Tribal Economies: The Case for Diversification

In May, the President released his proposed budget with major cuts that will directly impact tribes across Indian Country. And as the growth of Indian gaming has begun to slow, now more than ever tribal governments should be focused on diversifying their portfolios as a means to build stronger and more sustainable economies over the long term.

“Gaming has provided a lift for many Tribes for many years, but the reality is that it hasn’t provided enough revenues to address the many challenges that confront most tribal communities, nor has it supported the growth of tribal economies beyond the casinos,” said Jamie Fullmer, Chairman/CEO of the Phoenix-based Blue Stone Strategy Group. “The gaming industry has been more successful for some than for others, but it is clear that now is the time for all Tribes to focus attention on diversification into other businesses to provide steady revenue streams and creating more tribal jobs.”

The National Indian Gaming Commission (NIGC) reports that Indian gaming revenues began leveling off at around 2007 at $26.1 billion and has had only incremental increases in the last decade, indicating that the industry’s major boom period may have peaked.  

Fullmer says that successful diversification depends on several factors, including tribal leadership, community commitment, geographic location, infrastructure capacity,adaptability in strategic planning and land use initiatives.

“The initial step for tribal leaders diversifying their economy involves gaining an understanding of their Tribe’s particular competitive advantages, the available local and regional economic assets, and access to capital beyond gaming revenues,” said Fullmer. “Armed with this understanding, tribal leaders can then effectively deploy the various diversification theories that are in accordance with their particular goals and opportunities to achieve long-term job creation and economic growth.  

“It is critical to study the local market and workforce, understand the needs and wants of the area beyond just the tribal community and evaluate the potential opportunities in a particular location and then develop action oriented strategies based on the current reality of the area not just the potential.”

Most Tribes find themselves in one of two situations, said Fullmer. They are located near a relatively large metropolitan population, or in a relatively rural, isolated location where gaming operations and ancillary businesses are based on destination resort models or on capturing customers who travel through or near the reservation on major highways.  

Opportunities available to tribal nations with little acreage tend to focus on creating retail and service-oriented enterprises that do not require square footage. Comparatively, Tribes with vast reservations often contain one or more marketable natural resources and agricultural opportunities that can―if chosen by tribal leaders―be leveraged for economic development purposes. While Tribes can have both rural and urban attributes, the options for diversification differ depending on the cultural fit, demographics, and community support in a particular tribe’s situation, said Fullmer.

In general, Tribes tend to fall into one of four categories: Those near metropolitan areas; rural tribes situated on high-traffic corridors; those isolated with natural resources and agriculture; and those who are isolated without natural resources.

“Naturally, Tribes near large metropolitan areas usually have a strong infrastructural and economic advantage, left to solve the straightforward challenge of capturing an adequate piece of the purchasing power of the existing customer base in those areas,” he said. “While Tribes in rural areas, particularly in the western United States, have rural isolated reservations that are not near any major population centers or high-traffic corridors.”

To overcome these challenges, Fullmer advocates for developing a strategy that leverages the Tribes’ sovereign rights and advantages, that looks at both on and off reservation opportunities outside of gaming and toward human and natural resources and  to capitalize on the economic opportunities that tribal leaders may sometimes overlook.

“Blue  Stone’s  goal is to help tribes to evaluate and plan their own unique diversification program to what they believe is best for them, both culturally and economically,” said Fullmer. “But there’s no question that Tribal Nations need to move beyond gaming and establish a secondary, more refined approach in achieving diversification.  We have worked very hard over the last decade supporting our Tribal clients in diversifying their economies by combining our respect for the uniqueness of each tribe’s culture and history, providing proven tribal methods and perspective, while pairing them with best practices from Indian Country and the corporate world.”

Part 2 of 4: Planning for Diversification

Part 1    |    Part 2    |    Part 3

The first step in evaluating diversification options is to analyze a tribe’s current customers, their demographics, desire for services and willingness to spend disposable income.

