Louisiana casinos raking it in since Katrina

“It’s really amazing,” said Biloxi Mayor A.J. Holloway. “A lot of people say this is FEMA money and insurance money, but I don’t believe that. We’re getting a lot of people from out of town coming here. The casinos tell me their base is coming back.”

Reaction to destruction of the two states’ gambling industries was a huge contrast and, perhaps, a telling sign why many predict profitable days ahead for the Magnolia State.

Within weeks after Katrina, Mississippi Gov. Haley Barbour got the Legislature to allow casinos on shore. Until now, they’ve rested on barges moored along the beach, though hotels and other amenities were built ashore.

In Louisiana, New Orleans Mayor Ray Nagin’s idea of opening up the city’s downtown area to more casinos went nowhere. Gov. Kathleen Blanco has opposed any gambling expansion.

Andy Holtmann, editor of Casino Journal, a Las Vegas-based trade publication, said if New Orleans wished to challenge the Gulf Coast head-on for gambling tourists, it may have missed its chance.

“Unless everyone shifted gears right now and said ’Let’s open up New Orleans to casinos,’ it probably would be difficult to compete,” Holtmann said.

Nagin’s proposal was a long shot at best, considering Harrah’s Entertainment Inc.’s New Orleans casino has a state monopoly — granted in 1992 — on land casinos in the downtown area.

Harrah’s, which was used as an emergency staging point in Katrina’s aftermath, is moving ahead with plans to open a 450-room hotel adjacent to its casino in September. The casino, which reopened in February, had its best-ever month in May, winning $35.7 million.

“We’re very excited and very bullish on the region from Houston to Mobile,” said Jim Hoskins, the casino’s vice president and general manager.

Analysts agree Harrah’s, and its deep pockets, has a definitive advantage in New Orleans in the two-state fight for players. Louisiana’s riverboat casinos are another matter, especially when compared with the upscale resorts getting started in Biloxi and elsewhere on the Mississippi coast.

When the Louisiana Legislature authorized riverboat gambling in 1991, lawmakers said there could be no more than 15 licenses — and boats could have no more than 30,000-square feet of gambling space.

With those restrictions, Louisiana casinos can’t afford to make the sort of investments in customer-appealing expansions seen on the Gulf Coast, said Wade Duty, head of the Casino Association of Louisiana, a trade and lobbying organization. Also, Louisiana casinos pay state and local taxes of up to 27.5 percent, while Mississippi’s total burden is around 12 percent, Duty said.

“The bottom line is Louisiana almost has priced itself out of the market,” Duty said. “If you’re publicly traded, how can you justify to your shareholders hundreds of millions of dollars in reinvestments at this tax rate, when you can get a lower rate just next door?”

In the meantime, more competitors are lining up to attract gamblers to Biloxi. The toughest competition could come from MGM Mirage Inc.’s Beau Rivage, which is scheduled to reopen on Katrina’s first anniversary with 3,400 employees — the same as before Katrina — new restaurants and a poker room. The $700 million resort opened in 1999.

The most recent developer to join the fray, Trump Entertainment Resorts Inc., recently announced a partnership with a Mississippi company to build a gambling resort in Diamondhead, Miss.

Another casino on its way back this summer is Grand Casino Biloxi, also a Harrah’s property. Karen Sock, Grand Biloxi’s senior vice president and general manager, said it’ll be a long time before coastal casinos have to worry about hitting a wall in revenue growth.

“Years ago, people looked at Las Vegas and said, ’Oh, it’s getting too big.’ It still hasn’t gotten too big. And I think we have that same opportunity here on the Gulf Coast,” she said.

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