Economy driving state gaming revenues
by Lynn Lofton
Published: March 2,2009
The gaming industry is no longer considered recession proof, and Mississippi is no exception although it isn’t suffering to the extent of the larger Las Vegas and Atlantic City jurisdictions.
According to figures released by the Mississippi Gaming Commission (MGC), statewide revenues for calendar year 2008 were down six percent compared to revenues for 2007. The River Counties, with a decrease in revenue of eight percent for that time period, have been affected more than the Gulf Coast which had a decrease of 3.5 percent.
The state’s casino employment numbers began a downward trend in June 2008. By December, employment was down 11.5 percent, or 3,500 jobs.
“Considering the economic conditions nationwide, the impact on revenue has been small compared to other gaming jurisdictions,” says the MGC Executive Director Larry Gregory. “However, the access to financing due to the credit crunch has slowed expansion projects of existing casinos and has prohibited new projects from moving forward.”
Danny McDaniel, a gaming attorney with experience in Mississippi and Louisiana, points out that everyone is hurting because of the economy, but the numbers are going up in Louisiana and down in Mississippi.
“Mississippi was always about new gaming projects and hasn’t had any in a long time,” he said. “The state has open competition and a free marketplace advantage and has been about building something bigger and better. Unless that starts happening again, gaming in Mississippi will stagnate and become a limited license state like Louisiana.”
The Phelps Dunbar lawyer has done legal work at one time or another for 90 percent of the two states’ casinos. In addition to tight credit for new projects, he sees a problem with the difficulty of getting gaming licenses on the Biloxi beach front.
“I don’t see any big, new projects wanting to be anywhere but on front beach. Investors won’t put billion-dollar projects on Back Bay,” he said.
Another gaming attorney, Scott Andress with the Balch & Bingham firm, said it is fair to say development projects for the most part have been delayed or put on the sideline. One exception is the Riverwalk Casino, which opened in Vicksburg last November.
“Financing is not available,” he said. “Several proposed projects in Tunica are moving slowly or have been put on hold.”
Gregory agrees that the lack of credit combined with consumer confidence in the overall economy will have an impact on future growth, but he remains optimistic.
“Mississippi has returned from catastrophic Hurricane Katrina, and we are confident in our ability to weather the current economic conditions that exist,” he said. “We have granted several new site approvals in recent months, but due to the credit crunch, these site approvals have not moved forward to the development stage.”
One new project, the Grand Soleil Casino in Natchez, has been in the works for several years and recently hit a snag when a local bank threatened foreclosure on some of the resort’s property.
Grand Soleil director of marketing Baxter Lee maintains the project will be okay. “No one could foretell what the economy would do, and we are absolutely dealing with this problem,” he said. “We have partners and new investors on board and we’re not going to lose anything.”
He added that the company is taking care of procedural matters and is still planning for a late summer opening of its 30,000-square-feet gaming boat. The company’s historic Briars Bed & Breakfast Inn and new hotel are already open.
In light of its current problem and with renewal of its license scheduled for May, the Grand Soleil is being investigated by the MGC.
“The status of a licensee’s financing is always monitored by the MGC,” Gregory said. “The MGC is well aware of the current status of the Grand Soleil and is closely monitoring how they proceed. The conditions upon which the license was granted must be maintained. If those conditions change and no longer meet requirements of the MGC, then the license could be in jeopardy.”
The commission has the authority to halt the project but is hopeful the Grand Soleil can fulfill its licensing obligations and continue to move forward toward completion. If that happens, it will be the only new property opening this year.
Noting that Vicksburg’s Riverwalk Casino was developed by wealthy Chicago real estate investor Neil Bluhm, McDaniel sees a shift from corporate to individual gaming development.
“That’s one of the interesting things. In the early days, the riverboat gaming market was started and grown by individuals,” he said. “We now have wealthy people coming into it again. Ray Wooldridge and Jeff Jacobs on the Coast are good examples. There’s not a lot of gaming history, so it’s difficult to predict what will happen.”
While gaming revenue for the state is down and employment is down, the casinos are not losing money.
“Gross revenue numbers mean the state loses money, not the casinos,” McDaniel said. “The casinos may have to cut corners but they’re making money. Conversely, it may go the other way with them having to spend more to bring in business.”
Involved with state gaming since its inception, Andress said casino clients are making the necessary adjustments to continue operation.
“That’s because no one knows how long this downturn will last,” he added. “Obviously the state of the economy has affected the amount of discretionary funds people have to spend on entertainment, and casinos as an entertainment value are feeling it. It appears the local and drive-in markets, while also negatively affected, are faring better than destination resorts that require air travel and more lengthy stays.”
Contact MBJ contributing writer Lynn Lofton at firstname.lastname@example.org.
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