The new normal: Spirit Mountain Casino and Tribe have weathered competition well

On April 24, 2017, Spirit Mountain Casino relinquished its 21-year title as the closest casino to the lucrative and heavily populated Portland-Vancouver gaming market.

After fending off efforts over the last decade by other Oregon Tribes to open casinos closer to the Portland-Vancouver market and out-of-state investors from building a privately owned casino in Wood Village, the Grand Ronde Tribe finally saw its geographic advantage disappear when the landless Cowlitz Tribe was granted a Reservation from the U.S. Department of the Interior off Interstate 5 approximately 16 miles north of the Columbia River. The Cowlitz subsequently opened a casino, Ilani.

Portland-area casino aficionados suddenly had a drive one-fourth as long as the trek out to Grand Ronde.

Estimates of what the competition would do to Spirit Mountain Casino revenue and the dividend sent to the Grand Ronde Tribe for governmental operations and important programs such as Elders’ pensions, educational funding and health care were, at times, dire.

During a February 2008 General Council meeting, Tribal lobbyist Justin Martin estimated that the Grand Ronde Tribe’s gaming dividend would be slashed by 47.7 percent when the Cowlitz opened a casino closer to the Portland-Vancouver metropolitan area.

Martin also was quoted often in mainstream newspapers as saying that the Grand Ronde Tribe stood to lose more than $100 million annually in revenue once Cowlitz’s casino opened.

Not knowing what to expect, the Tribe drastically reduced its estimate of gaming dividend expected from Spirit Mountain Casino by 38.8 percent from 2016 to 2017. Tribal managers cut 5 percent from their budget requests during the 2017 budgeting process and funds from Tribal investments were used to balance the budget.

And everyone held their breath awaiting the opening of Ilani.

However, after a year of operating with casino competition closer to the Portland-Vancouver core, the dire predictions have proven to not be as devastating as feared for the Grand Ronde Tribe.

In adopting the 2018 budget, Tribal Council increased the projected dividend from Spirit Mountain Casino by 36.8 percent, offsetting the drastic reduction expected the previous year. The difference between the expected gaming dividend in 2016 compared to that projected in 2018 is now only 18.8 percent.

In August 2017, then-Tribal Council Chairman Reyn Leno, who also sits on the Spirit Mountain Gaming Inc. Board of Directors, announced that casino revenues were remaining competitive with those earned in 2016, which was a record revenue year. He added that compared to the casino’s five-year average, revenues were only down 8 percent.

Another indication that the effects of competition have not been as grave is reflected in Spirit Mountain Community Fund’s grant giving. The Tribe’s philanthropic arm receives 6 percent of Spirit Mountain Casino proceeds to distribute to nonprofits in 11 northwest Oregon counties.

In the four quarterly check distributions conducted by the Community Fund before the Cowlitz casino opened, the fund distributed $3.15 million. In the four quarterly check distributions following the opening of Ilani, the fund gave $2.9 million for a decrease of $254,924, which is an 8 percent decline in grant money awarded.

Preparation paid off

The Grand Ronde Tribe started preparing for Portland-Vancouver market competition several years ago.

As early as 2011, the Tribe donated $4 million to the Oregon Department of Transportation to help build the Newberg-Dundee Bypass, which is designed to make the drive from Portland to areas west of McMinnville safer and quicker.

Spirit Mountain Casino dispatched employees back east to conduct research on how Cowlitz casino investors, the Mohegan Tribe of Connecticut, operate casinos and attract customers. Ilani’s general manager helped run the Mohegan property in Wilkes-Barre, Pa.

In 2015, Tribal Council approved a $13 million remodel of Spirit Mountain Casino, which was completed in February 2017, and improvements to Spirit Mountain Lodge are currently being designed to offer more high-end suites to high-roller guests seeking luxurious weekend stays in Grand Ronde.

“The casinos I’ve seen that are facing new competition that don’t re-invest don’t do well,” Spirit Mountain Casino General Manager Stan Dillon says. “So the fact that we did re-invest into the property and we enhanced it. … We really did need that renovation badly.”

The last thing Spirit Mountain Casino needed, Dillon says, was for customers to visit a brand new casino and then visit a 20-year-old, unrenovated casino and start making unfavorable comparisons.

In early 2017, Spirit Mountain Casino also started accentuating the differences in gaming that occur when you cross the Columbia River. Washington state does not allow Las Vegas-style gambling that can be had in Oregon. The sign explaining those differences still stands inside Spirit Mountain Casino and is read by guests daily, Dillon says.

“Competition is good,” says Leno, who also is a longtime member of the Spirit Mountain Gaming Inc. Board of Directors. “I think it helps us sharpen our pencil and I think it helps us work harder to do what our customers want us to do as opposed to just thinking we are the only game in town. I think, basically, we’ve done that.

“To only have a single-digit impacts as opposed to the 40 percent that was mentioned in the beginning, which I never did believe would ever happen, means that our people at the casino worked hard and I think council at that time worked hard to prepare and now we’re in a really good position to deal with that competition.”

“I think today the effect is pretty much minimal when you think of a major player in the industry opening a mega-resort in your market, you’d expect to be devastated,” Dillon says, acknowledging the dire double-digit revenue drop predictions that were discussed before Ilani opened. “We are in the single digits.”

Dillon said Spirit Mountain Casino saw the greatest effect in the first five months after Ilani opened with double-digit decreases in revenue and customer counts, but then business normalized as the novelty of a new casino dissipated. In addition, Spirit Mountain Casino only lost 13 employees -- mostly table dealers -- to Ilani when it opened.