Next, applying two economic development principles can support tribes as they work to answer the diversification imperative:
1.  Capturing incremental customer demand
2.  Stage-based diversification

In the corporate world and even in the realm of small business, there are a couple of basic marketing strategies for business expansion that can be very useful to gaming tribes, particularly those who do not currently have other businesses outside of gaming. These strategies are related in that they both seek to grab more significant participation from a given customer.

The first step in evaluating diversification options is to analyze your current casino customers. It helps to literally visualize customers and think about what they are going to do with the disposable funds in the course of their visit or stay at the tribe’s casino. They will spend a certain amount on gaming, but how much would they spend on food? What kind of food would they prefer—fast food, buffet or fine dining? Would they spend money to stay the night? Would they bring their spouses if there were things for them to do? Would they bring their kids and pay for activities for them? Would they pay extra for higher-end services (i.e., valet parking, dry cleaning, spas and salons)? Are they in a hurry and want to enjoy gaming without all the distractions?

“When you start from a position of economic deprivation, the first time you see money coming into a community there is a thirst for it. So the biggest problem is the ability to suspend the desire for economic benefit for the time needed to invest and allow those businesses to grow." — Rob Porter, Seneca

With these questions in mind, what other operations is the tribe capable of running? Getting to know your customers and what they spend their dollars on is a critical step in pursuing both strategies.

The logic behind these questions relies on the fact that most customers are willing to spend more money on things that are leisure-related if you can pinpoint the right type of product or activity or service that they want. By fulfilling their needs and desires, they will reward you with their spending. Across Indian country, we see this play out in the gradual expansion of gaming. Most tribes start with a small casino, often a converted bingo hall or a temporary roadside tent. Then, over time, as many generate sufficient gaming dollars, they expand.

The first step typically involves the construction of a more substantial, permanent, dedicated casino building. Then gaming-related amenities are added, usually starting with more and different dining offerings. Often, a simple restaurant or buffet comes first. As the casino grows, restaurants with different cuisines and price ranges are established. Finally, accompanying hotels, spas and golf courses are added to target the entire available spending power of existing casino patrons and attract new ones.

This sequencing is so common, we are not going to spend much more time analyzing it, but it is worth noting. As tribes look to diversify, the same diversification concept applies, it just must be taken a step further and viewed through a lens of new enterprise creation that is less directly reliant on gaming. First, it is important to understand how the following two traditional marketing principles can support tribes as they work to answer the diversification imperative.

Capturing Incremental Customer Demand

The notion of capturing Incremental Customer Demand (ICD) involves the alignment of a customer’s desire for additional products or services with the enterprises’ ability to fulfill those needs. Beyond conventional gaming strategies such as adding table games or hotel and resort amenities, customer research and market surveys can help tribes identify and pursue more innovative commercial options that casino patrons may be willing to shell out dollars for.

For destination resorts, this may mean a vast array of retail options where the traditional casino resort has expanded into an outlet-style shopping complex. Patrons tend to be tourists who come not just to game, but shop and enjoy contemporary cuisine. By broadening their focus well beyond gaming, Tribes are able to capture an entirely new range of purchases from the same patrons who frequent their casino.

With Blue Stone’s help, a Tribe in the Southeast United States conducted an examination of its customer base and found that despite offering a full-service resort, what the local community really desired was an event venue for weddings, debutante balls, graduations, and other social gatherings. Because of its quasi-rural location near multiple small towns situated on a strip of land stretching over 100 miles, the region lacked significant family-friendly entertainment and event space.

Further investigation of the customer demand illuminated a strong desire for multipurpose entertainment venues such as modern bowling alleys. In Blue Stone’s experience, bowling alleys are rarely profitable and rarely a strong diversification option. However, in this particular case study, there was a quantifiable high customer demand for a facility that provided a range of entertainment formats (youth-oriented late-night bowling, weekday bowling leagues, slots for birthday bowling parties, and sports bar and gaming-related formats). Nearby bowling alleys were few and far between (about 30 miles apart), outdated, and primarily catered to day-time leagues. Furthermore, adult-oriented nightclubs were also non-existent despite a large under-forty single population in the area.

