Casinos struggle back from recession
Amid a new reality — casinos are not recession-proof — gambling in Louisiana and Mississippi is staging a slow comeback from the economic meltdown of 2008, aggravated for a time by the Gulf of Mexico oil spill that chased away some tourists.
But at least for the rest of 2010 and into 2011, industry analysts expect many players to keep a tight grip on their wallets amid uncertain economic times — and those who watch casinos are largely unwilling to predict when full recovery might come.
“Gamblers, like other people, have to feel comfortable about their financial situation,” said Joseph Weinert, senior vice president of Linwood, N.J.-based Spectrum Gaming Group. “There had been the perception that the industry was largely recession-proof, but we saw what happened a couple of years ago. When the economy got tanked, the industry got whacked.”
For the first three quarters of 2010, revenue at Mississippi’s state-licensed casinos totaled $1.83 billion, down 12.9 percent from the first nine months of 2008 — the period leading into the U.S. economic free fall. Still, the decline has slowed. According to the Mississippi Department of Revenue, casino takes dropped only 3.3 percent from the first three quarters of 2009.
In the latest count, the 11 casinos across the Mississippi Gulf Coast were down 12.7 percent from the first nine months of 2008, but recorded only a 1.3 percent drop from 2009, indicating that the oil spill had only a small effect on gambling. The 19 casinos on the Mississippi River, including Tunica in the Arkansas-Tennessee corner, were down 12.8 percent from 2008 and 5 percent from last year.
In Louisiana, the 13 riverboat casinos, Harrah’s downtown New Orleans casino and the four racetrack casinos, for the first three quarters of 2010, recorded a 7.7 percent drop in gambling revenue from the first nine months of 2008. The 2010 tally was down 5.3 percent from 2009.
“I’m reserved, but optimistically reserved. The numbers appear to be stabilizing,” said Dane Morgan, chairman of the Louisiana Gaming Control Board.
But sustained growth is a question mark, regionally and nationally.
Recently, at the Global Gaming Expo in Las Vegas, American Gaming Association head Frank Fahrenkopf said gambling revenue in state-licensed casinos rose 1.3 percent — or to just over $8 billion — from the second quarter to the third quarter of 2010. But that’s still about $100 million less than casinos took in during the same period last year. Fahrenkopf blamed that on reduced discretionary spending by consumers.
Earlier this month, Jefferies & Co. analyst David Katz said he expected Louisiana and Mississippi casinos owned by Penn National Gaming Inc., Pinnacle Entertainment Inc., Boyd Gaming Corp. and MGM Resorts International to report mixed results during fourth-quarter revenue reports, saying the region’s recovery still lags behind other markets.
“Right now, the gaming industry is largely a function of the regional and national economies,” Weinert said. “It depends upon whether you see those economies flatten out or start showing some life. The casinos will follow that.”
A large chunk of Louisiana’s casino business is pointed at Texans. Shreveport-Bossier City gambling revenue, for the first three quarters of 2010, fell 10.5 percent from the first nine months of 2008. The recent tally is down 4.4 percent from 2009. The five riverboats and the track casino in that market have been facing increased competition from Indian nation casinos in Oklahoma.
In Lake Charles, where direct competition is more isolated for three riverboats and a track casino, the tally is just about the same in comparing 2008 and 2010, although down 5.8 percent from 2009. The 2008 figures were skewed by September when two major hurricanes chopped as much as $20 million from the historic monthly count.
In the New Orleans area, which has two riverboats and a track casino along with the land casino, gambling revenue is down 9.4 percent in the three-quarter comparison of 2008 to 2010, and down 2.9 percent from 2009. The boats and the track casino generally appeal to a local market, while Harrah’s — more aimed toward tourists and the convention business — typically posts big months during such events as Mardi Gras, the New Orleans Jazz & Heritage Festival, the Essence Festival and big-ticket sporting events.
But more outlets want to get into the competitive fray, despite the slower times. Pinnacle hopes to open its $357 million riverboat casino-hotel project in Baton Rouge in December 2011. That market, which currently has two gambling boats, has seen a 13.3 percent drop in revenue from the first three quarters of 2008 to the first three of 2010.
“I think a new casino will grow that market, but it will be at the expense of the other operators,” said industry analyst Cory Morowitz of Galloway, N.J.-based Morowitz Gaming Advisors. “There’s not enough room otherwise.”
Three groups have filed for the 15th and final riverboat license allowed by Louisiana law. Two want another Lake Charles casino, while the other wants another suburban New Orleans boat.
Louisiana regulator Morgan said he hopes a decision on the winner will be made by March.
In Mississippi, Gaming Commission executive director Larry Gregory said no new projects are near fruition, but investors continue to express interest in the state, especially along the coast.
“We have had a lot of interest over the past year. People coming down here and looking and wanting to move forward with something. But in today’s economy, it’s difficult to fund these projects,” Gregory said. “The coast is prime for development. But it’s not just us. You look at mature jurisdictions all over, not new ones, there are just not many projects.”
