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Coast casinos plan to overcome crippling losses, rebuild

Before state legislators voted to allow gaming on the water’s edge in Mississippi, tourism officials on the Mississippi Gulf Coast had a tough time selling the 26-mile stretch of sand beach dotted with sleepy fishing villages and deepwater ports.

“It was probably among the 10 worst beaches for places to go,” said Larry Gregory, executive director of the Mississippi Gaming Commission. “If you look in any travel magazine now, it’s among the top 10.”

After Hurricane Katrina plowed a path of destruction through Pass Christian, Waveland, Gulfport, Biloxi and Ocean Springs August 29, the Coast’s 12 casinos closed for business for an indefinite period of time.

“The storm damage has crippled the casino economy,” said Gregory. “It’s affected close to 16,000 jobs and tax revenue of approximately $500,000 per day.”

Running the numbers

Celeste Mellet Brown, an equity research analyst with Morgan Stanley, said Harrah’s Entertainment (NYSE:HET) initially estimated uninsured losses from casino closures due to Hurricane Katrina at 0.5% of its annual EBITDA.

“We expect additional uninsured costs, particularly because HET is making a real effort to support its employees and the region as a whole in the wake of the storm,” she said. “For reference, the company’s combined exposure from the two Mississippi Gulf Coast properties and New Orleans property is 6% of 2006 EBITDA.”

Brown projected the company’s two Gulf properties would remain closed “indefinitely.”

“We believe that the Gulf properties were essentially destroyed and will need to be completely rebuilt,” she said. “In the least, HET will be able to take advantage of a recently passed law in Mississippi that allows casinos to be built on pilings. We, along with others, hope that the state will allow casinos to be built on land going forward.”

The 12 coastal casinos have indicated a desire to rebuild on the Gulf Coast, said Gregory.

“All casinos had business interruption insurance except maybe Treasure Bay, and they may have gotten it before the storm,” he said. “I haven’t spoken with Treasure Bay officials, but I think they’re making progress on wanting to return. I’ve heard the Copa is struggling with whether or not to come back, but executives there have indicated they are.”

Imperial Palace, which received less damage than its competitors, plans to reopen within 60 to 90 days.

“The gaming commission will look at other factors prior to opening casinos, such as: do people want to come down? If so, can they? We have to look at safety and health issues,” said Gregory. “I don’t know what the Gulf Coast will look like in 90 days, but the commission is willing and able and ready to assist this industry in getting back online as quickly as possible and kick start the economy.”

Stephen Richer, executive director of the Mississippi Gulf Coast Convention and Visitors Bureau, said the return of tourist activity will be slow, in part because all of the available hotel rooms on the Mississippi Gulf Coast are booked indefinitely with local, state and federal relief workers, construction workers, insurance adjusters and displaced residents.

Small steps

“Recovery will come in small steps,” Richer said. “We’re finished with the rescue phase and are now getting people back on their feet, getting retail underway, but a lot of people are still trying to find their insurance adjusters and identify contractors. But we’re going to get there. I’m hoping a year from now, people will be thinking the same thing they’re thinking over in Pensacola and the Alabama Gulf Shores area: did something big really happen here?”

Richer, whose workplace was destroyed and home received substantial damage, said he doubted that all historic structures destroyed in the storm would be rebuilt.

“So many people with an interest in the Coast have so many good ideas and the capital to implement those ideas,” he said. “It will be important to manage these ideas to rebuild the Coast in a way that will have a dramatically positive impact.”

Roger Dowd, president of the Travel Industry Association of America, recently surveyed the damage on the Mississippi Gulf Coast and initiated a Web site, KatrinaJobs.org, to help displaced casino workers find temporary work in other casino markets to keep their skills sharp.

“We have had so much help from Mississippi, U.S. and international sources,” said Richer. “It’s been great encouragement.”

Gregory said casino executives have agreed that, despite the hurricane-prone location, the Mississippi Gulf Coast is “a great place to do business.”

“The corporate folks have mentioned that what sets us apart from other states is our great employees, beautiful natural resources, favorable tax rate, gaming commission that knows the rules of the game, and a Legislature that doesn’t change those rules on a whim,” he said.

Contact MBJ contributing writer Lynne W. Jeter at lwjeter@yahoo.com.


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