Working with estimates combining various development options, Blue Stone blended together a mid-range hotel, conference/event space, bowling alley and nightclub, producing a formula for diversification that stood a good chance of effectively answering local customer demand. Each of these entities by themselves were not likely to be economically viable, but when combined into a single format customized to local needs and conditions, the overall enterprise showed the potential for significant financial returns. Below is an illustration of the options that the Tribe considered.

Illustrative Summary: Steady State Pro Forma

Internal Rate of Return (IRR) is a measure of the cost vs. benefit of the project’s overall worthiness based on both the upfront construction costs and the future estimated gross earnings after overhead costs. This measure assesses the percentage of cash flow compared to the initial costs of the project over a 20-year period, growing at a modest three percent per year. It should rise above the cost of capital in order to be deemed a feasible project. The above figures are meant to support a decision to further investigate feasibility; they are not intended to be official feasibility estimates, which should come from building contractors. For example, based on these estimates, the bowling center would take the Tribe up to 10 years to pay back the construction costs, while the hotel would take longer because of the steeper construction costs. The idea of diversification requires these kinds of long-term, strategic decisions.

Tapping into incremental customer demand also tends to increase the crossover value of existing gaming and other enterprises, when properly connected through cross-marketing and loyalty programs. In this particular example, synergies with its casino and the identified community benefits added further value to the project. The longstanding desires for both family and nightclub entertainment would be answered by this approach, in addition to incremental new revenues and profits generated from increases in:

  • The overnight stay percentage of current casino patrons
  • Casino customers pulled in by the bowling center and/or hotel
  • Bowling center revenues from potential slot locations inside the facility
  • Convenience store and Dairy Queen customers
  • RV customers
  • Movie theater customers
  • Number of golfers

Taken together, these factors—even if not that impactful individually— provide a healthy financial buffer against lagging performance and fixed-cost burdens when viewed from the perspective of the overall tribal economic benefit from the bowling alley and entertainment venue project. These additional value creation aspects, conservatively estimated, should push the overall project above a 10 percent IRR threshold. Conducting due diligence and gaining an in-depth understanding of the venture or opportunity into which a tribe is going to invest its time and money is essential to ensuring that it is viable long-term economic option and also a proper fit for your community. According to the Tribe’s chairman, one of the obstacles that the Tribe encountered was difficulty with being patient during the process of evaluating and considering the array of economic development opportunities.

At the root of this inactivity was a clear lack of alignment between the Tribal Council and its business board. The business board did have an organizational structure in place, but it lacked guiding policies and procedures, an investment strategy, an approach to ensure due diligence, and internal systems, contributing to a mindset among board and staff that, “any idea is a good idea”— which certainly did not engender much confidence among Tribal Council or community members.

Blue Stone worked with the Tribe to examine and improve its existing policies and procedures and developed new ones designed to facilitate its economic diversification efforts. The Tribe's economic development corporation (EDC) had been in place for 17 years, however, during this time it had not made any investments on behalf of the Tribe, raising concerns among tribal members. Consisting of a governing board and three staff members, the operating budget was roughly one million dollars per year to operate, but had done little to justify or recover that cost. Although the Tribe was allocating funds to operate the entity, there was no agreement on or approval to move forward on investment opportunities.

With the assistance of Blue Stone, the Tribe developed internal systems, instituted onboarding and training processes for all business board and staff members, and formalized and approved a clear due diligence process that outlined a step-by-step process by which the board would consider acquisitions or joint ventures. It also developed dashboard reporting for the board and Tribal Council, enabling members to quickly review data and the progress of each investment opportunity in order to identify and address risk factors and craft a diversified investment strategy. In addition, the Tribe designed a plan to create clear lines of communication between the board and Tribal Council and fully define the roles and responsibilities of each as well as reporting structures and policies governing the relationship between the two.

Equally important was its establishment of monthly meeting updates and quarterly reporting by the board to tribal members. With Blue Stone’s assistance, the Tribe also developed a standards-of-conduct manual, employee handbooks, an Indian preference policy, and a tribal job creation plan that provided education and trainings for community leaders. With these things in place, the Tribe possesses the decision-making infrastructure necessary to effectively evaluate and capitalize on investment opportunities.

