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Heavy marketing eats into casino budgets

Summer season could make or break less-profitable casinos

MISSISSIPPI GULF COAST — While state gaming tax revenues haven’t shown a decline with the slowing economy, casinos are still feeling the strain and the success of the summer tourism season could be critical for some of the less profitable properties.

“People look at gaming revenue totals and say gaming is holding its own,” said Beverly Martin, executive director of the Gulf Coast Gaming Association. “What people don’t realize is it is costing the casinos twice as much to maintain those levels. Some casinos say this summer is going to make or break them.”

President’s Hotel filed bankruptcy about a month ago, and Martin said there are other properties that need a good summer tourism season to survive.

“If we don’t have a really good season, we could find four to nine casino properties statewide that are borderline and may end up closing or going into bankruptcy,” Martin said. “That is the point we need to get across to the public. They just see the gaming revenues and don’t realize the amount they are looking at is gross and not net.”

Martin said casinos on the Coast have seen profits decrease because they are spending more money on marketing. The casino profit margin has decreased because of increased spending to get more tourists here.

“A lot of the casinos have doubled marketing efforts and, instead of growing the market, it is just maintaining what we already have,” Martin said. “We’re looking at the U.S. economy and hoping it will maintain or get better. There is a lot of talk of a recession. Even if that doesn’t happen, fear of that itself will cause people to cut back on the discretionary money they were going to spend on vacations.”

Speakers at the recent gaming summit held on the Coast said that maintaining present revenue levels are about the best casinos could hope for in the present economy. No new casinos are being built soon, and plans for some of the larger casino development planned on the Coast have been dropped.

Mandalay Bay Resort Group announced recently that it was dropping plans to develop a $225-million casino on the Bay of St. Louis Bay in Hancock County. The project, on a site near Interstate 10, originally called for a 300-by-500-foot casino barge, a 30-story, 1,400-room hotel and a convention center.

Mandalay Resorts, formerly known as Circus Circus, said it was forgoing the Mississippi project in order to work on intensively developing the company’s Las Vegas property. The casino company had difficulty getting permits for the project after environmental groups won a ruling from a federal judge requiring an Environmental Impact Statement before the project could proceed.

Casino analysts weren’t surprised by the announcement since the Coast market has been considered too saturated at present to support another new casino. However, city officials in D’Iberville say they continue to have interest from developers in a site just west of the I-110 bridge.

Currently a former floating casino covered with sheet metal owned by the family of the late Allen Paulson is docked at the site. Recently the Commission on Marine Resource voted to require the barge to be moved or to reapply for a permit to be docked at that location.

Paulson, who died in May, was also an investor in the proposed Hard Rock Caf

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