Lummi Nation Rolls Dice Again on Casino
Silver Reef Casino Offers Better Location, Attractive Facility

by Barry D. Bowen

 

This month the Lummi Nation will again gamble on success in the casino business, betting $20 million when it opens the doors of its Silver Reef Casino.

Casino officials are betting on the new location at the intersection of Slater Road and Haxton Way, a top-to-bottom emphasis on quality and changes in gaming laws to generate multi-million dollar annual payouts to the tribe.

The 28,000-square-foot facility is owned by the Lummi Nation and operated by Joliet, Ill.-based Merit Management Group. Merit operates eight casinos, including the Kingston, Wash.-based Point No Point Casino of the Port Gamble S’Klallam Tribe, which opened in early February.

A great deal of time and attention was given to selecting the right management company with whom the tribe should partner. The tribe considered five proposals before selecting Merit and signing a five-year contract, according to Merle Jefferson, a Lummi Nation council member. Jefferson also is the council’s representative to the Lummi Commercial Co. that recommended the new casino, and the tribe’s natural resources director.

“They had an excellent reputation and all the reports we got about them were positive. Merit also had the upfront investment money needed for the project,” Jefferson says.

With Merit in place, attention turned to analyzing what needed to be done differently from the now defunct Lummi Casino, which closed in August 1997. The tribe and Merit settled on two key physical characteristics — location and quality.

 

Location, location

“The location of the previous casino at Gooseberry Point was physically beautiful, looking out over the bay at Lummi Island, but it was eight miles farther from the interstate,” observes Harlan Oppenheim, the Silver Reef Casino’s general manager.

Both Jefferson and Oppenheim anticipate that sitting only four miles off the freeway on Slater Road will be seen as very convenient and accessible for Whatcom County patrons, and less of a barrier to cross-border guests.

The location also provides plenty of room for future expansion. Although phase two expansion plans are only conceptual at this point, a hotel is being considered, as well as casino expansion if business is booming. The design of the new facility anticipates the expansion. Two of the four sides of the building are designed so that they can be easily pushed out to add casino floor space or to add other facilities to the structure, such as a hotel.

“We have the land and we have the desire, so if the business volumes warrant it, we do intend to proceed with an expansion,” Oppenheim says.

 

Quality is key

While the Skagit Valley Casino Resort in Bow positions itself as a resort destination and the Nooksack River Casino in Deming cultivates a Northwest lodge atmosphere, Silver Reef is not planning any distinctive theme other than quality. Oppenheim characterizes the previous Lummi Casino as a very basic building that lacked high-quality amenities and décor and served food as something between an afterthought or a necessity of secondary concern. Both Jefferson and Oppenheim repeatedly underscored plans for an upscale facility and operations.

“We will have a quality restaurant and a beautiful entertainment lounge. Food will be an integral marketing tool, not merely a support function,” Oppenheim declares. “We intend to offer very high quality food at value prices.”

The menu, still being finalized, will feature everything for everybody. Pasta, meat, fish and poultry dishes, as well as sandwiches, burgers, soups and salads, are offered. Specialty buffets such as Mexican Mondays and Italian on Tuesday are planned.

“We are going to have a very upscale facility with a lot of beautiful handcrafted wood beams, hand-set stonework and granite counters,” Oppenheim remarks. “I think the public will find a higher quality of craftsmanship here than in other gaming facilities in Washington state. All this and easy access from the freeway is the key to our positioning.”

One example of the Silver Reef Casino’s focus on details is that it looked at over two dozen designs for a custom carpet before selecting a one-of-a-kind design, on which it will own the copyright.

 

Market conditions

With two established casinos within 20 miles of Bellingham, there’s one obvious question: Can a third casino be successful? Oppenheim considers market conditions to be strong, with pent-up demand in British Columbia that would welcome another casino.

Kevin Hogan, general manager of the Nooksack River Casino and chief executive officer of the Nooksack Business Corp., agrees that there is plenty of room in this market for another casino. The Nooksack continues to experience double-digit percentage growth month after month, reports Hogan, with 60-70 percent of its patrons coming from Canada, that growth continues even with a poor exchange rate. Hogan thinks another Whatcom County casino will benefit his operation by doubling the amount of marketing dollars and marketing messages, and enabling them to better segment the market to focus on particular customers.

“I don’t want to be successful by stealing business from other casinos. I want to be successful by building demand,” states Silver Reef’s Oppenheim. “I think we are in a good position to do that. We have to give people a reason to visit a casino. I think the combination of our convenient location and the quality of our facility and our food will do that.”

One enormous change in market conditions between the closing of the previous casino and the opening of Silver Reef is new gaming regulations making Class III, or electronic slot machines, legal. More than half the casino’s revenue is expected to come from electronic slot machines, with table games being a secondary revenue source, followed by food and beverage.

“They were not legal before and now they are. That makes this a whole new world,” Oppenheim remarks. “That very fact makes this venture viable. It is a lot more attractive both for the operator and for the customers.”

Traffic studies done by Merit project 1,000 to 1,500 patrons a day on average, with weekends busy and the first half of the week being slow. Oppenheim hopes to achieve those numbers soon .

“What typically happens, and I’ve opened casinos in many markets, is when you open, things are very strong because you’re the new kid on the block and everyone wants to see the latest and greatest,” he says. “After that, things fall off a bit because people figure they’ve been there, done that. Then traffic begins to build again.”

The target market for Silver Reef is Whatcom County and British Columbia. With the Skagit Valley Casino Resort based in Bow, marketing dollars will sparingly target Skagit County for special events, such as this month’s Tulip Festival.

Integral to the marketing program is a Las Vegas-style player program called Diamond Dividends — a “frequent flyer” program for gambling. The promotion rewards frequent customers with special promotions and a points program, accumulating one point for each dollar wagered. Points can then be redeemed for merchandise and food.

Since the casino doesn’t have a hotel, day trips will be another focus of promotions and transportation marketing. Bus tour marketing will be a component of the overall marketing mix, but not a central element, says Oppenheim.

 

Benefits to tribe

The casino now employs 30 people to prepare for the opening, but anticipates hiring 250. More than half of current employees are Lummi Nation members. While there is no hiring quota, there is a contractual hiring preference for qualified Lummis.

Jefferson is hoping that between 50 percent and 70 percent of all employees will come from Lummi Nation ranks.

“This could be the most significant economic development effort for the tribe in quite sometime,” he says.

The cost to build and open the casino is approximately $20 million, with a significant portion of that coming from Merit and the balance financed by the tribe. Jefferson expects the first two years of operation to be a break-even proposition that pays the bills. After that, if successful, the tribe can generate a few million dollars a year, but Jefferson declined to provide more detailed projections. Some of that should be used to fund other economic development efforts, he remarks, but a successful casino should also contribute significantly to the tribe’s general fund.