Casinos express new interest in coast
BILOXI (AP) — Seeing Gulf Coast casino revenue top 2009 levels in five of the last seven months has renewed investors’ interest in casino development in South Mississippi.
Gary Pedigo, general manager of Phoenix Gaming, said he’s probably had more inquiries in the last two months than in the last two years on the casino site the company owns in East Biloxi.
“The coastal casino and hospitality industries fought off the recession, fought off the BP oil spill, and still only experienced a 2.5 percent reduction,” said John Hairston, a member of the Mississippi Gaming Commission. “That is, in actuality, a stunning success.”
The state of the casino industry in South Mississippi is better than in many other casino jurisdictions, Gaming Commission chairman Jerry St. Pe said. The challenge for the commission this year is considering what the investment and makeup of a new casino should be.
“We need to give serious consideration to all investment that meets the basic standards that have been established here in Mississippi,” he said.
The industry began with casino cruises to nowhere, and has advanced to casino boats, casino barges and now land-based casino.
“As circumstances change, we need to be flexible and nimble enough to make sure we don’t turn away any good opportunity, and at the same time we don’t regress,” St. Pe said.
Four new coast casino projects have been announced in the last 12 months:
4Margaritaville Casino, which singer-songwriter Jimmy Buffett and other investors hope to open by the end of the year with a hotel in a second phase of construction.
4Rotate Black, proposed to open initially in a converted cruise ship docked next to Jones Park in Gulfport.
4CanCan Casino and the French Village, which already have approval from D’Iberville and are seeking financing.
4 Oyster Bay Casino, proposed for D’Iberville, although plans haven’t been submitted to the city.
In addition, a letter of intent has been extended by Diamondhead Casino Corp. to develop a casino just off Interstate 10, where CEO Deborah Vitalle said about 18 million vehicles pass the site each year.
“I think it’s getting the funding that is the biggest hurdle,” said Beverly Martin, director of the Mississippi Casino Operators Association.
Credit is much less available now as it was before the banking crisis. Chevis Swetman, president of The Peoples Bank, said upfront money for a new casino development has increased from 10 to 15 percent down a few years ago to 40 percent today.
Casinos also are facing increased competition from other states legalizing gambling and from additional Indian casinos, said Jeff Middleswart, Vice Fund portfolio manager for USA Mutuals in Dallas.
Mississippi has an advantage for future investment because it has a low tax rate, and some of the most lenient laws and regulations, he said.
Louisiana regulates the number of casino licenses in one location. Florida stipulates how close a casino can be to a racetrack. Other states ban tobacco and dictate the hours and limits of gambling.
If Florida and Louisiana legislators begin to deregulate the casinos, Middleswart said it will create major problems for Mississippi because of the many gamblers from those states who come to the Coast casinos.
“In the meantime, Mississippi still has a little bit better future even though it’s going to lose some customers,” he said, as many gamblers stay in their own states.
A report released by the Stennis Institute for Government said 26 percent of the guests at coast casinos come from within the state.
It compared Mississippi with 11 other states and concluded Mississippi has the fourth-highest casino revenue in the country after Nevada, New Jersey and Indiana and the third-lowest tax revenue.
“They compared us to all the states that have limited licenses. We’ve always had a free market approach,” Martin said.
She said the report doesn’t take into account the dollar-for-dollar investment the Mississippi casinos are required to make for every square foot of casino or that coast casino employees are paid above the state average, while in other states with more regulation and higher taxes, casino employees are paid below the average.
Middleswart said he agrees with some local casino operators that new casinos will split rather than grow the coast market.
Despite the recession, the 11 coast casinos upgraded their properties in 2010.
At Palace Casino, a $50 million expansion is under way to bring the property back to where it was before Hurricane Katrina, when it was a four-star resort.
Palace Casino General Manager Keith Crosby said it will take more than a new casino to bring more visitors to South Mississippi and grow the market.
In 1992, when the first casino opened in Biloxi, the market was unique because it was one of the few places that had legalized gambling, he said.
Now competition from other states is as challenging to local casinos as the recession, he said.
Susan Varnes, chief operation officer of Treasure Bay Casinos, said her company was one of the few that saw an increase in business in both 2009 and 2010.
“We found our niche,” she said.
Before Hurricane Katrina, she said the pirate ship brought customers, whether or not they gambled.
After Katrina, the casino began catering more to the local and close regional customers and casino service employees.
“We became a place people can come to and be comfortable,” she said.
Chett Harrison, general manager of Hollywood Casino Bay St. Louis, said he’s seeing positive trends, including golf bookings that are 20 percent from last year at this time as snowbirds head south to escape the winter’s cold.
“I think we’re going to see about 1 to 3 percent growth,” he said.
Information from: The Sun Herald, http://www.sunherald.com