For example, the board decided to make improvements to the existing convenience store and product offerings to meet industry standards. It also developed and finalized a feasibility study for a second convenience store, which would produce an estimated 120 percent return on investment and payback in just three years. Blue Stone helped the Tribe secure Bureau of Indian Affairs loans to fund the project and assisted with the necessary project management trainings. The project is currently under construction and will be located adjacent to the Tribe's gaming operation; is expected to employ 16 tribal members; and will likely produce over a million dollars annually in revenue from profits and taxes back to the community.

This example illustrates two principles: 1.) Understanding the opportunities for capturing incremental customer demand and 2.) Understanding the impact that new diversification projects can have on existing projects in terms of meaningful returns for the tribal economy.
In this case, there also was the added social benefit of providing space for family and friends to gather near the community rather than having to drive long distances. This type of traditional approach to diversification is particularly helpful for tribes who have exhausted their initial set of diversification options, such as resort amenities and convenience stores. Our next example examines how another traditional marketing strategy can help a Tribe diversify its customer base rather than enterprises.

Stage-Based Diversification

This concept is referred to under many different labels, but for the purposes of this article we will rely on the label coined by Dartmouth University professor Chris Trimble: Stage-based Diversification—the notion that a Tribe or its business entity faces fundamental choices when it comes to expansion. It can either pursue new markets for the products or services it currently provides or it can pursue new capabilities to produce new products and services; however, it likely will not be able to pursue both new markets and new capabilities at the same time. This fundamental insight enables expansion and diversification opportunity mapping over time, as shown in the following graphic.

To illustrate this methodical progression towards economic diversification, consider the example from a Tribe in California. Its reservation is located in southern California nearly 30 miles from the Mexican border surrounded by forests. The Tribe has occupied their region for more than 10,000 years practicing their customs, traditions and engaging their community. Today, they have developed one of the most modern government and business enterprises in Indian country. The tribal members agree that the lands are to be used to capitalize on the value of the property without compromising their cultural respect for the lands.

Step 1 (Casino Expansion), the Tribe will begin by building its first gaming facility. After several years of operation, the Tribe will have developed a management team and supporting cast of individuals with skill sets or capabilities necessary to effectively run a casino. A natural next step is to then leverage those capabilities into expanding gaming operations by building a second casino to reach a new market. This could be located in a different area of the reservation or it could seek to target a different part of the same geographic market in order to offer higher-end amenities to more wealthy customers. Alternatively, the Tribe could stretch the capabilities of its casino management team by expanding the existing casino into a resort with multiple new hospitality operations under one resort and casino umbrella. This path leverages the existing market for the current casino while further growing the capabilities of the management team. This tradeoff between developing new capabilities or pursuing new markets continues in the next stage of expansion.

Step 2 (Diversification) outlined above, the traditional gaming tribe is faced with same tradeoff. For this Tribe, this process took place at the end of the last decade, when it had to consider whether to further diversify in the wake of the significant success of their resort and casino outside of San Diego. Examining the experience it had gained in hotel and resort management, they recognized that it had developed significant skills and expertise in the general hospitality business and could utilize those capabilities to manage hotels off of the reservation. With an off-reservation venture came the need for additional financing. Reviewing its growing knowledge of casino and resort financing, the Tribe determined that it could—and would benefit most from—financing its own off-reservation commercial expansion.

Attempting to move into a new market and develop new capabilities at the same time (by building a manufacturing facility, for example) would be far too afield for the tribe and increase the odds of enterprise failure. But by incrementally growing and branching out along the markets and capabilities axis (see previous graphic), tribes can reduce their risks and diversify with a greater likelihood of success.

