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Hotel rooms most significant growth factor, Patton says

Coast gaming revenues lead River Cities

Gaming revenues in Mississippi continue to climb with new monthly highs being seen on a regular basis. The Coast has been seeing a greater percentage increase in gaming revenues than Mississippi River casinos. But profitability could be another matter as heavy competition on the Coast has led to revenues being split among more casinos.

Coast casinos are spending more money on marketing to attract more visitors. That increases total revenues, but can also affect profit margins.

First quarter gaming revenues for the Gulf Coast casinos totalled about $290 million compared to $405 million for Mississippi River counties. The March 2000 total for the Coast casinos was $105 million compared to $88 million in 1999. The March 2000 total for the Mississippi River counties was $144 million compared to $135 million in March 1999.

Availability of hotel rooms continues to be the most significant factor in growing Mississippi’s gaming industry, says Chuck Patton, director of the Mississippi Gaming Commission.

“Gaming revenues are tied to the increased capability of the casinos to provide rooms for gamblers,” Patton said. “I think we’re seeing now the fruits of Beau Rivage opening on the Coast. The Coast was obviously the leader in revenue increases. And that is where I think we will continue to go in the future. We have two casino hotel projects on the Coast coming in relatively soon, and the Coast will continue to grow in the future. We need additional rooms in Tunica, but we don’t have any coming on immediately.”

A hotel being constructed by New Palace Casino in Biloxi is expected to open in June, and construction has begun on the Phoenix Leisure Group casino and hotel in Waveland.

Regulatory and legal issues are holding up other plans for Coast casinos. Two large casinos planned on the Bay of St. Louis have been delayed due to a federal court lawsuit. Patton said he has been told a ruling on those projects is expected soon.

The status of a casino and hotel proposed for D’Iberville on the west side of the Interstate 110 bridge is currently on hold pending a Mississippi Gaming Commission regulation on where casinos will be allowed on Back Bay. The gaming commission voted in March to take public comments on allowing casinos all the way to the western city limits of D’Iberville.

That was opposed by some neighborhood and environmental groups, and by Keesler Air Force Base officials who expressed concerns that heavy commercial development on land located directly across the bay from the base airport, could affect the base’s future viability. Keesler said heavy development would increase safety concerns, possibly leading to unfavorable decisions when base closings are considered.

Patton said the gaming commission received a lot of input when the proposed regulation was put out for public comment. He said they felt it was important to review the public comments thoroughly before making a final decision.

The D’Iberville casino is being proposed by Coast Resorts Inc. of Las Vegas, which has three Las Vegas casino hotels and a St. Louis riverboat casino. Coast Resorts proposes building a casino, a parking garage and a 200- to 300-room hotel on a nine-acre site.

Other casinos planned for the Coast that have received the regulatory permits they need haven’t begun construction due to financing problems. A Hard Rock Casino and Hotel is planned next to Beau Rivage in Biloxi. Patton said he understood there are unresolved issues about how much Hard Rock would contribute to the project compared to other partners that has held up approval of financing. A casino barge for that site is docked just west of the I-110 bridge in Biloxi. So, once financing is approved, the casino is expected to be in place relatively quickly.

President’s Casino had received permission to fill in the Mississippi Sound for six casinos and 12 hotels. But financing reportedly has not been available for the ambitious project partly due to the response to the opening of the Beau Rivage. Revenues from the Beau Rivage were lower than expected initially which was one factor that led to the devaluation of Mirage Resorts stocks that made the company vulnerable to takeover offers. Mirage Resorts is merging with MGM Grand.

The merger comes at the same time that Beau Rivage is starting to show much better earnings. Higher profits at Beau Rivage that resulted from cutting operating expenses while increasing marketing expenditures was credited with helping Mirage Resorts post a 74% increase in profits during the first quarter of 2000. Beau Rivage had earnings before interest, taxes and depreciation of $17.4 million in the first quarter.

Other casinos in the state are also being merged with larger companies, a trend that Patton believes is healthy.

“These companies that are coming in generally have a stronger cash and credit position, and generally can do more in terms of expanding properties and bringing in more amenities,” Patton said. “This is good for Mississippi. I actually see the merger trend continuing. If you look at the casinos, there seems to be a group of casinos active in acquisitions at this time. Harvey’s is looking at expanding, and Park Place and MGM Grand are really expanding operations.”

Biloxi Casino Magic is now owned by Pinnacle (formerly Hollywood Park), and Park Place Entertainment owns the two Grand Casinos on the Coast plus Bally’s and Sheraton in Tunica. Penn National, the owner of Casino Magic Bay St. Louis and Boomtown, is reportedly planning to build additional hotel rooms near the casino in Bay St. Louis.

Also, Harrah’s, which has a land-based casino in New Orleans, is also reportedly looking at the Mississippi Gulf Coast as a potential casino site.

Contact MBJ staff writer Becky Gillette at mullein@datasync.com or (228) 872-3457.


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