With cash-strapped consumers spending less time gambling, River Rock Casino rolled the dice on a $5.5 million upgrade last year, betting that players would stay longer at its slot machines and card tables.
So far, the bet has paid off.
Sonoma County's only tribal casino generated nearly $32 million in sales in the fourth quarter, its first annual increase in three years.
River Rock added two new dining spots, upgraded its stage and opened a new poker room at the casino overlooking Alexander Valley. It replaced carpets and chairs, and removed several hundred slot machines to give players more elbow room.
Guests are playing longer and spending more money, said Joe Callahan, the casino's chief financial officer. "We couldn't be happier with the feedback," he said. "The customers love it."
But while River Rock's short-term prospects look good, the future is less certain.
Indian gaming has been hit hard by the recession, with revenue at California tribal casinos down 6 percent in 2008. Although figures for last year aren't compiled, there is little sign the sector has bounced back, said Alan Meister, an economist who tracks Indian gaming at Nathan Associates, a Virginia-based consulting firm.
"It's probably going to take a little longer for the California economy to recover, and that may carry over to the gaming industry as well," he said.
River Rock reported $124 million in sales last year, down 5 percent from 2008 and 11 percent from its peak in 2007.
The decline was about average for California's 65 Indian casinos, which generated $7.3 billion in 2008, compared to $7.8 billion the year before.
Nationwide, tribal gaming hit $27 billion in 2008, up slightly from 2007. Although its growth has slowed, tribal gaming could overtake the U.S. commercial casino industry in a few years, Meister said.
River Rock's owners, the Dry Creek tribe of Pomo Indians, shelved plans two years ago for a 267-room casino hotel, restaurants, spa and other attractions, citing a weak U.S. credit market.
The Tuscan-themed destination resort on the tribe's 75-acre reservation near Geyserville would replace its temporary casino and could cost $600 million, including financing costs.
Meanwhile, the tribe has $200 million in debt that comes due next year.
River Rock benefits from having the Bay Area's closest Las Vegas-style gaming, but it could face competition from new tribal casinos in Sonoma County, according to Standard & Poor's, which rates the casino's debt.
The most serious challenge could come from Graton Rancheria, which plans a large casino resort in Rohnert Park, 20 miles south of River Rock, according to Melissa Long, a Standard & Poor's analyst.
Graton has partnered with Las Vegas-based Station Casinos on a resort with a 300-room hotel, 2,000 slot machines, showroom and restaurants.
The federal government has approved land for the Graton tribe's Rohnert Park project, but it still faces legal and financing hurdles.
The Cloverdale Pomo tribe wants to build a casino resort on Highway 101 about 10 miles north of River Rock.
A third tribe, the Mishewal Wappo of Alexander Valley, is seeking federal recognition that could pave the way for its own casino in Sonoma County.
The potential for competition and higher debt load have hurt River Rock's credit rating. In December, Standard & Poor's rated its debt "B+ Negative" -- junk bond territory -- reflecting a higher level of risk.
The Dry Creek Pomos haven't given up on their resort plan, said Harvey Hopkins, the tribe's chairman. It will get back on track when the credit market thaws.
"The market's starting to look good," Hopkins said. Meanwhile, the tribe might scale down the project to make it more attractive for investors, he said.
River Rock's new CEO, David Fendrick, said he's excited about the plan. "The potential for a new resort is unlimited."
River Rock moved to upgrade its existing casino last year while the expansion project was on hold. The 62,000-square-foot temporary casino is inside two dome-shaped structures made of stressed membrane.
On a weekday afternoon earlier this month, Nada Hinojosa of Lodi sat before a brightly-flashing electronic gaming machine and said she's impressed with the buzz of activity at River Rock.
"There are a lot of people here, and it's a Friday," she said. "It's very nice, but it's a little smokier than most."
The casino allows cigarette smoking on its main casino floor, but has smaller rooms for non-smokers.
Hinojosa said she was vacationing in the area and wanted to try her luck at the casino overlooking the Russian River. "I'm not a big gambler, but I have fun," she said.
River Rock opened in 2002 and has grown to become one of Sonoma County's largest private employers, with some 600 workers. About 6 percent of its employees are tribe members.
The tribe received $13.3 million in profits from the business last year.
The casino is open 24 hours every day and currently has about 1,200 slot and video poker machines, down from more than 1,500 in 2008.
The casino's daily win per slot machine -- the difference between wins and losses -- was $218 in 2009, up 14 percent from the prior year.
Many of River Rock's customers come from the urban Bay Area, where the casino operates about 32 buses a day. Guests pay $10 to $15 for the trip to River Rock and get $15 to $25 to spend inside the casino.
You can reach Staff Writer Steve Hart at 521-5205 or steve.hart@pressdemocrat.com.
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