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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Harrah's Ready to March Back In

16 February 2006

NEW ORLEANS -- Watching from the sidelines, Harrah's Entertainment executives could only look on during the past five months as its New Orleans competitors raked in gaming revenue from recreation-starved residents and hurricane recovery workers.

Early Friday morning, Louisiana's largest casino gets back into the game.

Harrah's New Orleans will reopen shortly after midnight today after being closed since Aug. 29, when Hurricane Katrina and subsequent flooding thrashed New Orleans and the Mississippi Gulf Coast.

With the city's annual Mardi Gras celebration set to begin Feb. 28, Harrah's Entertainment believes the casino could play a major role in the storm-ravaged city's recovery.

"A lot of the businesses have been looking to us for a signal that the city is making a comeback," said Harrah's Entertainment Chairman Gary Loveman, who spent the early part of the week in New Orleans offering pep talks to returning employees.

"I think we'll play an important role in reinvigorating tourism in New Orleans," Loveman said.

Before it was closed, Harrah's New Orleans was the crown jewel among Louisiana's 19 riverboats, racinos and land-based casinos, winning a statewide-best $320 million from gamblers in 2004, 14 percent of the state's overall take of $2.14 million. The casino was on its way to a similar performance in 2005 when Hurricane Katrina hit.

The flooding that leveled much of New Orleans didn't reach Harrah's and the casino's location near the French Quarter on Canal Street. However, the storm destroyed exterior doors, ripped a few holes in the roof and left much of the casino's interior in disarray.

In addition, the storm set back construction on a 500-room hotel and retail complex Harrah's was building to complement the 100,000-square-foot casino. Those areas, across Poydras Street from the casino, are expected to open by the end of the year.

Loveman said the casino will open with 1,250 employees, less than half of the 2,800 workers the casino employed before the hurricane. Many of those returning lost their homes in the flooding.

"A lot of folks have found other housing or are living in trailers," Loveman said. "Staffing is purely going to be function of volume. As revenue levels increase, employment will increase."

While Harrah's New Orleans was closed, its two competitors, Pinnacle Entertainment's Boomtown and the Treasure Chest, operated by Boyd Gaming Corp., flourished.

Boomtown's gaming revenues jumped more than 100 percent in October, November and December while the Treasure Chest had 70 percent-plus increases the last two months of the year.

Gaming analysts said New Orleans residents, hungry for any entertainment with the Crescent City in shambles, flocked to the two riverboat casinos because they were open and had full restaurant and bar service. Many of the area's restaurants have still not reopened. Movie theaters have remained closed. The city's major sports teams are playing in other cities.

"Being down here this week, there's a level of excitement," Loveman said. "People are happy we're reopening."

Harrah's spent the past few months repairing the casino's infrastructure while the downtown area rebuilt. Two shopping malls adjacent to property have partially reopened, as has much of the French Quarter. Meanwhile, the Ritz-Carlton hotel may not open until 2007, while other nearby high-rise hotels are back on line.

Still, Harrah's executives are unsure how long it will take to reach prehurricane revenue levels.

"Based on the results at the two suburban casinos, I think we'll do quite well," Loveman said.

Deutsche Bank gaming analyst Marc Falcone thought it would take several months to rebuild the business levels.

"Broadly speaking, there is limited tourism in the French Quarter, as opposed to the population in the suburbs," Falcone said. "It's encouraging for the local economy and I think they'll do a good business with construction workers."

Even while Harrah's New Orleans was closed, the company continued to make monthly payments on its annual commitments of $60 million to Louisiana and $12.5 million to the city of New Orleans.

Harrah's may have been the hardest hit of the gaming companies during the Gulf Coast hurricane season. Four of the company's casinos were destroyed by Hurricane Katrina and Hurricane Rita, which hit the Lake Charles area Sept. 24.

In the Mississippi communities of Gulfport and Biloxi, Harrah's lost both its Grand casino properties to Hurricane Katrina. In January, the company announced it was selling its Gulfport site to concentrate on rebuilding in Biloxi. Loveman said he expects an announcement on that project in the next few months.

Harrah's is still assessing the damage to its twin riverboat casinos in Lake Charles.