Mississippi casinos watching potential competition in South

Barbara Powell

Thursday, May 8, 2003 | 10:14 a.m.

BILOXI, Miss. -- Mississippi's casinos can brag of stable revenues, but gaming industry experts say the state needs to watch competition that could sprout across the South.

Texas, Arkansas, Tennessee, Florida and Alabama don't allow casinos, but industry insiders expect some of those states to permit gambling halls in the next few years.

As a consequence, casino operators, tourism officials and gaming regulators say Mississippi's 29 state-regulated casinos must diversify and enhance their offerings and lobby to keep taxes low and regulations reasonable.

Gambling industry insiders are meeting this week in Biloxi for the 2003 Southern Gaming Summit. Much of the talk involves protecting turf and growing revenues.

The Mississippi Gaming Commission also is considering whether the state should drop its prohibition against land-based casinos, citing the limited life span of casino barges and the threat of tropical weather.

Revenue from the state's casinos for the past two years has been flat. For the first quarter of this year, revenue dropped slightly to $707.9 million, from $711.26 in 2002.

The 12 Gulf Coast casinos fared better, with revenue up 2 percent. The 17 Mississippi River casinos saw revenue fall 2.3 percent in the first quarter.

"This has been a great state to do business in -- open minded, fair but firm," said Tim Hinkley, senior vice president of operations for Isle of Capri Casinos Inc., which has four Mississippi casinos and eight other properties in Louisiana, Colorado, Iowa and Missouri.

"But there are rumblings of taxes coming down the road," Hinkley said. "There's still a lot of sectors that don't like gaming. And we've got to have a satellite school like Tulane (University) come in and offer gaming education. What's up with that? That's wrong."

Lawmakers have repeatedly nixed letting the state's two- and four-year colleges teach gaming management courses.

Casinos have pumped more than $2 billion into Mississippi coffers since the first casino opened in 1992. Some legislators have suggested raising gaming taxes next year to strengthen the state budget.

Mississippi Gaming Commission Chairman Leonard Blackwell said the state should keep gaming taxes at a reasonable rate -- currently 8 percent to the state and 4 percent to local governments. He also said the state should reconsider its rule that state-regulated casinos must be on floating barges.

Casino barges have a life span of about 15 years, and the state's oldest casinos are more than a decade old.

"It's time to inquire whether there's any discernible purpose to requiring Mississippi casino vessels to float," Blackwell said.

Some lawmakers and casino operators fear that eliminating the barge requirement could open other parts of the state to casino development.

But floating casinos are more vulnerable to severe weather, which threatens jobs and tax revenue, said Gaming Commission executive director Larry Gregory.

Casino operators are concerned about possible competition from other states. Mississippi and Louisiana depend heavily on drive-in traffic and their casinos could take a hit if other states in the region allow casinos.

Hinkley said casino operators need to market more effectively to broaden drawing power and increase the number of times visitors return.

Isle of Capri is doubling its hotel rooms in Biloxi and may expand the casino there. To attract more visitors, Boyd Gaming Corp. executive Keith Smith said his company has built an arena and a golf course in Tunica and is co-sponsoring a NASCAR race in Memphis.

Pinnacle Entertainment, which owns Casino Magic in Biloxi and casinos in Louisiana, Nevada and Ohio, is considering improving existing properties and building new ones.

Pinnacle Chairman and CEO Daniel Lee said he may add hotel rooms in Biloxi. He said the Biloxi market is the softest of Pinnacle's five markets, but Casino Magic must remain competitive locally and with markets outside the state.

Lee said Pinnacle researched Texas law and concluded that changing the gambling laws in that state -- requiring a two-thirds majority by the state Legislature and the voters -- will be difficult.

So Pinnacle will break ground next month on a new casino in Lake Charles, La., that will try to draw customers from the Houston area.

"We're making a bet that Texas won't legalize," Lee said.