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Louisiana casinos raking it in since Katrina

Minus competition from the Mississippi Gulf Coast and with thousands of recovery workers with time and money on their hands, Louisiana’s casino industry is enjoying a boom.
Harrahs Casino Re-Opens In New Orleans
Vacationers Laura Mazzarella and Mark Reedy of Baltimore celebrate a pair of winning spins on the slot machines at Harrah's Casino in New Orleans in January. State revenues from casinos are up sharply, despite the destruction from Katrina in the area.Sean Gardner / Getty Images
/ Source: The Associated Press

Minus stout competition from the Mississippi Gulf Coast and with thousands of recovery workers with time and money on their hands, Louisiana’s casino industry is enjoying its biggest boom ever — thanks to the double punch of hurricanes Katrina and Rita.

But Mississippi, with a reconstruction plan featuring shoreside casinos that are attracting billions of dollars in investments, will be back in the hunt soon and positioning itself to reclaim its gambling dominance in the South, industry analysts say.

Flocks of gamblers have provided a revenue boost for Louisiana, which faced dire predictions of deep cuts in spending after the storms. Through the first 11 months of the current fiscal year, the state’s take was $473.8 million, up sharply from $413.9 million a year ago.

That’s despite the closure of three casinos since Katrina and Rita, and the exodus of many south Louisiana residents.

“The people who have come here to rebuild the city have a lot of money in their pockets and not a whole lot of entertainment options,” said industry analyst Nick Danna of Stern, Agee & Leach in New Orleans.

In May, gamblers left behind $220.2 million at the state’s 16 casinos, a big jump from $199.5 million in May 2005. In April, gamblers lost $213.9 million, compared with $189.4 million lost in April 2005. The month before, casinos pulled in $239.1 million, compared with $198.6 million the previous March.

Most of the increase has been centered in New Orleans and Baton Rouge, which both saw big population shifts because of Katrina, and in Lake Charles, where an influx of workers repairing Rita damage has joined regular throngs from nearby Texas.

How long the boon will last, however, is anyone’s guess.

Analysts and industry figures suggest the planned $5 billion of investments to rebuild Mississippi’s coastal casino resorts will again relegate Louisiana’s gambling outlets to second-class status.

Some picture the Mississippi coast, already one of the nation’s top gambling markets before Katrina, ranking behind only Las Vegas and Atlantic City, N.J., in terms of prestige, size and the number of gamblers within a few years.

Nationally, gambling has picked up after a period of slow growth following the Sept. 11 terrorist attacks that sharply cut travel. According to the American Gaming Association, state-licensed casinos won $30.3 billion in 2005, up from $28.9 billion in 2004, $27 billion in 2003 and $26.5 billion in 2002.

“The Mississippi Gulf Coast will emerge as the third-best gaming market,” Danna said. “The amount of capital being spent there makes that market comparable with the best markets.”

Already, despite catastrophic damage from Katrina, business in Mississippi have made a stunning rebound.

The three coastal casinos that have reopened since Katrina grossed a total of $246.6 million from January through April, according to the Mississippi Gaming Commission. That’s more than half of what 12 coastal casinos took in during the same period of 2005.

“It’s really amazing,” said Biloxi Mayor A.J. Holloway. “A lot of people say this is FEMA money and insurance money, but I don’t believe that. We’re getting a lot of people from out of town coming here. The casinos tell me their base is coming back.”

Reaction to destruction of the two states’ gambling industries was a huge contrast and, perhaps, a telling sign why many predict profitable days ahead for the Magnolia State.

Within weeks after Katrina, Mississippi Gov. Haley Barbour got the Legislature to allow casinos on shore. Until now, they’ve rested on barges moored along the beach, though hotels and other amenities were built ashore.

In Louisiana, New Orleans Mayor Ray Nagin’s idea of opening up the city’s downtown area to more casinos went nowhere. Gov. Kathleen Blanco has opposed any gambling expansion.

Andy Holtmann, editor of Casino Journal, a Las Vegas-based trade publication, said if New Orleans wished to challenge the Gulf Coast head-on for gambling tourists, it may have missed its chance.

“Unless everyone shifted gears right now and said ’Let’s open up New Orleans to casinos,’ it probably would be difficult to compete,” Holtmann said.

Nagin’s proposal was a long shot at best, considering Harrah’s Entertainment Inc.’s New Orleans casino has a state monopoly — granted in 1992 — on land casinos in the downtown area.

Harrah’s, which was used as an emergency staging point in Katrina’s aftermath, is moving ahead with plans to open a 450-room hotel adjacent to its casino in September. The casino, which reopened in February, had its best-ever month in May, winning $35.7 million.

“We’re very excited and very bullish on the region from Houston to Mobile,” said Jim Hoskins, the casino’s vice president and general manager.

Analysts agree Harrah’s, and its deep pockets, has a definitive advantage in New Orleans in the two-state fight for players. Louisiana’s riverboat casinos are another matter, especially when compared with the upscale resorts getting started in Biloxi and elsewhere on the Mississippi coast.

When the Louisiana Legislature authorized riverboat gambling in 1991, lawmakers said there could be no more than 15 licenses — and boats could have no more than 30,000-square feet of gambling space.

With those restrictions, Louisiana casinos can’t afford to make the sort of investments in customer-appealing expansions seen on the Gulf Coast, said Wade Duty, head of the Casino Association of Louisiana, a trade and lobbying organization. Also, Louisiana casinos pay state and local taxes of up to 27.5 percent, while Mississippi’s total burden is around 12 percent, Duty said.

“The bottom line is Louisiana almost has priced itself out of the market,” Duty said. “If you’re publicly traded, how can you justify to your shareholders hundreds of millions of dollars in reinvestments at this tax rate, when you can get a lower rate just next door?”

In the meantime, more competitors are lining up to attract gamblers to Biloxi. The toughest competition could come from MGM Mirage Inc.’s Beau Rivage, which is scheduled to reopen on Katrina’s first anniversary with 3,400 employees — the same as before Katrina — new restaurants and a poker room. The $700 million resort opened in 1999.

The most recent developer to join the fray, Trump Entertainment Resorts Inc., recently announced a partnership with a Mississippi company to build a gambling resort in Diamondhead, Miss.

Another casino on its way back this summer is Grand Casino Biloxi, also a Harrah’s property. Karen Sock, Grand Biloxi’s senior vice president and general manager, said it’ll be a long time before coastal casinos have to worry about hitting a wall in revenue growth.

“Years ago, people looked at Las Vegas and said, ’Oh, it’s getting too big.’ It still hasn’t gotten too big. And I think we have that same opportunity here on the Gulf Coast,” she said.