Business at casinos owned by Native American tribes in the United States has historically held up well in periods of negative or sluggish economic growth. No more. In Connecticut, for example, the state’s share of such revenues declined by 17% in the fiscal year ending June 30, 2011.

In addition, prominent casino companies owned by Native American tribes are having severe difficulties meeting their debt obligations. The Associated Press reports that the Mescalero Apache Tribe last year restructured $200 million in bonds for its New Mexico-based casino resort; the Mohegan Tribal Gaming Authority, which operates casinos in Connecticut and Pennsylvania, faces a debt load of over $750 million and is attempting to refinance; and the Foxwood Resort Casino in Connecticut is also trying to rewrite the terms of its debt. (The Native American casino companies are in a strong negotiating position with creditors because the former cannot default or be foreclosed on because the tribal governments are sovereign under U. S. law.)

The deteriorating state of these Native American casino companies is an ominous sign for U. S. casino and racino interests. Whereas languid economic conditions, persisting high unemployment, and the resulting decline in tourism have contributed to the financial problems experienced by the tribal casinos, the major and more structural cause is almost certainly that the U. S. market for gambling is inundated with bricks-and-mortar locations and online suppliers.

What’s more, gambling suppliers are sure to proliferate in the next several years. Ohio is about to launch four casinos, New York is looking to expand into full-fledged casinos (including at Aqueduct), Massachusetts recently approved three casinos, the U. S. Department of Justice has opened the door to online gambling (except for sports betting), and the prospects for racinos in Kentucky and more gambling venues in Florida and Illinois have improved.

While aggregate gambling revenue in the United States will grow, the pot is likely to be divided up among the growing number of land-based and online companies. Pari-mutuel wagering is easily transacted online and this inherent quality is the best means of sustainability and global growth in the midst of the surging competition for customers’ patronage.

Copyright © 2012 Horse Racing Business

Originally published in the Blood-Horse. Used with permission.