The Viejas tribe in Alpine offers gaming and shopping at its nearby outlet center. Here the center illuminates the night with an evening light and water show.

San Diego’s Indian gaming tribes are quickly learning that it is not wise to gamble their economic futures solely on money they make from slot machines and card games. They’re betting some of their casino profits on new ways to produce revenue through diversification.

Last year, the Sycuan Band of the Kumeyaay Nation spent $45 million in gaming monies to purchase the U.S. Grant Hotel, named after the president who signed an executive order in 1875 setting aside specific lands in San Diego for the exclusive use of local Indian tribes. Sycuan will spend another $10 million to renovate the hotel.

While that real estate transaction could be interpreted as a symbolic gesture of gratitude for the land that now houses Sycuan’s casino complex in rural El Cajon, it marked a new chapter in the tribe’s conversion of casino profits into non-gaming business ventures. This kind of diversification is a trend being followed by other local tribes.

So far, Sycuan’s financial reach has included the U.S. Grant, the purchase of a sprawling East County golf course, the planned development of a $30 million hotel complex in National City, the launching of a professional boxing promotion company and other business pursuits.

“Indian gaming is an economic engine that is allowing tribes to pull their own weight and pay their own way,” says Daniel Tucker, Sycuan’s tribal chairman. “And Indian communities are creating even more jobs through new non-gaming businesses as they diversify into retail development and services.”

It was inevitable that once revenues started pouring into their casinos, tribes would start using some of that money to invest in enterprises on and off the reservation that are not directly tied to the gaming business: hotels, restaurants, golf courses, spas, conference centers and other businesses. To tribal leaders in San Diego, this is a strategic move aimed at keeping them from becoming dependent on a single source of income that may or may not be as plentiful in the future as it is today. It’s given rise to the development of so-called destination resorts such as the Barona tribe’s casino, hotel and golf course complex in Lakeside and the Pala Indians’ Pala Casino Resort Spa in North County.

“These additional amenities create additional revenue streams while also adding to the bottom line of a tribe’s core business, which is the gaming facility,” says Kate Spilde, senior research associate with the Harvard Project on American Indian Economic Development, who has studied tribes here. “Some tribes also develop their tourist economy more generally, appealing to families or non-gamblers who may visit the reservation to play golf or visit a water park. These businesses allow tribes to utilize their hospitality expertise without relying on gaming for all their development.”

Anthony Pico is chairman of the Viejas tribe.

Anthony Pico is chairman of the Viejas tribe, which built a $56.6 million outlet center across the street from its casino in Alpine and owns controlling interest in a bank, among other non-gaming ventures. “Diversification from gaming,” he says, “is the next logical step in the evolution of tribal governments and their efforts to stabilize their economies. Gaming is a means to an end, and that end for tribal governments, their communities and tribal members should be as diverse as those experienced by many in this country.”

Nine of the 18 Indian reservations in the county have gaming operations, ranging in size from the 30-slot arcade run by the La Jolla Band to the large complexes offered by Viejas, Sycuan, Barona, Pala, Pauma, San Pasqual, Campo and Rincon tribes. Two tribes — the La Posta Band of Mission Indians and the Santa Ysabel Band of Diegueno Indians — signed gaming contracts with the state last year that would allow them to open small gaming operations in the backcountry. Two other tribes, Cuyapaipe and Jamul, are actively pursuing opening casinos.

More tribal investments in non-gaming ventures are certain to occur as revenue from casinos and other tribal businesses grows. So far, Sycuan, through its business development arm, the Sycuan Tribal Development Corp., has established itself as an aggressive leader in diversification. Its non-gaming investment portfolio is unmatched among San Diego area tribes. “A number of years ago, Sycuan made a conscious and strategic decision to aggressively pursue other business ventures to further secure the economic well-being of the tribe and the community,” says Adam Day, director of public relations for the tribe. That decision, he says, has led to the creation of new jobs and new taxes.

In 2001, Sycuan purchased the 425-acre Singing Hills Country Club, a golf course and hotel development near its El Cajon casino, renamed it the Singing Hills Resort at Sycuan, and poured $3 million into a renovation program last year. “Singing Hills is consistently rated as one of the top golf resorts in San Diego,” says John Tang, Sycuan’s business manager. “This acquisition adds diversity to Sycuan’s base and, at the same time, takes our gaming business to another level.”

