Coast casinos building back

BILOXI — The past 11 years have brought hurricanes, a recession and an oil spill to South Mississippi. But by the end of 2010, casino revenue had returned to where it was in 2000.

John Ferrucci, general manager of Silver Slipper Casino in Hancock County, considers it an accomplishment that the coast casinos survived the disasters and remain profitable.

“Our market — the fact that it’s been doing as well as it has — is a tribute to the guys operating in this market and the customers that stuck with us,” he said. “It’s been a ride.”

Each disaster and economic fluctuation is reflected in the casino statistics for the decade. Revenue rose steadily from 2000 until Hurricane Katrina closed all 12 coast casinos in 2005. As the casinos reopened starting in late 2005, revenue again climbed. Record months in 2007 came to an abrupt end in September 2008, when Hurricane Gustav and the recession arrived together.

South Mississippi still has one less casino and nearly 2,000 fewer casino hotel rooms than it had before Katrina. From a peak of 7,400 hotel rooms in 2005, there were 5,560 at the end of 2010. The occupancy rate was 86 percent at casino hotels in 2010, the same as it was before Katrina in 2005. The average daily rate that swelled to $92 in 2006, when government and construction workers filled the rooms, is now $76, just $10 more than a decade ago.

The Mississippi Gaming Commission reports a substantial drop in visitors at Coast casinos over the decade, from 27.2 million in 2000 to 15.8 million in 2010.

Scott King, director of research and policy for the Gulf Coast Business Council and a former casino employee, said visitor count is an inexact science, often still done by security personnel with hand counters.

The percentage of Mississippi residents at coast casinos has risen from 24 percent in 2004 to 26 percent in 2010, he said. “This suggests that visitation has been reduced relatively proportionately, and roughly three quarters of our visitors still come from out-of-state.”

Along with rising fuel prices, the next great challenge for coast casinos could be competition from neighboring states. Alabama, Florida and other states are considering expanding gambling to keep players and tax revenue at home.

Most of the customers at Silver Slipper Casino are from Louisiana, which has casinos, and Ferrucci said he’s not overly concerned by the drop in visitor count.

“Our guests are afraid of hurricanes and oil spills, too,” he said. “We have to build back their confidence.”

A report released in December, “Playing to win: The outlook for the global casino and online gaming market to 2014,” says as the U.S. economy improves, casino revenues should start to recover in late 2011, but won’t return to prior levels until 2012.

Mary Lynn Palenik, author of the report and director of gaming, entertainment, media and communications practice for consulting firm PwC, said that is a difficult but not surprising message for the casino industry.

The report was less optimistic for Atlantic City, the only market expected to see 2014 revenue below 2009 levels.

Palenik said destination markets will see the greatest growth in the next few years and can learn from what happened in Atlantic City.

“Don’t oversaturate the market and make investment in products and technology,” she said. “Create new and compelling reasons to visit the area. It’s all about supply and demand. Other markets can look at Atlantic City, take that lesson and they can focus strategically on developing demand for the market and not just cannibalizing.”

Ferrucci said South Mississippi needs more attractions, activities and events.

“We need some things that are family friendly,” he said.

The success of the coast casinos also depends on bringing the younger generation to the table.

“Every industry has a consumer life cycle and it obviously needs to be replenished,” Palenik said. “The challenge for the industry is always going to be to create products and services that align with the preferences of this new group.”

For younger generations who grew up with technology and have more choices for gambling, it will take more than the latest slot machines.

“It’s an overall experience. It’s an experience from the moment you walk into the door to the moment you leave,” she said. “They want more and the casinos and the properties and the companies that respond with more are the ones that are going to have the greatest outcome.”

Mary Perez/The Sun Herald