CEO panel focuses on Katrina recovery, taxes

Wednesday, Sept. 14, 2005 | 11:02 a.m.

Although the spike in the price of gasoline got everybody's attention immediately after Hurricane Katrina, top executives for three moderately sized casino companies say things are already returning to normal.

"It's the spikes in prices that get people's attention," said Kevin DeSanctis, president and chief operating officer of Penn National Gaming Inc., Wyomissing, Pa., in a wide-ranging panel discussion about bottom-line issues facing the nation's casino industry.

DeSanctis and two other executives, including Boyd Gaming Corp. President Keith Smith, were featured speakers in one of the opening panels for the Global Gaming Expo at the Las Vegas Convention Center Tuesday. The four-day event, the largest gaming trade show in the world, is expected to draw more than 27,000 people for a series of industry presentations and the exhibition of hundreds of new casino products.

The three panelists jumped right into current events -- the impact of Hurricane Katrina on their respective operations and what the widespread devastation means to the Gulf Coast's casino industry. The executives agreed that recovery would be a lengthy process.

"Ultimately, I think there will be fewer casinos, but nicer casinos (in the area)," DeSanctis said. "Five years from now, it should be in pretty good shape and ultimately, it will be a very good overnight destination."

Smith said Boyd's Kenner, La., operation, the Treasure Chest Casino, survived the storm, but the property's 1,000 employees have other things on their minds.

"We could turn the lights on tomorrow in Kenner," Smith said. "But we don't have the employees. They're working through the tragedy."

Tim Hinkley, president and chief operating officer of Isle of Capri Casinos Inc., Biloxi, Miss., said his company's employees are regrouping from the disaster, which hit close to home -- he said his daughter lost everything in the storm.

The three executives said the sudden rise in the price of gasoline following the storm put a dent in revenue for a short period, but traffic is nearly back to normal after the initial shock. Smith attributed some of the lull to the "CNN effect" of people hunkering down in their homes to watch disaster developments unfold on television.

While the hurricane and its impact dominated much of the discussion, there were other things on the executives' minds.

"What I worry about the most every day is new legislation," DeSanctis said.

He said he is convinced that states have an insatiable appetite for tax revenue and that lawmakers haven't realized that casino companies will spend proportionately fewer investment dollars in markets with high tax rates.

The executives pointed to Las Vegas, in a state with the lowest gaming tax rate, as an example of how investments in amenities flow to destinations where companies can produce the best return on investment.

So why aren't Penn National and Isle of Capri in Las Vegas?

"The cost of land," said DeSanctis. "Our goal is to get 5 percent free cash flow and it's hard to make an acquisition in Las Vegas work when the price of land is so high."

Hinkley said Las Vegas is low on his company's investment list and Isle of Capri, which has 16 properties in 14 states, mostly riverboat developments, is looking at opportunities in the United Kingdom and Singapore.

Smith, a member of the Las Vegas Convention and Visitors Authority's board of directors, said the city is looking to market the underserved international market and attempt to make the same impact on the small-meetings industry as it has had on the convention and trade show industry.

To that end, several Las Vegas projects are on the drawing board, including MGM Mirage's Project CityCenter, Las Vegas Sands' expansion of the Venetian, the new Fontainebleau project and Smith's company's redevelopment of the Stardust.

Following the presentation, Smith said his company would continue to be mum on plans for the Stardust. Published reports have suggested Boyd is considering a convention center development, but Smith said details of what is planned aren't expected to be announced until late this year.