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The Gulf Coast: back in business
2005 saw absolute devastation along Mississippi’s Gulf Coast as Hurricane Katrina hit. Sharon Harris visits the area to see the progress and process of recovery
Ten years ago, I visited and reported on the Mississippi Gulf Coast’s first decade of gaming. The 1990 statewide legalization of riverboat gaming transformed the previously-deteriorating region into a vital economic engine.
Fifteen years later on August 29, 2005, Hurricane Katrina killed or destroyed virtually everything in its path. In the post-Katrina sunshine, surviving residents evaluated the damages and questioned their futures.
Recognizing the emergency measures needed to help the gaming industry rejuvenate the region, Mississippi lawmakers immediately enacted a new law. It permitted casino gaming floors to be relocated on land within 800 feet of the property’s hotel, lobby or convention space. The legislation defined the 800-foot measurement from the back door of the gaming operation.
I returned to the Gulf Coast this past August to assess the region’s recovery. I found a work in progress, led by a courageous, determined people. Gleaming new buildings, rebuilt homes and shopping malls replaced the former sight of tons of dirt and debris, damaged buildings and property strewn across the highway. However, numerous empty lots and boarded up structures demonstrated that much must still be done for the region to recapture its former prosperity and growth.
The resiliency and sheer will of everyone I interviewed was most impressive since some had survived with little more than their lives. Their courage and optimism were truly inspirational.
The early days loomed large
Gulf Coast gaming had continually expanded from 1992 to 2005. Upon taking office in 1993 and immediately recognizing gaming’s potential, Biloxi Mayor A.J. Holloway strongly advocated gaming to jumpstart the beleaguered region.
“Gaming saved Biloxi from debt and deterioration. After the Isle of Capri opened on August 1, 1992, others followed. Gaming has helped fund upgrades of our infrastructure, roadways, community centers, sewer and water systems. Thousands have jobs, which has improved the quality of our citizens’ lives,” says Holloway.
Katrina strikes
Prior to 2005, Hurricane Camille in 1969 was the benchmark Gulf Coast storm. Camille cost billions and killed 143 from Louisiana to Alabama. Katrina topped Camille. Raging winds and 30-foot wave surges over eight hours ravaged every barrier and protective stabilizer. As a peninsula, Biloxi faced exposure on all sides.
The world media focused on neighboring New Orleans’ levee flooding, but Mississippi’s more severe damage spanned a wider area. The casino barges’ reinforced attachments splintered from their main properties. Katrina’s level of destruction may have varied among casino operations, but everyone confirms its life-changing, humbling effect.
Ironically, the MGM International’s Beau Rivage parallels the downtown business center and absorbed the brunt of the storm. Its 20-foot walls failed to stop 30-foot surges. At the Isle, a new barge was under construction the week before Katrina struck, and a new casino/hotel section had debuted in July 2005. Both were devastated, but management quickly recovered and the Isle was the first to reopen on December 26, 2005.
Along the beachfront on Highway 90, Treasure Bay’s iconic pirate ship was in ruins. Opened as a barge in April 1994, an authentic replica of an 18th century vessel soon replaced it. The adjacent medieval fort housed restaurants and other attractions. Katrina destroyed the ship’s reinforcements, reducing the structure to a broken shell.
Heading west and located several miles from the main highway, the Silver Slipper Casino in Bay St. Louis was the smallest coastal property on the Gulf. General Manager/COO John Ferrucci laments that Lady Luck was not with them that weekend.
“We were the little mouse that roared because we didn’t even have a hotel. We targeted those southeastern Louisiana parishes south of Lake Pontchartrain,” Ferrucci says.
After purchasing the former President Casino’s three-level gaming barge in April 2005, the Silver Slipper planned a four-week renovation and relocation. By Friday, August 27, 2005, the barge was ready for the shipyard refurbishment, but never made it. As Katrina hit Sunday night, the barge flew over Highway 90, landing atop a hotel.
Ferrucci explains, “The state closed everything by midnight. At 8 a.m. on Saturday, August 28, the Mississippi Gaming Commission collected backup informational computer tapes. They then secured the money and building.”
