Tribal Gaming 2024 & 2024: Record Revenues, Shrinking Margins

The tribal gaming industry has long been a key pillar of economic stability for Native American communities across the U.S., and 2023 has been no exception. In fact, tribal casinos generated a record-breaking $41.9 billion in revenue, according to the 26th Annual Indian Gaming Cost of Doing Business Report, produced by business consulting firm Wipfli. However, behind this celebratory figure lies a more nuanced story, one that reveals a complex interplay between growth, increased operational costs, and the rising challenges posed by modern digital entertainment options.

Key Points

The report’s headline figure underscores the resilience and growth of the tribal gaming sector. But while revenue continues to surge, profit margins have steadily declined. The industry’s margins fell to 26% in 2023, down from 30% in 2022 and 36% in 2021. This indicates that while the top-line figures are impressive, bottom-line performance is under pressure.

Wipfli's Grant Eve, leader of the tribal gaming and government sector, aptly pointed out that the narrowing margins signal both opportunity and challenge for tribal casino operators. As costs rise, particularly in key areas like marketing, promotions, and wages, tribal casinos are spending more to attract customers and maintain competitiveness. This trend speaks to larger economic headwinds, including inflation, that are reshaping the broader entertainment industry. But, beyond that, it prompts a crucial question: Are tribal casinos spending more just to keep pace in a changing consumer landscape?

The Slow Burn of Sports Betting

Despite the nationwide excitement surrounding legal sports betting, tribal casinos have yet to see significant financial gains from this new revenue stream. Sports betting, though growing, remains a relatively small slice of the revenue pie for tribal gaming operations. This fact is highlighted in sharp contrast to the staggering $119.84 billion wagered legally across the U.S. in 2023, as reported by the American Gaming Association (AGA). The reason is simple: online sportsbooks account for the overwhelming majority of sports betting action, with retail sportsbooks at physical casinos claiming a paltry 10% or less of the total bets.

This lack of in-person engagement in sports betting is perhaps most evident in states like New York, where retail sports betting accounted for just 0.3% of total handle in July. Most sports bettors prefer the convenience of online platforms, opting to place wagers through mobile apps rather than traveling to physical sportsbooks. This growing trend explains why California’s tribes, in the lead-up to the 2020 election, directed their efforts to defeating Prop 27 — a measure that would have allowed commercial operators to offer online sports betting — rather than championing Prop 26, which would have legalized sports betting only at tribal casinos.

In contrast, slot machines and table games continue to hold strong, generating $49.37 billion in revenue across commercial casinos in 2023, a 3.3% increase from the previous year, as per the AGA. This enduring appeal underscores a unique in-person gaming experience that digital platforms have yet to replicate at scale.

Is Online Gambling Cannibalizing Tribal Casinos?

One of the most pressing questions facing tribal gaming operators is whether the rise of online gambling is eating into their brick-and-mortar revenues. With online casinos seeing rapid growth — iGaming revenues in the U.S. increased by 25.2% in Q2 2023 compared to the same period in 2022 — there’s a growing belief that the convenience of online gambling is drawing potential patrons away from physical casinos. For some, this correlation explains the shrinking profit margins reported by tribal casinos.

However, others argue that online gaming serves as a complementary product rather than a competitor to traditional casinos. The consistent increase in retail gaming revenues alongside the boom in online gaming provides support for this view. The 3.3% growth in slot machine and table game revenues in 2023, despite a 22.9% rise in online casino profits, suggests that digital gambling platforms may be driving new customer segments to traditional casino experiences.

The reality for tribal casinos is that costs are rising across the board. Marketing and promotional efforts, in particular, have become some of the largest expenditures for tribal casinos, according to Wipfli’s report. This suggests an industry working harder than ever to capture market share in an increasingly fragmented and competitive entertainment landscape.

With more leisure options and new forms of entertainment cropping up every year, tribal casinos are battling not only traditional competitors but also the entire spectrum of recreational activities that vie for consumer dollars. From streaming services to immersive video gaming, tribal casinos are operating in an environment where consumer attention and disposable income are more contested than ever before.

The Expansion of Tribal Gaming Footprint

Even with these challenges, the tribal gaming industry continues to grow geographically. Several new tribal casinos are in development across the U.S., signaling ongoing optimism in the sector. States like California, Texas, Wisconsin, Oklahoma, and Virginia are all seeing major tribal casino developments, with multimillion-dollar investments highlighting the sustained interest in expanding gaming operations.

In Beloit, Wisconsin, for example, the Ho-Chunk Nation’s $405 million casino, set to open in 2026, promises to feature 1,500 slot machines, 40 table games, and a sportsbook. Meanwhile, California's Timbisha Shoshone Tribe is planning a new casino, following a 25-year gaming compact with the state. Such projects reflect a long-term commitment to growing the tribal gaming presence, despite the competitive and economic pressures at play.

While profit margins have narrowed, the overall financial health remains strong. It’s crucial for casino operators to use these insights to strategically navigate the economic challenges ahead and continue delivering value to their tribal communities.”

Conclusion

The record-breaking revenues in 2023 underscore the strength and resilience of tribal gaming, but the shrinking profit margins and rising operational costs reveal a sector at a crossroads. Tribal casinos must adapt strategically to maintain profitability in the face of inflation, rising competition, and the relentless growth of online gambling.

As tribal casinos explore ways to navigate these challenges, the industry’s future will depend on how effectively it balances tradition with innovation — continuing to offer the unique in-person experiences that have long drawn patrons, while also finding ways to compete in an increasingly digital world.