Big gamble for the Coast leads to Cinderella-like success

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Published: August 19,2002

The Mississippi Gulf Coast waterfront that exists today could have been little imagined a decade ago. As the Coast celebrates the 10th anniversary of dockside gaming this month, what has been called “the Las Vegas of the South” has replaced many of old seafood factories and rundown warehouses that used to detract from the tourism atmosphere the Coast wanted to project.

Larry Gregory, director of the Mississippi Gaming Commission, says 10 years ago no one knew if gaming on the Coast would be a success or a failure.

“Literally, the Gulf Coast took a gamble and voted to legalize gaming in Harrison and Hancock counties,” Gregory said. “Ten years later, we can proudly say that gamble has paid off.

“In the beginning, many labeled the success of gaming in our state as the ‘Mississippi Miracle.’ I feel that miracle has matured into a mega resort destination that provides a solid base for the economy of the Coast. Just take a drive down Highway 90. You will see not only casinos, but first-class resorts offering restaurants, hotels and various forms of entertainment. You will also see cars visiting these casinos from all over the country. As a result, tax dollars are entering the state coffers to benefit the Gulf Coast as well as the State of Mississippi.”

The Isle of Capri Casino Resort in Biloxi was the first casino to open on the Coast. Like the other first casinos, it was housed in a riverboat.

“I think the first day we opened we did not have a vision of what was to come in the next 10 years on the Mississippi Gulf Coast,” said Rich Westfall, senior director of marketing, Isle of Capri Casino Resort. “But shortly after we opened we realized the potential was here. The vision with replacing the riverboats with casinos on barges came up, and we all began working on them. It was influenced by the type of business we were experiencing on the Coast. Companies like Grand Casino and then the crowning glory, Beau Rivage with its $700-million investment in Biloxi, solidified this as a viable gaming destination. But 10 years ago no one envisioned this type of development.”

Besides adapting from the small riverboats to large casinos built on barges that rivaled land-based casinos, several other factors were critical to the growth of the industry.

“One of the biggest things they did was enact a rule where existing companies had to invest 25% of their current investment on land,” Westfall said. “That led to the development of hotel rooms on these properties. If you track the yearly gaming revenues, you will see it grew significant in years hotel rooms were added to casinos. Right now revenues are flat because no new hotel rooms have been added to the market since Beau Rivage opened in 1999. A few room have been added at the Palace Casino and Casino Magic in Bay St. Louis but nothing in larger numbers that would influence the market.”

Cooperative marketing between the casinos has also grown the market both by advertising blitzes in markets such as Atlanta and Tampa/St. Petersburg, and putting together events such as “Cruising the Coast” formed in cooperation with the Harrison County Tourism Association.

“Cruising the Coast has grown and really made an impact on our October business,” Westfall said.

This summer the three casinos on the east end of Biloxi, the Isle of Capri, Casino Magic and Grand Casino, have cooperated to put on a $15,000 fireworks display every Friday night. That has caused a big impact on Friday night business that carries over into the weekend.

Westfall said the area was economically starved prior to gaming. And while gaming was the spark for economic development on the Coast, he gives a lot of credit to the local officials for making the best of the opportunities.

“Biloxi and Gulfport lifted their communities up by their boot straps,” he said. “They took a spark and moved it forward taking advantage of economic development to improve the community quite a bit.”

Mayor A.J. Holloway likes to refer to the dramatic change in the Coast as “the nation’s Cinderella story.”

“The tremendous turnaround that we have seen in Biloxi is one of the great success stories in the country,” Holloway said. “We have gone from about a million visitors a year before casinos to anywhere from 11 million to 25 million visitors a year, depending on whose numbers you go by. We have gone from 4,000 hotel rooms to 17,000 today in Biloxi. We have added daily jet service and have seen the airport go from 185,000 passengers a year before casinos to almost a million passengers in recent years. And we have seen the Coliseum and Convention Center double the size of its meeting space.”

Gaming tax revenues have been used to make numerous improvements on the Coast. For example, Biloxi’s new $32-million high school opened recently for the new school year and another $20-million in school construction projects are underway. About $80 million has been invested in infrastructure improvements such as streets and drainage, and about $60 million in major transportation improvements are underway.

“What is really important is how we’ve improved the quality of life for the people of Biloxi and provided new opportunities for all of our residents,” Holloway said. “You don’t have to be one of the 14,000 gaming employees in Biloxi to be a beneficiary of what this industry has meant to our quality of life.”

The improvements have come about while property tax rates have been cut, and the city’s credit rating has improved from junk bonds to a Class A rating.

Andy Bourland, executive director of the Mississippi Gaming Association, said a key element behind the success story of gaming in Mississippi is the partnership between the state leadership in the executive branch, the legislature, the Mississippi Gaming Commission and the industry itself.

“First and foremost Mississippi did it right in the sense of creating a climate for a free market enterprise modeled just like the industries in Nevada and, to a lesser extent, New Jersey,” Bourland said. “There was a partnership between the industry and the state that really set the table for the very rapid success in Mississippi that made it the third leading gaming destination is just a handful of years.”

Other states, primarily in the Midwest, put restrictions on the gaming industry such as admission fees, betting limits and requiring the casino vessels go on “cruises to nowhere.”

“Those impositions or restrictions on the industry didn’t happen in Mississippi,” Bourland said. “It was very much a free market system where if you had the wherewithal to open a property, you could compete.”

Dockside gaming has been successful not only for operators, but the state with gaming tax revenues reaching $320 million per year plus an additional $40 million in other tax revenue areas. Bourland said that is between 7% to 10% of the state’s annual budget.

“The key point to make is that the gaming industry today provides more to the State of Mississippi in gaming taxes than every other business combined pays in corporate income taxes. Clearly there is the element of prosperity the gaming industry has brought to Mississippi that, I think, has contributed to some of the other expansions you have seen. Nissan was quoted as saying the infrastructure provided primarily by gaming dollars helped make them decide to come to Mississippi. The gaming industry is tremendously proud to be a part of the overall economic development and success that Mississippi has realized over the past 10 years.”

Duncan McKenzie, president of Grand Casinos and president of the Mississippi Gulf Coast Gaming Association, agrees that the free competition environment is critical to both current and future success.

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0;I think we are going to look dramatically different in the next 10 years,” McKenzie said. “The free competition environment, and the fact that the tax rate allows

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