Step 3 Return-Driven Projects (RDP) and Self Financing begins with all the capabilities developed from past diversification efforts and the customer bases of existing enterprises. Taken together, the portfolio of investments and the inherent capabilities of this Tribe resembles a real estate firm or a company highly skilled at managing and financing large cash-driven assets (casinos, hotels, etc.). In the corporate world, the closest analogy would be a Real Estate Investment Trust (REIT). In this case, the Tribe could look to new market real estate investments in luxury apartments that leverage its ability to manage high-end real estate properties in any domestic location. Moving in the other direction, in an effort to further develop its cash management and financing capabilities, the Tribe could get into commercial banking by purchasing a small existing bank or chartering its own to service the Tribe and nearby communities. Using this model, the Tribe is able to essentially self-finance real estate or banking projects that only a decade before would have seemed entirely unrealistic without vast amounts of outside support and assistance.

“The most important thing for any tribe is not to invest in a business but to support the people and entrepreneur support. There is a real need for sound planning and to avoid going after the 'quick buck', so the two things we look for are sustainable revenue and employment, which offer tribal members a chance to grow and have opportunities while building a sustainable revenue source for the tribe that we can build upon as a vehicle for job creation. ” — Jon Greendeer, Ho-Chunk

As you can see from this diversification progression, a Tribe can gradually expand in stages by leveraging either existing customer markets or existing capabilities to grow. By not going too far and too fast in pursuing new markets and new capabilities at the same time, a tribe can avoid higher-risk enterprises and the costly failures that sometimes result. Over time, taken in stages, diversification can be an exercise in low-risk expansion that proceeds at a pace that the Tribe can control. In addition, by connecting each stage together, a long-term strategy emerges from the distinct choice that a tribe makes at each stage between new markets and new capabilities. Blue Stone has mapped out diversification path options for many tribes at various stages of development across the country. In each case, the framework provides tribes with a clarity of choice that helps eliminate project options that are too ambitious or far afield for tribal decision-makers to effectively execute. From a financial perspective, this framework also has the indirect benefit of increased likely returns because the projects chosen are more likely to be successful over the long run.

As previously discussed, the stage-based approach to diversification can work hand in hand with the strategy of attracting incremental customer demand. Each time a tribe develops new capabilities in an existing market, it in effect captures incremental demand. Taken together, these two approaches can be extremely helpful to tribes who are seeking to plan and execute economic diversification. In our next article, we examine other frameworks for diversification that are more unique to tribes’ particular economic development situations and challenges.

Tribal Governance Made Easy with Blue Stone’s Soft Touch


Author: Gale Courey Toensing

Blue Stone Strategy Group
, a majority Native-owned and –operated business that supports tribal leaders in governance and economic development issues, has reached an important milestone: October marks its 10th anniversary in business.

That’s a major achievement, since less than 50 percent of new businesses last that long, according to the Small Business Administration. “About half of all new establishments survive five years or more and about one-third survive 10 years or more,” SBA says.

For Blue Stone co-founders Chairman and Chief Executive Jamie Fullmer and President John Mooers, the anniversary is a time to celebrate. “Not only are we celebrating 10 years in business, we’re celebrating the economic impact of our work with over 100 tribes across Indian country,” Mooers told ICTMN.  “We continually review and reflect on the business practices that make us a long-standing, solid and strong team.”

That continued self-examination inspires Blue Stone leaders to re-commit to Blue Stone’s mission – helping tribal leaders protect tribal sovereignty by providing them with supportive services in governance and economic development that promote sustainability and economic independence.

“We are solidly committed to our purpose of serving tribal leaders and helping them to support and protect sovereignty,” said Fullmer, former chairman of the Yavapai-Apache Nation.

Tribal leaders have much on their plates and tribal government systems and their economic development arms are often stretched thin because of competing priorities for time and resources, Fullmer said.

The partners pride themselves on community-based, strategic planning with tribes. “Our focus is not only creating viable solutions, but the ultimate test is to ensure smooth and successful implementation. The last thing tribes need is another binder of plans on the shelf that never gets implemented,” Mooers said.

During their ongoing self examination this year Fullmer and Mooers looked closely at where tribal leaders are having the most challenges. “How can we provide the best support with our work? How can we make sure we’re providing the best project teams with the best subject matter experts?“ Fullmer said. He and Mooers relied for help on Blue Stone’s own internal leaders who guide the firm’s vision and mission.

