Mississippi’s casino revenues hit their lowest yearly mark since 1997
The gaming industry in Mississippi has hit a 26-year low, and the Tunica market may be less than two years from drastic changes if the spiral doesn’t stop in the next 18-24 months.
Numbers released last week by the Mississippi Gaming Commission indicate gross gaming revenue — the money casinos earn after payoffs are subtracted from wagers — dipped to its lowest level since 1997 when the gaming industry was still in its infancy.
In 2013, the 30 Mississippi casinos collected $2.136 billion in gross gaming revenue. In 1997, 24 casinos collected $1.984 billion. The high year for revenue was $2.891 billion in 2007. The 2013 total is 5.1 percent below the $2.251 billion collected in 2012.
“The state of gaming is competition,” said Allen Godfrey, executive director of the Mississippi Gaming Commission. “Even Pennsylvania just had its first down month in the last five or six years.”
Mississippi casino revenue has been falling steadily since 2007 as more states legalize gaming in an effort to keep their gaming and tourism dollars at home. That competition especially has hurt the Mississippi River casinos, which have seen revenue fall from a high of $1.589 billion in 2007 to $1.072 billion in 2013 — about a 33 percent drop in six years.
“If you take the free market approach, I think it will dictate over the next 18 months what the Tunica market will look like,” said Larry Gregory, executive director of the Mississippi Casino Operators Association. “I can’t predict what will happen, but if the numbers continue to drop, most likely we’ll see fewer casinos than more casinos.”
“I’m not privy to their financial status, but several properties are under tremendous stress,” said Webster Franklin, president and CEO of the Tunica Convention and Visitors Bureau. “Our job is to try to create an environment to allow them to flourish. But this is not unique to Tunica. Competition is everywhere.”
The Tunica market has several tried various ways to slow the decrease, but the drop continues.
“I think they know the situation,” said Gregory. “The issues are hard issues. We’ve got national expansion and tough competition, and we’ve got to offer alternatives to combat those hard issues. They’ve tried to offer incentives — concerts, million-dollar giveaways — to get visitors to come back.
“A lot of this growth has shown that convenience does mean something.”
Convenience is the convenience gambler. In the case of Tunica, it’s usually means the Memphis gambler who used to drive to 30-45 minutes to Tunica for a few hours and wager a few dollars, then return home. Many of those gamblers are now taking the shorter trip to West Memphis, Ark., to play at Southland Park, which is prepared to embark on a $34.7 million expansion. Before the Mississippi River floods in May 2011, Southland was a small player on the gaming landscape. But when Tunica casino were closed for a few weeks Memphis gamblers opted for Southland Park, which adjusted to the situation and has profited.
“It brings challenges,” Franklin said of the Southland expansion. “I think the flood has had a greater impact on the Tunica market than most people ever thought it would have. Today, every American is within three hours driving time of a casino, and convenience gaming has had an impact on destination gaming — and in Tunica, we are a destination.”
“But Tunica is fighting a fight and doing everything in their power to combat the competition,” said Godfrey. “I don’t know if it’s going to be enough, but I do know there are some wonderful properties up there with some good places to visit and good restaurants.”
As the casinos lose money, it has a trickle down effect within the community, both in the less casino tax money and in fewer jobs.
County governments statewide share 4 percent of casino, an amount that fell from $9.1 million in Sept. 2007 to $7.8 million in Sept. 2013. Jobwise, during that same period, Tunica County’s unemployment rate rose from 5.9 percent to 11.9 percent.
“(The tax revenue decrease) is creating numerous challenges for our local government,” said franklin. “We’ve invested a considerable amount of money in tourism in things like golf courses and the mississippi River Park, and those facilities still have to be maintained.
“I would think a lot of (the unemployment rate) is related to the casinos,” said Franklin. “We went from about 15,000 gaming jobs at its peak to about 11,000 jobs now. But the workforce of Tunica County is only about 6,000 people. We have a lot more jobs than we have people who live here and can be employed.
“I think the most important thing is our economy was based solely on agriculture and tourism and gaming,” said Franklin. “Now what your seeing is because of the infrastructure — the four-lane roads, water and sewer — we’re seeing our area become more viable for industry. We have Schulz Xtruded Products and Feuer Powertrain. And Greentech Automotive is constructing a building as we speak. In the last year, we’ve announced 1,000 new jobs.
“Growth in Tunica is no longer about gaming and casinos. We need to build other things around the casinos. The reason Schulz invested $300 million here is because of the hotels, restaurants and entertainment. So when Schult brings in their suppliers, they put them in our hotels.”
“In Tunica, there’s no doubt the expansion of gaming in West Memphis, Alabama and other places has affected the Tunica market,” said Gregory. “They’ve taken a definite hit in that area. Your not seeing the investments like they’re making in Gulf Coast. Right now, with numbers in a negative trend, you’re not going to see any new investors in that area.”
Meanwhile, the Gulf Coast, which was once a step-child to the prolific gaming market in Tunica, is poised to pass the river casinos in revenue. Until recent years, it was normal for the river casinos to post revenue numbers that were $200 million to $400 million more than the Gulf Coast. In 2013, that margin shrunk to less than $8 million. The Gulf Coast’s total for 2013 was $1.064 billion.
Coast casinos outperformed Tunica casinos in each of the last six months of 2013. Previously, that had happened in only six other months total since 1995. “The Lower River Region (south of Greenville) and he Coast area are seeing a lot of capital expenditures to their properties, and that speaks highly for those areas that people are willing to do that.”
“Two areas of the state are responding differently,” said Gregory. “Confidence on the Coast is going to continue to grow. Just look at the investments this past year: The Golden Nugget spent $100 million in renovations, the Island View is spending $60 million to rebuild the older hotel tower, Hard Rock is opening its new hotel next week, The Silver Slipper is adding a hotel, IP is investing in its property, the Hollywood in Bay St. Louis is adding a new Lazy River, and the Beau Rivage is adding a baseball stadium that can be used for other events.
“And their shareholders and investors expect a return on these investments, so this tells me that the Gulf Coast is doing okay. Certainly, they could be better, but they’re maintaining their product. They’re going to have to maintain their product because people are not coming just to sit in front of a slot machine. They are wanting a lot more for their entertainment dollars.”
But the Coast is not immune from competition. Casino gaming expansion is expected to be a hot topic among Florida legislators when they meet beginning March 4.
“There’s no telling how that will end up,” said Godfrey. “But if they do expand it, we will feel the impact. Just like we feel the impact from the Poarch casinos in Alabama and the casino in West Memphis.”
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