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Best of Howard Stutz

Gaming Guru

Howard Stutz

Aftermath of Hurricane Katrina: Casino Lands New Home

21 November 2005

EDITOR'S NOTE -- Review-Journal reporter Howard Stutz and photographer John Locher recently visited the hurricane-ravaged Gulf Coast region to examine the effect on the gaming industry. This is the last in a weeklong series of articles looking at how the industry and its employees are dealing with the disaster.

BILOXI, Mississippi -- When gaming arrived here in 1992, the Caribbean-themed Isle of Capri was the region's first casino barge.

Now it will be Mississippi's first land-based casino.

Following the destruction from Hurricane Katrina, Isle of Capri will open a temporary casino in late December in the property's convention area.

A recently enacted law allows the coastal casinos to conduct gaming 800 feet away from the water's edge.

Isle of Capri's 32,500-square-foot floating casino was destroyed by the Aug. 29 Category 4 hurricane and sits at a slight angle squeezed in between a smaller barge and the main building entrance. Broken glass and debris are strewn across the once-bustling casino.

A portion of the smaller boat fell away from the larger barge, sending slot machines and gaming equipment tumbling into the Gulf of Mexico.

Despite the destruction, a recently added convention and events center in the hotel tower is being reconfigured to become a temporary 33,000-square-foot casino, housing 940 slot machines, 25 table games and a small poker room.

Before Katrina hit, Isle of Capri completed a $150 million expansion that added hotel space to the 750-room property, the convention area and a parking garage.

Within 12 to 18 months, Isle of Capri expects to open a 100,000-square-foot permanent casino, built over both land and the Gulf of Mexico.

Tim Hinkley, president of Isle of Capri Casinos, said the casino's history with the community had some influence on the decision to reopen. The company, traded publicly on the Nasdaq National Market, is the only major gaming company headquartered in Biloxi.

Isle of Capri operates 15 casinos in Mississippi, Louisiana, Missouri, Iowa, Colorado and Florida, catering to regional customers and employing 11,000.

Giving Biloxi citizens a semblance of a normal life and a form of entertainment weighed into the reopening thought process, Hinkley said.

"I think it's worth it to get back and operating to give people a sense that recovery is happening. But I also think it's a good business decision." Hinkley said. "It gives the community a shot in the arm. If you can do it, you should do it."

Isle of Capri will reopen, however, without the convenient access from a key market that it used to enjoy.

Located on the far eastern end of the peninsula that makes up the casino corridor, Biloxi connects with customers in nearby Ocean Springs by the Highway 90 bridge. But the bridge was wiped out in the storm, and it may be a year before it's rebuilt.

Isle of Capri was adjacent to the Point Cadet residential community that was laid waste by the hurricane. Hardly any of the small homes remained after Kartrina.

Isle of Capri general manager Bill Kilduff said reopening is also an important step to get a majority of the casino's 1,000 employees back to work. Hourly workers are being paid wages and benefits for 90 days, but the program expires at the end of the month.

"There will be a bit of a lag time in between the end of the benefits and when we reopen," Kilduff said. "But getting the property back up and running will bring some normalcy to the employees and the community."

Robert Butler, an Isle of Capri dealer for 12 years, agreed. He's been working temporarily in food and beverage service in a makeshift cafeteria, feeding construction crews and relief and recovery workers until the casino is back in business.

"Once the casino reopens, I'll go back to dealing, but this isn't so bad," said Butler, a Biloxi resident whose home had minimal storm damage. "It's exciting to see the temporary casino being built. Everybody I've talked with is looking forward to getting back."

While the casino barge was destroyed, Isle of Capri's hotel rooms and convention space had minimal storm damage. However, the restaurants and much of the back of the house area, including casino offices, were demolished.

In addition, a section of the new parking garage collapsed.

Kilduff said he hopes to bring back about 700 employees once the casino opens. The market, he believes, will be predominately locals as well as construction and relief workers. The only competition will come from the Imperial Palace, which is also planning to reopen in December.

Hinkley said Isle of Capri is bullish on the eventual return of the Biloxi gaming market, which made up $1.2 billion of the state's $2.7 billion in gaming revenue last year. But he thinks it will be at least February or March before it's known how vibrant the market will be in the short term.

"It will come back, but the infrastructure and permanent gaming facilities will take two to four years to build," Hinkley said. "The facilities that will be built will be far superior to anything we ever had."

Isle of Capri operates four casinos in Mississippi that produced combined revenue of $256.3 million in fiscal 2005, less than a quarter of the company's $1.11 billion revenue stream.

One gaming analyst who follows the company said the customers that will return to Isle of Capri will be the hard-core gamblers. Steve Ruggiero of CRT Capital Group in Connecticut said producing pre-Katrina cash flow will be a challenge for the casino.

"With just two casinos in the entire market and little competition in the foreseeable future, it makes sense to reopen," Ruggiero said. "But it's going to be a tough go with the area so destroyed."