Uncertainty hampers rebounding casino market
2007 offering unique challenges as Coast continues to reboundasinos cautious as various factors hamper rebounding Coast market
BILOXI - Billion-dollar construction projects would be a certainty for the Coast’s casino economy in 2007 if it wasn’t for the FUD factor.
Fear. Uncertainty. Doubt.
Topping the list of concerns is whether the Mississippi Band of Choctaw Indians will build a casino resort in Jackson County. Other dampers: high construction costs, the possibility of another monster hurricane and a changing market.
“I’m a strong believer that the Choctaws are producing fear, uncertainty and doubt,” said Mark Calvert with Cascade Capital Group, who is working with W.C. “Cotton” Fore and Roy Anderson III to develop the Broadwater site.
Besides having the competitive advantage of not paying taxes, a tribal development would “cut off” business from Floridians and other casino customers arriving on I-10, he said.
Some casinos are even putting expansions on hold.
“We’ve got a preliminary master plan,” said Keith Crosby, the general manager of the Palace Casino. “Now, it’s sit tight and see what happens with the Indians. It’s kind of hard to go and ask for 200 million bucks when you don’t know the answer on what’s going on over in Jackson County.”
That answer may not be known until November 2008. Choctaw Chief Phillip Martin has asked Jackson County to hold a non-binding referendum to coincide with the next presidential election to gauge public support for the proposal.
Harrah’s Entertainment, the owner of the Biloxi Grand, has suspended plans for a billion-dollar-plus development. Company officials cited rising construction costs and a volatile marketplace as reasons for the delay but would not say whether a potential buyout of the company was a factor.
Sifting out
Putting aside concerns about a tribal casino, politicians, regulators, analysts and casino executives are generally upbeat about the year ahead. However, they don’t expect the same revenue surprises that 2006 brought. Coast casinos rebounded so well after Hurricane Katrina that monthly revenues began surpassing pre-storm levels by year’s end.
Paul Girvan, a managing director with The Innovation Group’s New Orleans office, expects 2007 to be a year of “sifting out.” Larry Gregory, the executive director of the Mississippi Gaming Commission, said it will be a year of “evaluation.” Mayor A.J. Holloway hopes to announce new ventures for Biloxi.
Only one property, the Hard Rock Casino, is slated to come on line next year. Construction on another Biloxi casino, Bacaran Bay, could start.
During 2006, nine casinos reopened and one new property, the Silver Slipper, debuted. Four established names made plays in the market: Golden Nugget, Trump Entertainment, Foxwoods and former Mandalay executive Peter Simon. Foxwoods had a purchase agreement on the Broadwater property, but let it expire. The others still have active agreements or own land outright.
The real estate scramble is likely to continue as speculators assemble small parcels into developable sites or casino companies play a game of checkers with land. The Isle of Capri, Golden Nugget and Grand Casino are bumping into one another as they expand their footprints on Point Cadet.
Site shopping
Biloxi, the Coast’s top casino city, has a transportation loop open for development that rings the eastern section of its peninsula. Other locations are emerging. D’Iberville, where Simon already had a project in the works, recently approved a massive rezoning to let other casino developers know they will be welcomed.
Long Beach is working on an ordinance to allow casino development north of its harbor. Gulfport’s casino, the Island View, is expanding at a rapid pace.
Hancock County now has two casinos, double what it had before Hurricane Katrina. Trump Entertainment is partnering with another developer to possibly build a third. The Isle of Capri has plans for its second Coast casino just across the county line in DeLisle.
“I expect by the end of 2007, we will have a clearer picture of who is moving forward or who is not,” said Girvan, whose company does feasibility studies for casino projects. “That will lay the groundwork for what the market will be doing in 2010.”
A redevelopment analysis by Calvert of Cascade Capital projects that gambling revenues on the Coast could approach $2 billion by 2010, but not without work.
“We need to further grow the market by becoming a destination market where tourists account for a larger percent of gaming revenue versus the local market,” Calvert said. “That will be done when the convention center is completed and we have more amenities mixed in with gaming.”
Broadwater has had offers, Calvert said, but the property owners are holding out for the right casino to be the type of anchor tenant that attracts spinoff development, such as a upscale retailers.
Anteing up
Existing casinos are upgrading their offerings.
Beau Rivage just opened its Tom Fazio-designed Fallen Oak Golf Course and will open three new restaurants this month, including celebrity chef Todd English’s Olives. Treasure Bay expects to have its hotel and expanded casino floor open by the end of the first quarter.
The IP Casino has several upgrades in store, including more space for gambling, a new high-limit area, renovations to the movie theater and a new restaurant.
New construction projects may not start until 2008, Gregory said, but nevertheless he expects the Gaming Commission to have busy year.
“The first quarter of 2007 will be a time of reflection for investors and developers to look and see what the Gulf Coast market did in a year,” Gregory said. “I think they are going to be in my office for what may come in the future.”
Source: Sun Herald