The purchase of the 284-room U.S. Grant Hotel and later financial dealings established Sycuan as a major player in San Diego’s business community. The tribe acquired the 94-year-old hotel from Wyndham International for $45 million. When the $10 million renovation is complete in 2005, the hotel will be flagged as a Starwood Luxury Collection Hotel and managed by San Diego-based American Properties Management Corp. “It will be the first five-star hotel in Downtown San Diego,” says Day. The site held the Horton House when it was purchased in 1895 by the son of the Civil War general and president. The U.S. Grant Hotel opened in 1910.

Sycuan Tribal Development Corp. also is planning the development of a $30 million hotel, restaurant and conference center project in National City’s Harbor District with partners Latino Builders and MRW Group. The partnership was granted an exclusive negotiating agreement last year by the National City Community Development Commission for this Marina Gateway project. Sycuan wants to build a 150- to 170-room high-end hotel on the property, with 30,000 square feet of conference space, a restaurant and farmer’s market. Day says it is hoped that construction could start this year with completion in the middle of 2005.

Sycuan’s investment in Downtown real estate is not limited to the U.S. Grant Hotel. It owns property at Sixth Avenue and J Street in the Ballpark District where the $34.1 million, 10-story, 235-room Hotel Solamar is under construction near the San Diego Padres’ Petco Park. JMI Realty Inc., the real estate development partner of the Padres, is building the boutique hotel. Sycuan Tribal Development Corp. provided part of the equity for the development in the form of a mezzanine loan and is leasing the property to a JMI entity. San Francisco-based Kimpton Hotels will operate the hotel, which is targeted for completion late next year.

Day says Sycuan has enjoyed an eight-year relationship with the Padres. Sycuan was the title sponsor for the Padres’ 2000 season for which it paid out more than $1.5 million, and this year it is one of five companies holding major sponsorships with the team. The tribe was unsuccessful, however, in obtaining naming rights for the new ballpark that opens this month.

Two other non-gaming ventures — mutual fund management and professional boxing promotions — have been launched by Sycuan Tribal Development Corp. during the past year. Last October, the corporation created Sycuan Capital Management, a registered investment advisory firm that launched the Sycuan U.S. Value Fund, a mutual fund to invest in large and medium-sized American companies. Day says Sycuan was the first Indian tribe in the nation to enter the financial services industry. Brandes Investment Partners in San Diego, which manages more than $57.3 billion in assets, was retained by Sycuan Capital to act as adviser to the fund.

The launch of the Sycuan Funds “is an important step in educating Native Americans on the importance of long-term investments and self-reliance,” says Henry Murphy, a Sycuan Tribal Council member who serves as the fund’s president. The fund, he says, will not only seek investments from Indians, but from public and private companies, pension plans and 401Ks. Day says the fund’s returns are both aggressive and conservative.

In January of this year, Sycuan established Sycuan Ringside Promotions to promote professional boxing matches, and at the same time signed an exclusive promotional agreement with undefeated junior featherweight champion Joan Guzman. The venture has been called the first of its kind by any Indian tribe or casino in the nation. “Boxing goes hand and glove with other things we provide,” says Day. “We’re adding to our core specialty of hospitality and entertainment.” Today, the Sycuan tribe employs close to 4,000 people in its various business ventures. Some 2,300 of those workers are involved in the gaming side of the tribe’s operations.

The Viejas Band of Kumeyaay Indians, Sycuan’s East County neighbor, can also count itself as one of the country’s leading American Indian economic ventures with assets that extend far beyond its Viejas Casino & Turf Club in Alpine. Those non-gaming assets not only include the $56.6 million Viejas Outlet Center across the street from the casino, but ownership of Ma-Tar-Awa Recreational Vehicle Park, the tribe’s first business acquisition in 1976, purchase of the Alpine Springs Recreational Vehicle Park in 1996, and majority ownership of the federally chartered Borrego Springs Bank, the first Indian-owned bank in California. “Tribally owned banks are a source of capital and growing expertise in accessing money for economic development,” says Pico, the tribal chairman. “Bankers make solid financial partners in accessing funds, targeting and nurturing successful business deals and tribal banks have tribal interests sitting on our boards of directors.”

The Viejas tribe’s latest non-gaming enterprise is its partnership with three other gaming tribes to form Four Fires LLC, a business entity that is financing construction of a $43 million Residence Inn by Marriott in Washington, D.C. The 13-story, 233-suite hotel is being built by The Donohoe Co. and will include a business center, underground parking, a fitness center, indoor pool and a gift shop. The hotel, expected to open in January 2005, will be located three blocks from the future site of the Smithsonian’s National Museum of the American Indian.

