Once-white elephant casino fuels Harrah’s growth in Louisiana

Alan Sayre

Friday, July 23, 2004 | 9:25 a.m.

NEW ORLEANS -- Just a few years ago, many doubted Harrah's New Orleans Casino would ever open. Then, it appeared that the gambling hall might not last.

Today, Harrah's has not only survived, but it is making New Orleans something few thought the city would ever become: a tourist destination for gamblers.

"We are going to become a world-class entertainment complex in one of the greatest cities in the world," said John Payne, the casino's general manager. "With that commitment, we feel this is a business that will continue to grow."

Construction has begun on a $141 million, 450-room hotel just across the street from the casino's Canal Street site. Another $6 million has been spent to bring the buffet up to the 400-seat limit specified in state law and to install an upscale steakhouse. About 95 percent of the casino's 2,200 slot machines have been replaced in the past year.

Harrah's now has its own in-house entertainer -- veteran Las Vegas singer Earl Turner, who impressed the company so much that it spent $5 million to build him his own theater.

The casino is on pace to easily surpass last year's fiscal year take of $277.3 million, and its winnings from gamblers in May -- $27.8 million -- gave it its best month ever. In terms of the industry as a whole, that would put Harrah's New Orleans in the middle of the pack among the 12 casinos in Atlantic City.

"My feeling is that New Orleans can compete with any city in America," Payne said. "The uniqueness of the city can get people to get on a plane and come to this city."

The growth of the New Orleans casino is only part of several recent business moves that have strengthened the position of Las Vegas-based Harrah's Entertainment Inc. in Louisiana.

The company has just completed its $1.45 billion acquisition of Horseshoe Gaming Holding Corp., which owned the state's largest-grossing riverboat casino in Bossier City. Last year, Harrah's opened a slot-machine casino at its Louisiana Downs race track in Bossier City, which it bought, along with five individual investors, for $73.5 million in 2002.

To alleviate regulatory concerns about market concentration, Harrah's sold its Shreveport riverboat to Boyd Gaming Corp. for $190 million. Harrah's also owns two riverboat casinos in Lake Charles.

If Harrah's $9.4 billion cash and stock deal to buy Caesars Entertainment Inc., goes through, the company also will get a riverboat casino in New Orleans, though whether Harrah's would keep the boat was unclear.

"Next to Nevada, we have our largest investments in the state of Louisiana," said Anthony Sanfilippo, Harrah's central division president.

The New Orleans casino was the idea of former Gov. Edwin Edwards. The law allowing it was passed in 1992 and Harrah's -- like others tempted by the guaranteed monopoly of being the only casino not on a riverboat in New Orleans -- entered the fray.

A temporary casino at the city's Municipal Auditorium wasn't opened until 1995. At the time, Harrah's managed the gambling hall and was a minority partner in the ownership company with hotel-casino developer Christopher Hemmeter and various individual investors with close political ties to Edwards.

But the temporary casino closed in six months and the ownership company went into bankruptcy. Finally, in late 1999, the Canal Street casino opened, but threatened to shut down until, in 2001, the Legislature cut its minimum state tax from $100 million to $60 million a year and allowed it to build its own hotel.

Harrah's later bought out the ownership company, JCC Holding Co., and the casino is now a wholly owned Harrah's property.

Payne said Harrah's growth in revenue is due to more customers from such regional markets as Houston, Tampa, Fla., Birmingham, Ala., and Memphis, Tenn., as well as attracting gamblers from all points of the United States.