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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Gaming in the Gulf: Las Vegas Companies Stir Casino Revenue Rise

16 August 2006

LAS VEGAS, Nevada -- Two Las Vegas-based gaming companies continue to spur a revival of Louisiana's casino market as the one-year anniversary of the devastation caused by Hurricane Katrina approaches.

Louisiana casinos reported statewide gaming revenue of $226.5 million in July, a 4.1 percent increase from $217.7 million in July 2005, figures released Tuesday by the state's Gaming Control Board show.

The rise came despite the continued closure of three storm-ravaged casinos, including the Columbia Sussex-owned Belle of New Orleans, which was destroyed last year by Hurricane Katrina on Aug. 29.

"Statewide results continue to display the positive impact of the population shift (the movement of storm-affected residents from New Orleans to Baton Rouge) and construction crews (and) other personnel in the region for posthurricane reconstruction," Bear Stearns gaming analyst Joe Greff said in a note to investors.

The growth rate, however, has slowed in recent months. In March, the Louisiana gaming win peaked at a 20.4 percent increase.

Hurricane Katrina closed 13 casinos in the neighboring Mississippi Gulf Coast communities of Bay St. Louis, Gulfport and Biloxi. Gaming analysts said displaced casino customers left coastal Mississippi for New Orleans.

But competition has changed. Three casinos reopened in Biloxi in December, Harrah's Entertainment reopens the Grand Casino Biloxi on Thursday and MGM Mirage's Beau Rivage in Biloxi, the state's largest casino, reopens Aug. 29.

"The (Louisiana) results (for July) reflect a trend of decelerating growth since its peak in March," Greff said. "Competition is ramping up in Mississippi."

Louisiana gaming regulators on Tuesday also granted Las Vegas-based Pinnacle Entertainment permission to open a second riverboat casino in Lake Charles near its L'Auberge du Lac resort.

The company said it would use one of two Louisiana casino licenses it is acquiring from Harrah's Entertainment to build the $350 million, 400-room hotel Sugarcane Bay.

Pinnacle is swapping its hurricane-destroyed casino in Biloxi, Miss., to Harrah's Entertainment for the company's gaming licenses in Lake Charles that covered two riverboats destroyed by Hurricane Rita on Sept. 24.

Meanwhile, Harrah's New Orleans, which reopened in the middle of February after a five-and-a-half month closure, was the state's leading gaming revenue generator for the fifth straight month. Operated by Las Vegas-based Harrah's, the state's only land-based casino collected $31.6 million from customers, a 7.2 percent increase over July 2005.

Pinnacle's L'Auberge du Lac generated $26.7 million in gaming revenue in July, a 35.7 percent increase from a year ago.

Pinnacle also operates the Boomtown New Orleans, which has consistently reported double-digit, sometimes triple-digit, gaming revenue increases since it reopened in October. July was no exception as the casino in the New Orleans suburb of Harvey had $17.8 million in gaming revenue, a 57.3 percent jump from $11.3 million in July 2005.

The company's third Louisiana casino, in Bossier City, earned $9.8 million in July.

Pinnacle has not said what it will do with the second casino license it is acquiring from Harrah's. Company executives have speculated about moving the riverboat to Baton Rouge, where Columbia Sussex and Penn National Gaming operate casinos.

Another possibility is to move the license to New Orleans and build a second riverboat adjacent to Boomtown.

However, the Orleans Levee Board, which has jurisdiction over the New Orleans waterfronts, wants to entice Pinnacle to move the boat to the rebuilding South Shore Harbor Marina to replace the Belle of New Orleans. Columbia Sussex received permission to move the rebuilt boat west to nearby St. Mary Parish.

The Orleans Levee Board is asking the Louisiana Gaming Control Board to remove a clause in Pinnacle's agreement with Harrah's in which the company would have to pay $50 million if it were to move one of the licenses to Shreveport, where Harrah's operates the Horseshoe riverboat, or anywhere in New Orleans other than next to Boomtown.

"The practical effect of this (penalty) provision is to preclude riverboat gaming in Shreveport and New Orleans for five years," Orleans Levee Board President Mike McCrossen said in a letter to gaming regulators. "Given the limited number of riverboat gaming licenses, such a provision places a very real disadvantage to prospective gaming venues in New Orleans and Shreveport."

McCrossen wrote that resumption of casino gambling on the site "is critical to the restoration and reopening" of the marina as well as providing money for flood protection.

Las Vegas-based Boyd Gaming Corp. showed gaming win increases at two of its three Louisiana casinos. The company's Treasure Chest in New Orleans had gaming revenues of $12 million, a 19.5 percent increase from a year ago.

Gaming in the Gulf: Las Vegas Companies Stir Casino Revenue Rise is republished from Online.CasinoCity.com.