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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.”