Declining revenue batters many Miss. casinos
JACKSON, Miss. (AP) — Month after month, Mississippi's casinos are winning less from gamblers.
Some months, such as August, see a blip, and revenue rises a little. But those are exceptions. After hitting nearly $2.9 billion in 2007, revenue fell 22 percent to $2.25 billion in 2012. And the take is on track to dip another $100 million in 2013, state figures show.
Revenue is dropping because fewer people are coming through the doors at the state's 30 casinos. The number of customers fell from 10.1 million in the months of April, May and June 2007 to 6.4 million in the same three months of 2013, according to the Mississippi Gaming Commission.
The figures don't include casinos operated by the Mississippi Band of Choctaw Indians, which doesn't report figures to the state.
What was Mississippi's miracle industry of the 1990s has 15,000 fewer employees than it did in 2000, and the slide also is cutting into gambling taxes.
Increased competition is drawing some gamblers to other states, and casino executives say others never came back after the recession. Some Mississippi casinos are cutting costs to maintain profitability, which may keep them from investing in renovations and marketing for new customers.
The newest threat to the state's casinos is Arkansas, where electronic "games of skill" became legal in 2006 at Southland Greyhound Park in West Memphis and Oaklawn Park in Hot Springs. For a while, the two establishments were insignificant. Then steady growth shifted into high gear in 2011, when the Mississippi River's flood left many casinos closed, but Southland open. The pair won $181 million from gamblers last year, and that could grow by more than 20 percent this year, according to figures from the Arkansas Racing Commission.
The two Arkansas sites are just the latest competitors siphoning off people who used to come to Mississippi for a good time. Tunica casinos used to seek patrons in Oklahoma, but Indian casinos have mushroomed to more than 100 there, and now compete for Arkansas customers. Missouri once barred gamblers from buying more than $500 in chips in two hours, driving some to Mississippi, but voters abolished that limit in 2008. About 40 states now have casinos of some sort, the American Gaming Association says.
"Everybody opened up to gaming," said Webster Franklin, president and CEO of the Tunica County Convention & Visitors Bureau. "They saw what Mississippi had done."
Competition has hit casinos along the Mississippi River in Greenville, Lula and Tunica the hardest. The effects can be clearly seen at Coahoma County's only gambling complex, the Isle of Capri in Lula. That casino, which sits in the river bottom where U.S. 49 crosses into Arkansas, targets mainly customers from Little Rock, company officials say. Revenue at the casino fell from $75 million in its 2007-08 fiscal year to $55 million in 2012-13. Operating profit dropped from $11.5 million in 2008-09 to $4.3 million in 2012-13. Employment fell from 954 in 2000 to 459 this year.
But there's more going on than competition. Even the number of casino patrons from Mississippi fell by 16 percent at the state's casinos from 2007 to 2013. Gambling revenue nationwide fell by 9 percent in 2008 and 2009, according to the American Gaming Association. Revenue rebounded almost to pre-recession highs by 2012 but is now spread over more casinos and states.
"It's not that they're going to the competition, it's that the consumer is just being more conservative with their discretionary entertainment dollar," Penn National Gaming Inc. president and chief operating officer Tim Wilmott told investors in July. Among Penn National's casinos are the Boomtown in Biloxi and the Hollywood casinos in Tunica and Bay St. Louis.
Some casino companies borrowed heavily before the recession, only to find they couldn't repay debts. The Grand Station Casino closed in Vicksburg in 2012, and four other Mississippi casinos have been handed over to lenders through bankruptcies or foreclosures.
Even companies that escaped financial distress have concluded the best way to boost profits is to cut costs.
"I think now it's just a matter of we get enough cost out to offset the decline in revenue," Churchill Downs Inc. CFO Bill Mudd told investors in August of the company's strategy at its Harlow's casino near Greenville.
But George Weinert, the executive vice president of research firm Spectrum Gaming Group, says less money can mean run-down facilities and less investment in incentives to lure gamblers. That can drive further revenue declines.
For example, during the recent bankruptcy of Legends Gaming — which owned DiamondJacks casinos in Vicksburg and Bossier City, La. — an Oklahoma Indian tribe dropped a planned purchase after a report concluded DiamondJacks was losing market share and it facilities were in "woeful" condition.
But good news may be coming. Some of the worst revenue decreases came in early 2013, when casinos were fighting the effects of increased payroll taxes, high gas prices and fouled-up income tax refunds. In the early months of 2014, comparisons will stack up against those terrible months.
It's not clear whether investment in large multiplayer markets such as Biloxi and Tunica can improve the market's overall revenue. Tunica's Franklin advocates a strategy of building other tourism amenities, such as a water park, to draw visitors who might then gamble.
"We've just got to start building a diversified tourism economy," Franklin said.