hotels had higher operating expenses and lower net profit rates than casinos without hotels. The higher operating expenses were largely driven by marketing and promotions.
Gaming revenue predominantly came from slots, regardless of property type. Food and beverage and gift shop revenue was similar among all casinos, whether or not they operated a hotel.
Why does “normal” matter?
Because the COVID-19 pandemic disrupted operations so severely, operators may need a wider view of performance. Casino operators can use these findings to measure their performance against industry peers and to build strategic responses. Operators can also learn from one another as they plan for the next phase of recovery.
How Wipfli can help
Wipfli produces the only industry report that quantifies the financial performance of Indian gaming facilities. To see how your gaming operations stacked up to industry standards, download the 2021 Indian Gaming Cost of Doing Business Report. Then, explore profitability assessment services from gaming experts at Wipfli.