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Best of Howard Stutz

Gaming Guru

Howard Stutz

After slight Gustav hit, casinos ready to reopen

3 September 2008

LOUISIANA -- Unlike hurricanes Katrina and Rita, Hurricane Gustav caused more disruption than destruction to the Gulf Coast casino industry.

The storm made landfall on Labor Day and brought about minimal damage to casinos in New Orleans, Lake Charles, La., and the Mississippi gaming communities of Bay St. Louis, Gulfport and Biloxi. Most casino operators expect to welcome customers by the weekend.

"We believe we'll be ready to reopen later this week, pending regulatory and other approvals and the return of our employees," Pinnacle Entertainment Chief Executive Officer Dan Lee said Tuesday.

The Las Vegas-based company closed Boomtown New Orleans and L'Auberge du Lac in Lake Charles over the weekend in preparation for the storm. Both casinos reported minimal exterior damage to their main facilities and never lost power.

MGM Mirage said its Beau Rivage resort in Biloxi suffered minor flooding on its lower levels. Highway 90, which connects the Mississippi gaming communities of Bay St. Louis, Gulfport and Biloxi, was flooded by Gustav's storm surge. MGM Mirage spokesman Alan Feldman said the company planned to have workers back in the building Tuesday for cleanup.

Mississippi Gaming Commission executive director Larry Gregory told The Associated Press on Tuesday that many of the Gulf Coast casinos took in water on their ground floors but there was no structural damage.

The damage done by Gustav was vastly different from 2005, when hurricanes Katrina and Rita roared across the Gulf Coast about a month apart and inflicted billions of dollars in damages. More than a dozen casinos were closed after the storms, with some of the gambling halls knocked out of commission for more than year. Gaming companies lost revenues and spent millions to rebuild their hotels and casinos. The states lost tax revenues associated with the casinos.

Beau Rivage, Mississippi's largest casino, was closed for a year following Katrina. Others, such as Pinnacle's Casino Magic in Biloxi, never reopened. The casino site was eventually sold to Harrah's Entertainment.

On Tuesday, Gregory said the casinos can reopen when cleanup is completed and they are adequately staffed.

The storm disrupted business on what might have been a busy three-day holiday weekend. Casinos in Louisiana and Mississippi closed Saturday and Sunday, allowing guests and employees to evacuate north.

Wall Street analysts said damage to casinos from Gustav did not reach levels where gaming companies could invoke business interruption insurance.

"The impact from the hurricane was not nearly as severe as anticipated," Deutsche Bank gaming analyst Bill Lerner said in a note to investors. "Early reports indicate that most casinos emerged intact and should reopen."

Wachovia Capital gaming analyst Brian McGill said it would be a while before any lingering damage from Gustav could be determined. He said Pinnacle faces the most exposure because of the hurricane; L'Auberge contributes an estimated 42 percent of the company's annual cash flow, while Boomtown New Orleans is responsible for roughly 27 percent of the annual cash flow.

"It is likely that third-quarter cash flow estimates will eventually be lowered," McGill said.

Boyd Gaming Corp. had three Louisiana casinos affected by the storm, the Treasure Chest in New Orleans, the Delta Downs racino near Lake Charles and Sam's Town in Shreveport. Company spokesman Rob Stillwell said Tuesday said that the Treasure Chest, which is in the New Orleans suburb of Kenner on Lake Pontchartrain, could reopen once city officials allow residents and visitors to return.

Harrah's New Orleans, the state's only land-based casino which is located downtown near the French Quarter, is also affected by travel restrictions.

On the Harrah's New Orleans Web site, the company posted a message saying guests who were scheduled to stay at the resort's 450-room hotel through Thursday had their reservations automatically canceled.