Spirit Mountain Casino has seen its number of employees decrease to a current total of approximately 1,050. Leno attributes the employment decline to pencil sharpening, as well as the cost-saving effects of better technology.

Dillon says that when he took over as general manager in 2014, staff levels were bloated and he has allowed staffing numbers to decrease to where the casino is operating efficiently. However, he admits, with the current unemployment rate in Oregon hovering at about 4 percent, finding new employees to fill about 100 vacant positons is increasingly difficult.

“We’ve reduced employment, but we’ve also become more efficient,” Leno says. “There are a lot of machines taking the place of people. We don’t need as many people in the cash cage because we have machines that do it (ticket redemption) on the floor. You don’t hardly go to the cashiers anymore.”

Leno says he thinks there are many efforts by the Tribe that are now paying dividends, including the bypass contribution, casino amenities such as the buffet and free valet parking, and the recent investments into the property. Even small things, such as free soft drinks on the casino floor, make an impression on guests, Dillon says.

But, Leno said, for the serious gambler, the big difference is the kind of gaming allowed in Washington state and Oregon.

“To a real gamer, it’s about where the odds are best for me to win money, and that’s out here at Class III,” Leno says.

Dillon concurs. He said he also thinks Oregonians have a strong allegiance to their state and that gamers who are loyal to Spirit Mountain Casino may have visited Ilani, but they have returned to Grand Ronde for a variety of reasons, include Las Vegas-style games.

“We are a glorified locals casino,” Dillon says. “Our main market is Salem and when people come out here they know us and it feels more like home. That has an appeal of its own.”

And then there is the issue of traffic. Portland was recently ranked as the 12^th most congested city in the United States and the drive through the city on Interstate 5 both north and sound bound usually bottlenecks as multiple lanes merge near the Columbia River bridge crossing. Dillon says that the other option, Interstate 205, also is becoming more congested as the Portland area increases in population.

Although Ilani might be closer as the crow flies, the drive time for Portland residents can be equal or even longer than the drive to Grand Ronde.

The positive side of traffic, Leno says, is having the busiest highway to the Oregon coast running right by Spirit Mountain Casino.

“Nothing is going to take that away 365 days a year,” Leno says. “On a beautiful, sunny afternoon, we still have that traffic going to the Oregon coast.”

Dillon adds that when the Siletz Tribe’s Chinook Winds Casino in Lincoln City books big-name entertainment that Spirit Mountain Casino sees increased business from people who stop off on their way home to the Portland area.

Leno says that the years and money spent fighting competition – both Tribal and private -- were worth it because it gave the Grand Ronde Tribe time to prepare.

“It helped us build our endowments, it helped us plan and be successful in what we’ve done at the casino as far as re-doing the whole floor and all of that stuff,” he says.

The new normal?

Dillon, however, does not think the Grand Ronde Tribe and Spirit Mountain Casino have reached the “new normal” after only one year of competition.

“The new normal, I don’t think we know what that is yet,” he says. “For us to identify what the new norm will be is to look at now. They did open in April, but they really didn’t get going until May. So, May through September, that first five months is where we saw the larger amount of the impact and then it dwindled from there. Going into this next five months will be what really says what the long-term impact will be.”

Dillon says Spirit Mountain Casino naturally saw an effect on its customers who live in Vancouver and northern Portland because of the proximity issue, but that the casino has held its own with clientele who live in the southern Portland area and its suburbs.

Dillon cautions that there might never be a new normal.

The Cowlitz Tribe and its majority investor, the Mohegan Tribe of Connecticut, will continue to invest in Ilani. A new events center that can seat 2,500 concertgoers is scheduled to open soon.

“The new norm isn’t over,” Dillon says. “They’ve opened and they’re not hitting their numbers. … They are not as successful because they haven’t been able to pull from us as hard, nor from the (Oregon) lottery. The lottery is getting stronger and stronger with their new machines. The lottery is truly the biggest competitor that we have.

“I hate to say anything is ‘normal.’ If you are a company that opened a casino. You invested $500 million. You’re a very progressive gaming company and you’re not hitting your numbers, are you just going to call that your normal? No. You’re going to get very aggressive and say, ‘What is it we’re doing? What is it we have to do to make this work?’ They are going to analyze and strategize to figure out how to get those numbers up. They’ve already started their campaign of reinvestment … They are going to become more aggressive with big-name entertainment, much bigger than we can afford.”

Dillon says Ilani can leverage being business partners with the Mohegan Tribe and that big-name performers can be booked at the Mohegan Sun in Connecticut and in southwestern Washington.

“The new norm is we’re going to be competing for a while and then as it gets older it will start to stabilize,” Dillon says. “I do believe over the next five months that I don’t know that the impact will be worse than we’ve seen. … We have a smart competitor with a huge amount of money and a lot of resources. … For Round One, we’re doing pretty good, but there are other rounds to come and I think it will get tougher.”

Dillon compliments Spirit Mountain Casino staff members who have worked hard on providing good customer service, which has helped retain many loyal customers.

“We are actually a much tougher competitor than they estimated and that probably surprised them,” Dillon says.

As part of the “new normal,” Leno says Spirit Mountain Casino has identified Salem, with its approximately 170,000 residents, as more of a main market. Spirit Mountain Casino remains the closest gaming facility to the second largest city in Oregon.

“We were planning worst-case scenario,” Leno says. “I think instead of talking so much about Cowlitz, it should have just been talking about competition. We’re going to have competition and we need to get better at what we do. And I think we have.”