Tribes looking beyond gaming and geography for revenue

For decades, gaming has been a primary revenue source to tribal nations, helping to fund housing, healthcare, education, infrastructure and other essential services while creating jobs and economic opportunities for tribal citizens.

“Tribal gaming was an early broad business push for many tribes and one of the most significant modern exercises of tribal sovereignty and self-determination,” said Jordan Herrington, a relationship manager with the Native American Financial Services team at BOK Financial®.

“Gaming created meaningful economic opportunity for many tribal nations, generated capital that could be reinvested in communities and demonstrated what could be accomplished when tribes were able to direct their own economic futures. Now, tribes are continuously looking to deploy capital into other businesses and diversify revenue sources from more than just gaming.”

To achieve this diversification, tribal nations are investing in a range of industries across the country, from more local opportunities like fuel centers, agriculture and real estate development, to manufacturing companies, sport franchises and energy. These ventures help to create jobs, strengthen communities and reduce reliance on a single source of income, Herrington explained.

Why economic diversification has become a priority

To be clear, gaming remains an important economic engine for many tribes, and Herrington does not see that changing anytime soon. However, tribal leaders increasingly recognize the value of building economies that are not dependent on a single industry.

"By generating multiple streams of income, tribes can insulate themselves against economic downturns that might negatively impact one business,” he explained. “It's very similar to how investors look to diversify their investment portfolios."

For tribal nations, that approach can help reduce concentration risk and create more consistent cash flow over time, as revenues from one business can help offset impacts to another.

Herrington points to gaming as a good example. Gaming remains a powerful and often resilient economic engine, but it is still tied to discretionary consumer spending. Diversification is less about replacing gaming and more about reducing the risk of too many government services depending on one primary revenue source.

A study examining the effects of recession on gambling expenditures for more than 50 years found that consumer spending on casino-based gaming grows during economic expansions and remains flat during recessions, leading the researchers to conclude that casino-based gaming is not recession-proof.

Although a tendency towards flat growth during recessions is better than a decline, it’s still important for tribal nations to prepare for economic downturns. One way to do this is by building a portfolio of businesses that don’t follow the same economic cycles as gaming, which can help tribes create resilience in their cash flow streams, Herrington said.

Keys to successful economic diversification

The real work happens before the investment, Herrington says. “Successful diversification usually starts with strong governance structures, clear decision-making authority and alignment between tribal leadership, enterprise leadership and the broader community.”

There is often a significant amount of work that goes into educating stakeholders, evaluating opportunities, understanding risks and making sure everyone agrees on the long-term vision before pursuing a new business venture, according to Herrington. “Creating alignment around why the tribe is pursuing a particular opportunity, what strengths it is leveraging and how that investment supports long-term community priorities is an important first step.”

Organizational structure for new businesses is also extremely important, with the most successful businesses typically having clear reporting lines, experienced management teams, strong financial reporting and well-defined responsibilities between tribal leadership, boards and enterprise management, Herrington said. “One common characteristic we often see in successful organizations is that management teams are empowered to run day-to-day operations while remaining accountable through board or other governance oversight,” he noted. These types of structures can help create continuity through tribal leadership transitions and allow organizations to remain focused on long-term execution.

“Access to capital is often more complicated than people realize.” Herrington continued. Many development projects require a thoughtful combination of tribal equity, debt financing, grants, tax incentives and other funding sources. In some cases, tribes or their established businesses may need to financially support a new venture through a construction period and until it can stand on its own. In other situations, acquisition of an existing business with stable cash flow may require less support because the business already has demonstrated earnings and operating history. Either way, access to capital is rarely just about whether an opportunity sounds attractive on paper. It often comes down to whether the project has the appropriate structure, governance, financial reporting, management expertise and long-term support necessary to attract financing, he explained.

Looking beyond geographical barriers

This push for economic diversification is not new, Herrington noted. For instance, tribal nations have long put gas stations on trust land because the absence of state excise tax can lower the wholesale cost and increase retail margins. Additionally, depending on the local geography, some tribes have looked to agriculture to generate income.

Some tribes also have a unique advantage of having trust land adjacent to major metropolitan areas. This provides the opportunity to develop and own retail, industrial or office properties, or to ground lease tribal land to developers, which can create long-term revenue streams without bearing the full cost of construction. “They're getting lease income from properties they own or in some cases just the land, but an even more important component is that they're benefiting from tax revenues generated by the businesses operating on tribal land,” Herrington said. “It's a very long-term and stable revenue source.”

However, what’s changing now is the scope of diversification beyond local opportunities.

“They're not limited to what's next door,” Herrington said. “Tribes are looking at opportunities to invest in anything they're interested in anywhere in the country.”

Investing in industries where the tribe already has extensive operational expertise is a common trend as it means that they can leverage their business and operational experience rather than starting from scratch. “You're seeing tribes invest in commercial casinos, resort properties, hotel properties, golf courses and even sports teams,” Herrington said. “These types of businesses are often attractive because tribes have spent decades building experience operating similar assets. That can significantly reduce execution risk compared to entering a completely unfamiliar industry.”

A long-term view of sovereignty and self-determination

Finally, unlike many private investors focused on quarterly results, tribal nations take a much longer view when evaluating business opportunities. As Herrington said, “I don't think tribes are looking for fast, quick returns. A lot of what they're investing in is more long-term and generationally focused.”

That perspective is closely tied to tribal sovereignty and self-determination.

Every tribe faces unique priorities, whether it's building housing, expanding healthcare access, improving infrastructure, supporting education or strengthening public safety services, he noted. Diversified revenue streams provide the financial foundation needed to support those priorities well into the future.

Furthermore, as tribal communities grow, so do the costs of providing government services. Schools, healthcare facilities, police departments, fire departments and infrastructure projects require ongoing investment.

“Many of those services aren't generating income on their own,” Herrington said. “By growing different business investments, tribes are creating revenue streams that can help keep up with those needs and continue improving quality of life for tribal members.”

“Tribes aren't just solving a problem today; they have a very long-term focus. They're thinking about the grandkids and future generations and trying to create generational prosperity.”