Viejas and its three partners — the Forest County Potawatomi Community of the Algonquin Nation, the Oneida Nation of Wisconsin and the San Manuel Band of Mission Indians (another Southern California tribe) — each own 16 percent of the hotel property. Four Fires LLC holds 58 percent of the investment equity in the hotel. Viejas officials say the project represents the largest economic collaboration for American Indian governments. “Indian gaming has boosted tribes to new levels of purchasing power and economic growth,” says Pico. “And we haven’t even begun to scratch the surface.” Nikki Symington, public relations consultant for Viejas, says Four Fires LLC will continue to look for additional ways to increase the tribe’s economic base.

Other Indian gaming tribes in the county are using their gambling profits to appeal to a broader audience through the development of destination resorts. In Lakeside, the Barona Band of Mission Indians turned Barona Casino into the $260 million Barona Valley Resort & Casino, which was unveiled last year. In addition to the 310,000-square-foot gaming floor and eight restaurants, the complex sports a 400-room hotel, a wedding chapel and event center, and the Barona Creek Golf Course. This year Barona will add an Asian restaurant and will expand its poker room — additions that will cost more than $2 million, reports Linda Devine, assistant general manager for sales and marketing. Barona, which opened the first Indian bingo hall in California in 1983, now employs 3,200 workers at its Lakeside complex.

North County’s Pala Band of Mission Indians turned Pala Casino into the Pala Casino Resort and Spa in August 2003 after completing a $105 million expansion. Along with its 2,000 slot and video machines and 77 gaming tables, the complex features a $215 million, 10-story, 507-room hotel, eight restaurants, a 10,000-square-foot spa and salon, an Olympic-size swimming pool and two entertainment venues: the Grand Cabaret, which seats up to 1,000; and the 2,000-seat outdoor Palomar Starlight Theater.

Harrah’s Rincon Casino and Resort in Valley Center should have a $165 million expansion completed by December, turning the complex into a full-service destination resort. The Valley Center property is owned by the Rincon San Luiseno Band of Mission Indians and managed by Harrah’s Entertainment Inc.

By December, Harrah’s Rincon Casino and Resort in Valley Center expects to have a $165 million expansion completed, turning the complex into a full-service destination resort. The Valley Center property is owned by the Rincon San Luiseno Band of Mission Indians and managed by Harrah’s Entertainment Inc. The expansion includes the construction of a 21-story hotel tower that will add 450 rooms to the existing 201, tripling its size to become the largest hotel in North County. The expansion also will include a full-service spa on the first floor of the hotel tower, a seventh restaurant, enlargement of the swimming pool area to include a tropical garden, and the addition of a 1,200-space parking garage. The casino floor also will be enlarged by 12,000 square feet. The expansion will add another 250 to 350 workers at Harrah’s Rincon, which currently employs 1,300. Tribal officials say the casino has generated an estimated $31 million in annual payroll.

Golden Acorn Casino in Campo has developed plans to open a 100-room, 55,000-square-foot hotel adjacent to the 60,000-square-foot casino. The Campo Band of Kumeyaay Indians opened the casino in 2001 and the property now includes a 24-hour restaurant, a truck stop that offers free showers to truckers who purchase fuel, and a convenience store.

The tribes’ diversification into non-gaming business ventures not only strengthens their economies, but is seen as a hedge against possible future threats to their gambling halls, such as a proposed state ballot measure that would require all gaming tribes to contribute 25 percent of their revenues to the state or allow 30,000 slot machines in 11 non-Indian card clubs and five racetracks in California. Pico says this would “drastically shift the market and the revenues derived from it.” However, says Pico, “The increase or decline of gaming revenues falls to the individual gaming operations and their capabilities in managing and marketing their gaming operations in a highly competitive market.”

Kate Spilde, the senior research associate at Harvard, sees a political motivation behind the tribes’ diversification efforts. “Partnering with investors and developers creates an extended network of professionals who understand tribal sovereignty and Indian gaming,” says Spilde. “These partners become invested in the continued viability of tribal governments and can become important allies, especially when Indian gaming is under attack politically.”

“I’m very impressed with the tribes in Southern California,” Spilde says. “They are very innovative and are doing a lot of creative things.”