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Casino Industry in Gulf Coast Rise Steady but Slow

Posted on December 1st, 2010

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The casino industry is one of the many industries that have fallen victim to the recent economic recession. But the recession isn’t the only thing that can affect the industry. The gambling halls of Louisiana and Mississippi have learned this the hard way, and are staging a slow but steady comeback from so many adverse events—from the economic recession of 2008 to the Gulf of Mexico oil spill which allegedly took a toll on the area’s casinos by discouraging tourists away.

For the rest of 2010, as well as the coming years, industry analysts are still skeptical that a full recovery will take place. Thus, they are tight-lipped when asked when it will actually happen. Many casino patrons are expected to still hold on to whatever money they have in their wallets and bank accounts. Joseph Weinert, senior vice president of Spectrum Gaming Group based in Linwood, NJ, commented, “Gamblers, like other people, have to feel comfortable about their financial situation. 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, state-licensed casinos of Mississippi raked in a total $1.83 billion. This figure is down by 12.9 percent compared to the first nine months of 2008, which was the period that lead to the U.S. economic meltdown. However, the decline has been lessened, at least according to the Mississippi Department of Revenue. Compared to the figures of the first three quarters of 2009, the current figures only showed a 3.3 percent drop. As of the latest count, the Mississippi Gulf Coast’s eleven gambling halls showed a 12.7 decrease from the first nine months of 2008, but only had a 1.3 percent drop from 2009. These figures indicate that the oil spill may have actually had only a little effect on the area’s gambling activities. Ironically, the 19 casinos far from the Gulf Coat, located on the Mississippi River, including the one in the Arkansas-Tennessee corner, were down by 12.8 percent from 2008 and 5 percent from last year.

Meanwhile, in Louisiana, Harrah’s casino in downtown New Orleans, the state’s 13 riverboat casinos and the four race track casinos recorded a decline of 7.7 percent for the first three quarters of 2010 from the first nine months of 2008. The 2010 tally was lower by 5.3 percent from 2009 figures. Dane Morgan, chairman of the Louisiana Gaming Control Board, said, “I’m reserved, but optimistically reserved. The numbers appear to be stabilizing.” But the bigger question among insiders of the industry both regionally and nationally, is not about stabilization, but when sustained growth will actually happen.

At the recently concluded Global Gaming Expo in Las Vegas, the head of the American Gaming Association, Frank Fahrenkopf claimed that gambling revenue in state-licensed casinos all over the United states has risen t0 1.3 percent or over $8 billion from the second to the third quarter of 2010. However, that is still at least $100 million less what casinos raked in during the same period last year. A reduced discretionary spending trend by consumers is what Fahrenkopf blames for the decrease. An analyst from Jefferies & Co., David Katz, said he expected casinos of the two states, which are owned by the following companies: Penn National Gaming Inc., Pinnacle Entertainment, Boyd Gaming and MGM Resorts International to come up with mixed figures during their reporting of fourth quarter revenue. This is because he claimed that the recovery of the region is still lagging compared to other markets which have been faster in getting back on track. He explained, “Right now, the gaming industry is largely a function of the regional and national economies. It depends upon whether you see those economies flatten out or start showing some life. The casinos will follow that.”

According to owners of casinos in the area, they would still love to intensify the competition among facilities in the area despite the slow business. Pinnacle still has a $357 million riverboat casino-hotel project in Baton Rouge to open by late next year. Cory Morowitz, an industry analyst at Morowitz Gaming Advisors of New Jersey, commented, “I think a new casino will grow that market, but it will be at the expense of the other operators. There’s not enough room otherwise.”