Card clubs face slump as tribal gaming grows

Erica Werner

Monday, June 2, 2003 | 9:57 a.m.

BELL GARDENS, Calif. -- With its marble floors and faux-Chinese decor, the Bicycle Club is more Las Vegas than Wild West, but it offers the same thing California's card rooms have provided since Gold Rush days -- a place to bet on games of luck and skill.

The Bicycle is crowded around the clock with gamblers playing Hold 'Em and Seven Card Stud, Pai Gow Poker and No Bust Blackjack. But now officials with the Bicycle and dozens of other California card clubs fear they may gradually be forced out of business.

The explosion of Indian casinos, which offer slot machines and house-banked card games that are off-limits by law to card clubs, is creating more and more competition for the clubs.

Meanwhile tribes are using their large and growing political clout to block card clubs' attempts to modernize, reform outdated regulations and offer new games, owners said.

"We can't compete," Haig Kelegian, the Bicycle's owner, said. "We need help, because eventually our business is going to go down the drain."

Tribal officials dismissed the complaints, noting that the clubs fought ballot measures in 1998 and 2000 that legalized Indian gambling in the state. If tribes have had more legislative success than card clubs in the years since, tribal officials said, that's because lawmakers are following the will of voters who gave Indians a monopoly on Nevada-style gambling.

"Let's not feel sorry for the card rooms. They're not going broke; they're not going out of business. That's a canard," said Michael Lombardi, a tribal gambling consultant in the state. "For those people who really know the industry, they know that the real competition for the California card rooms is each other."

Serious card players such as Russell Fox are helping keep the clubs afloat. For him, Indian casinos offer few temptations.

"I have no desire to play slot machines or blackjack," said Fox, 41, a consultant from Irvine who plays poker at the Bicycle Club.

But despite the loyalty of customers like Fox, card club officials said their once-profitable businesses are struggling to survive.

There are 104 card clubs in California with a total of 1,394 tables, down from 220 clubs and 1,955 tables in 1997, when the industry was at its peak, according to figures from the state attorney general's office. Except for the 20 or so largest, most of the clubs have fewer than 10 tables.

Industry experts said the clubs generated about $1 billion in annual revenue in the late 1990s and still bring in close to that today. But profit margins at the clubs have dropped from 20 percent or higher in the late 1980s and early 1990s to single-digits today, said Andrew Schneiderman, vice president and general counsel of the state's largest card club, the 230-table Commerce Casino.

"It's just a matter of time before the cost of operating exceeds the revenue being generated, and then the whole business makes no more sense," said Schneiderman, who also is president of the Golden State Gaming Association.

Meanwhile tribal gambling has become a $5 billion-a-year industry, according to state officials, and ongoing negotiations between tribes and the state are expected to lead to even further growth.

With the exclusive right to offer slot machines and house-banked card games, tribal casinos can make greater profits than card clubs and draw more gamblers. At card clubs, players bet against one another, not the house.

Card clubs' one advantage is that many are near large cities, while tribal casinos are in outlying areas. But club operators and cities such as Bell Gardens and Commerce, which get up to 50 percent of their budget from taxes card clubs pay, fear that tribes will begin to encroach on their territory.

Tribes, which pay no state or local taxes, said that won't happen anytime soon because of the barriers to establishing casinos away from reservations.

For gamblers like Johnny Gendian, 80, location is key. Gendian, a retired farmer, makes the 40-minute drive from his Los Angeles home to the Commerce Casino a couple times a week but said Indian casinos are too far away.

"I went to one last week; it took me three hours to get there," Gendian said. "It was nice, it was different, but I don't want to drive three hours."

One Northern California tribe, the Lytton Band of Pomo Indians, is attempting to become the first in the state with an urban casino by taking a piece of land in San Pablo into trust and turning the card club already built there into a casino. Four Bay Area card clubs have sued to stop the plan and are awaiting a ruling by a U.S. district judge.

The same clubs also sued to overturn Proposition 1-A, the 2000 voter-approved initiative that legalized Indian gambling. They lost in court but have appealed to the 9th U.S. Circuit Court of Appeals.

Meanwhile lawmakers benefiting from tribal largesse have promoted legislation favorable to tribes, such as a constitutional amendment introduced this year that would cap nontribal gambling at levels in place as of Jan. 1.

The measure was introduced by legislators including Senate Minority Leader Jim Brulte, R-Rancho Cucamonga, who received more than $80,000 in tribal campaign donations in 2001-02.

Schneiderman hopes that at some point legislators will allow card clubs to offer house-banked games. If not, the future may hold further consolidation, buyouts by other gambling interests or the gradual fading away of an industry that's been around as long as California itself.

"The future's not bright," said Roger Dunstan, a researcher at the state library's California Research Bureau. "The industry's not going to be extinct, but it's not bright."