There probably isn’t a single word to adequately describe what Blue Stone does — neither “consulting” nor “advisory” covers all the firm does. It works exclusively with tribal governments to improve their two core functions: the inextricably intertwined branches of tribal governance and tribal economic development. In line with the fundamental tenet that strong tribal governance protects and strengthens tribal sovereignty, Blue Stone helps tribal leaders develop a vision and structure to promote and grow the services their communities need, as well as the strategies, processes and systems required.

The firm provides tribal governments with analyses of the strengths and weaknesses of their operations, practical advice on becoming efficient and transparent, and strategies for improvement, with workable step-by-step plans. Blue Stone covers all facets of tribal governance, as can be seen on its website, including: tribal financial health, housing, compensation and benefits, training and development, human resources, executive management support, tribal leader development, master planning, tribal land planning, healthcare planning and more.

Blue Stone has helped tribal businesses increase revenues and profits across a wide range of fields, including economic development boards, investment due diligence, feasibility assessments, real estate services, land planning, casino performance, loan restructure, business/enterprise assessment, leadership economic development planning and more.

Each project the firm takes on gets a dedicated project team that includes former and current tribal leaders and subject matter experts who provide one-on-one guidance to the tribal client’s leaders in leadership training and development, governmental financial literacy and accountability to support continued internal leadership growth. The team also reviews departments and programs with an eye to improving efficiency and accountability.

Blue Stone has completed around 400 projects over the past 10 years, working with more than 100 tribes, large and small, all over the country.

The work is challenging, Fullmer said, because each tribe is unique in its culture and how it’s organized, in how the community participates, in financial resources, in demographics, in geographic location, in what they prioritize culturally and in what they prioritize as a government. All of those factors are considered as Blue Stone develops a tribe’s strategic plan. Fullmer added, “People say, ‘Use the cookie-cutter approach,’ but we can’t do that.”

A common element for Blue Stone clients is that differing priorities among leaders have to be resolved for the tribal nation to move forward, and Mooers said that is the main reason Blue Stone is called in. “If there is a lack of alignment on initiatives and timelines and so forth, then things don’t get done.” It’s a challenge, but it’s also one of the best opportunities for Blue Stone to assist.

“Some of the best work we do is work with diverse agendas, diverse political interests. We take a long list of priorities and initiatives and work really closely with leadership to bring them into agreement on the top three or four or five items that are really going to move the community as a whole forward,” Moers said.

The growth and success of Blue Stone’s tribal clients over the past 10 years is the best predictor of Blue Stone’s prospects, because when a business reaches that 10-year anniversary milestone, its future looks bright, according to the SBA, which says, “As one would expect, the probability of survival increases with a firm’s age.”

Original Article:

Part 1 of 4 – The Ongoing Need for Economic Development

Part 1    |    Part 2    |    Part 3

The economic development opportunities on reservations that feature predominantly trust land are fundamentally similar to that of large, master-planned land-use programs.

The-Ongoing-Need-for-Economic-DevelopmentThe genesis of Indian Gaming is well-documented in terms of how it was based on the unique and recognized sovereignty of American Indian tribes in relation to their state and municipal counterparts. What began as bingo nights in church basements with an all-volunteer staff, eventually morphed into a $28 billion a year gaming industry. The impact of gaming on Native communities is incalculable and nothing short of miraculous. But gaming is only one part of a multi-faceted strategy to bring long-term financial stability to Indian Country.

Now, more than ever before, it is crucial to continue developing a progressive, diversified portfolio that allows tribes to spread the risk and develop business ventures that will translate into jobs and economic security not only for tribal governments, but also for their tribal members. The ability to provide meaningful, full-time employment in the multitude of fields and professions that are necessary for the day-to-day governance, human needs, education and well-being of tribal members is one of the most important benchmarks for tribal self-sustainability in the foreseeable future.

In the beginning, tribes did not have a lot of managerial or even financial expertise regarding the complexities and sophistication of the gaming industry, which had a global market presence. Most tribes reached out to the industry, primarily in the Las Vegas market, for assistance and entered into Managerial Agreements. Often these agreements included assistance in accessing capital since the tribes had limited ability to secure financing or obtain credit on their own.

