Casinos committed to rebuild on Gulf Coast

By Liz Benston (contact)

Monday, Sept. 19, 2005 | 11:22 a.m.

All of the largest operators of commercial casinos with properties in Mississippi and Louisiana have committed to rebuild their properties in the wake of Hurricane Katrina, the American Gaming Association's top executive said last week.

Those companies include MGM Mirage, Harrah's Entertainment, Boyd Gaming Corp., Isle of Capri Casinos, Penn National Gaming, Pinnacle Entertainment and President Casinos.

During a conference call last week with Mississippi Gov. Haley Barbour, American Gaming Association Chief Executive Frank Fahrenkopf said member companies were working to get casino employees back to work.

A couple of thousand casino workers still have not been accounted for by member companies, which have set up hotlines and other means to contact them, Fahrenkopf said.

The governor raised the possibility of building temporary casinos in the interim, but casino companies on the conference call said that might not be feasible.

"If you put up temporary facilities how are you going to get people there?" Fahrenkopf said.

The state has an aggressive timetable for restoring basic infrastructure such as roads and bridges on the Gulf Coast. Power has since been restored in the region, Fahrenkopf said. Some observers still estimate it could take two to five years to fully restore the region's economy, including its chief economic engine.

Gov. Barbour is expected to call a special session of the Mississippi Legislature to address rebuilding after Katrina. Changing state law to allow casinos to be built on land will top the agenda. As a concession to opponents who wanted to limit the properties' scope, casinos are now required to be built on water. The Legislature passed a law earlier this year allowing casinos atop permanent structures, such as pilings, over water.

Fahrenkopf said members have reached a consensus that riverboat casinos are "not really the way to go."

Should the state Legislature agree to allow casinos to be built on land, MGM Mirage Chief Executive Terry Lanni and Harrah's Chief Executive Gary Loveman indicated that their rebuilt properties would be located near their original sites rather than further inland.

Loveman, whose Grand Casino Biloxi riverboat was thrown several hundred feet ashore in the storm, said legalizing land-based casinos has become a "public safety" issue.

"Absolutely nothing has been gained by having the casinos on water," he said. "These are regular businesses and should be on land like any other business."

The executives participated in a panel discussion last week during Global Gaming Expo, an annual industry conference in Las Vegas.

In spite of offers made to relocate employees to other company casinos across the country, Lanni and Loveman said few workers have chosen to leave.

Workers are "very deeply ingrained" in their communities and are reluctant to move, Loveman said.

The American Gaming Association's Katrina relief fund has so far raised about half a million dollars for casino workers on top of the millions of dollars casino companies have been raising on their own, Fahrenkopf said last week.

The biggest casino companies, which have property damage and business interruption insurance, have said the hit to corporate profits after insurance won't be terribly significant. Even so, the timing of insurance claims isn't clear and could cloud casino stocks over the next one to two years, one analyst said.

"We anticipate that it could be some time before operators have a clear picture of insurance receipts, which could make earnings reports for operators confusing over the next year or longer," Deutsche Bank stock analyst Marc Falcone said in a research note to investors Friday.

Allowing casinos to build more secure, permanent facilities will be key in order for those companies to obtain insurance against future storms, he said.

Depending on what form such legislation takes, Falcone said rebuilding the casinos could take two to three years, which could result in "fewer but nicer gaming offerings."

Separately, management at the Imperial Palace hotel and casino in Biloxi said last week they intend to reopen the property for business in two to three months.

The property is owned by the same Las Vegas trust that owns the Imperial Palace on the Strip. Harrah's is scheduled to close the purchase of the Las Vegas property by the end of the year.

The Biloxi property suffered "minimal damage" compared with its peers on the Gulf Coast and has some 500 of its workers helping in the restoration process.

"Our goal is to help rebuild our community by getting Imperial Palace back up and running," President and General Manager Jon Lucas said. The property will reopen with "great restaurants, better product" and "newly renovated guest rooms."