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Best of Howard Stutz

Gaming Guru

Howard Stutz

Gulf Revenue Slips, But Relief is in Sight

20 September 2006

MISSISSIPPI AND LOUISIANA -- Mississippi's Gulf Coast casino industry saw its reported gaming revenues for August decline for the 12th straight month as the area recovers from the impact of Hurricane Katrina. But analysts said Tuesday that help has arrived.

Eight Gulf Coast casinos in Biloxi and Bay St. Louis generated $68.2 million in gaming revenues during August, a report released Tuesday by the Mississippi Gaming Commission shows. The results were down 36.9 percent compared with $108.1 million a year ago, when 12 casinos were operating.

The Aug. 29 opening of MGM Mirage's Beau Rivage, along with the additional openings of two other coastal casinos during the month, had little effect on August's numbers.

September, however, should be another story.

"We would look to September for a more accurate picture of the addition of the new August supply, which will moderate growth rates at the already open facilities, but overall we expect continued strong performance from the Gulf casinos," Deutsche Bank gaming analyst Bill Lerner said in a note to investors Tuesday. "August is seasonally softer as customers focus on back to school rather than vacations."

Hurricane Katrina hit the Gulf Coast on Aug. 29, 2005, shutting down all gaming activity in the area for more than four months.

Three casinos opened in December and two others followed in June.

MGM Mirage reopened the Beau Rivage in Biloxi on the hurricane's one-year anniversary. The Gulf Coast's largest casino added 2,200 slot machines and 100 table games to the market. A smaller version of the Grand Casino Biloxi was reopened by Harrah's Entertainment on Aug. 17 with 800 slot machines and 28 table games.

On Aug. 31, Penn National Gaming reopened the Casino Magic in Bay St. Louis as the Hollywood Casino, adding 900 slot machines and 20 table games.

Meanwhile, the Island View casino, formerly known as the Grand Casino Gulfport, opened with 1,000 slot machines and 14 table games on Monday.

The Gulf Coast has nine casinos. A 10th casino is expected to reopen shortly while the Treasure Bay in Biloxi is expected to open an expansion in October.

"We note the revenue decline on the coast was the second smallest since Katrina hit, and feel that, in general, gaming spending on the Gulf Coast is quite robust," Bear Stearns gaming analyst Joe Greff said in a note to investors.

Greff said casino operators attribute federal aid money, the lack of other entertainment options, and a limited supply of casinos as reasons for the growing gaming numbers.

"We think strength is sustainable for sometime," Greff said.

The only new casino planned for the region is the Hard Rock in Biloxi, that had been scheduled to open the week following the hurricane, but was destroyed by the storm. A rebuilt Hard Rock has a planned opening of July.

Statewide, Mississippi casinos reported $205 million in August, a decline of 12.6 percent compared with $234.7 million a year ago. The river counties, which primarily include casinos in Tunica, reported gaming revenues of $136.8 million, an 8.1 percent increase compared with $126.6 million a year ago.

Mississippi does not break out its gaming revenues by individual property.

Meanwhile, in Louisiana, where gaming revenues were briefly affected by Gulf Coast hurricanes, analysts expect the growing number of Mississippi casinos will cut into the inflated gaming win figures being reported the past 10 months, especially in the New Orleans area.

In August, Louisiana casinos had gaming revenues of $209.5 million, an 18 percent jump compared with $177.2 million a year ago, according to numbers released Tuesday by the Louisiana State Police.

The biggest winner was Las Vegas-based Pinnacle Entertainment, Deutsche Bank's Lerner said. The casino company, which has Louisiana properties in New Orleans, Lake Charles and Bossier City, has seen its gaming revenues generated in the state increase 40 percent during the first two months of the third quarter to $103.6 million.

Pinnacle's flagship Louisiana casino, L'Auberge du Lac in Lake Charles, had gaming revenues of $26 million in August, up 52 percent from a year ago. The company's Boomtown New Orleans reported $15.6 million in gaming revenues in August, an 86 percent increase from a year ago.

Harrah's New Orleans, the state's largest and only land-based casino, had gaming revenues of $32.7 million, a jump of 32 percent. Meanwhile, Boyd Gaming Corp.'s Treasure Chest Casino in New Orleans won $11 million in August, a 37 percent increase from a year ago.

"Louisiana, and particularly New Orleans, will continue to show moderation from initial post-hurricane levels as the properties in Mississippi re-open," Lerner said.