Initially, tribes needed government approval of expansion projects, business investments or new business ventures, but today this is no longer required leaving the tribes free to diversify and manage their assets as they see fit.

Today, tribal leaders recognize the fact that they cannot depend on unlimited expansion of their casino operations. They see the finite capacity of casino development, as the revenues have begun leveling off in the last five years. Even the commercial gaming industry in Las Vegas and—in particular—Atlantic City have realized that they need to diversify revenue sources to balance their revenue base if they are going to survive.

So where does this leave the tribes? With an opportunity to learn from their successes and failures and find a path to growth and job creation in their communities.

Faced with the challenge of building sustainable economies over time, tribes across the country are taking steps to diversify their economic activities. Emerging from these efforts are examples illustrating a spectrum of potential opportunities, ranging from traditional gaming-related amenities to initiatives designed to apply other in-house capabilities to the development of successful non-gaming enterprises.

The first step to tribal diversification involves gaining an understanding of unique competitive advantages, the available local and regional economic assets, and where potential new dollars beyond gaming can come from. Armed with this understanding, tribes can effectively deploy the various diversification theories in accordance with their particular goals and opportunities to achieve economic growth. Other areas of consideration include zoning issues, potential land purchases, and taking land into trust, among other requirements. While these are not “deal breaking” impediments, they need planning and cooperative agreements with other governments.

The natural expansion of Indian gaming led to increasing the destination aspect of casinos. Hotels were built to accommodate gamers, but were also used as convention venues for scores of other businesses that were primarily interested in the capacity of the facilities for their meetings, and little to no interest in the casinos. Many tribes also developed golf courses, spas and outdoor recreation areas for their membership, their workforce and visitors. Investments included developing independent small and large businesses on the reservation for tribal members and others.

Like most significant endeavors, the first step in a tribe’s diversification effort should be to assess the economic opportunities available to the tribe based on its particular location. The economic development opportunities on reservations that feature predominantly trust land are fundamentally similar to that of large, master-planned land-use programs. This means that in order to understand what’s economically possible, one has to understand the potential consumers, or customers, available given a tribe’s specific location. Naturally, there are multiple strategies that tribes can use to overcome their geographic limitations. For example, some tribes use a “destination” or “resort” model to attract customers from relatively distant locations for multiple-night stays in their casino. The key is to learn the potential opportunities a tribe can explore based on its particular location and economic geography, and then develop customized development strategies based on that reality.

Most tribes find themselves in one of two situations. They are near a relatively large metropolitan population, in which case they likely have developed gaming ventures to attract nearby customers. Or they find themselves in relatively rural, isolated locations, where gaming operations consequently are based on destination resort models or on capturing customers who travel through or near the reservation on major highways on their way from one metropolitan area to another. Tribes with land along a major highway or interstate are best situated, as they can still establish profitable gaming operations despite being relatively rural. Others find themselves in truly rural environments without easy access to major markets, and likely have small gaming operations typically frequented mostly by tribal members. At best, truly rural gaming tribes can build large destination resorts to which customers are willing to travel long distances and typically stay for multiple nights.

Determining which diversification path best suits a tribe’s particular needs depends in part on its geographical location. Opportunities available to a rural tribe tend to depend heavily on the size of its reservation and the natural resources it holds under trust. Tribes with little acreage usually have to focus on creating service-oriented enterprises that do not require square footage. Comparatively, tribes with vast reservations often contain one or more marketable natural resources that can—if so chosen by tribal leaders—be leveraged for economic development purposes. While each tribe is unique—one can have both rural and urban attributes—it is helpful to break down possible economic development opportunity sets into four categories: tribes near a metropolitan area, rural tribes on high-traffic corridors, isolated tribes with natural resources, and isolated tribes without natural resources.

The options for diversification differ depending on which category best describes a particular tribe’s situation. Recognizing that some tribes have multiple characteristics, the following articles will examine how the economic diversification opportunities for tribes are determined in each category.