The Hard Rock also suffered bad timing, after receiving its license that very weekend to open the Monday after Katrina hit. As Biloxi Public Affairs Manager Vincent Kreel wryly states, “The Hard Rock had one customer that weekend, and Katrina was it.”
Hard Rock President/General Manager Duncan McKenzie describes the casino barge’s engineering as ultimately disastrous. Lacking interior support columns, the storm caused the barge to “pancake”, leveling everything on top of itself.
The post-Katrina era
What would come next? Virtually everyone praises Mississippi Governor Haley Barbour’s leadership immediately and throughout the following years. They claim his management expertise expedited the rebuilding and minimized delays.
“Haley Barbour fought in the political arena north of the I-10 highway. After Katrina, the legislators quickly enacted the relocation law. Wall Street approved, which eliminated the biggest risk factor for legislators,” says Ferrucci.
Rebuilding meant accumulating resources beyond Mississippi. As a successful lawyer, Washington lobbyist and former chairman of the Republican National Committee (1993-1997), Barbour understood the workings of the federal government system.
McKenzie applauds Barbour’s political skills, saying, “Governor Barbour used his Washington experience on our behalf. His appreciation of gaming as a revenue source meant being treated like other businesses. Our original legislation had supported a free-market model.”
Mississippi Hotel & Lodging Association Executive Director Linda Hornsby also describes Barbour as relentless. She states, “Nothing was enough. Every time funding came through, Governor Barbour returned to Washington for more.”
His personal involvement soothed everyone emotionally. Jill Alexander, senior director, corporate communications at the Isle of Capri Casinos, Inc. says, “Governor Barbour rolled up his sleeves, coupling leadership with compassion. He visited the Gulf Coast an unprecedented number of times.”
Community spirit rebuilt the coast
Facing billions in damages, each casino determined its own road to recovery. They questioned whether to reopen in stages or wait for the reconstruction to be complete? Several venues, including Harrah’s Grand, MGM’s Beau Rivage, the Isle of Capri’s Isle and Hard Rock’s Hard Rock, had corporate owners who could secure outside resources for financing.
MGM Resorts International Regional Operations President and Chief Operating Officer George P. Corchis, Jr. describes just how crucial reconstruction was to the region’s collective psyche. He says, “We added $550 million for rebuilding after the original Beau Rivage construction investment of nearly $800 million. Beau Rivage re-opened for business on the one-year anniversary of Katrina, an aggressive timetable in light of what needed to be done.
“We wanted to get 3,800 people back to work as quickly as possible, and believed the reopening date would deliver hope for the community. The world would also know that the Mississippi Gulf Coast was back bigger and better.”
Despite long-term business and personal heartache, the gaming industry pulled together. Hornsby says, “It took almost three years to reach a real turning point. As always, the casinos were benevolent citizens, helping any cause. After Katrina, most continued paying their employees for a while.”
According to Isle Vice President/General Manager Doug Shipley, the Isle opened its own relief center. The corporate office rotated many employees to other positions within the company’s other properties. He says, “We made serious efforts to care for each other.”
On a smaller basis as a private company with finite resources, Treasure Bay’s rebuilding took longer. They worked hard to recoup because COO Susan Varnes realized a delayed reopening would magnify economic problems.
“Our ship was a smaller property with only 52,000 square feet of gaming space. Without the 800-foot law, we could not have reopened. What would have happened to our team here? They could hardly relocate to the Caribbean, where we own and operate three properties and manage two additional sites.
“Our self-funded insurance program helped us rebuild bits at a time. Within the gaming community, our reconstruction proved controversial. The the Mississippi Gaming Commission had awarded us a special license to reopen with only 81 machines and a restaurant in June 2006.
“We worked in phases through December 2007, and consolidated operations into the hotel building on Highway 90’s north side. There are no emotional scars since we came out of it,” says Varnes.
The totally new Island View Casino Resort, Gulfport’s only casino, was built on the actual footprint of Harrah’s former gaming property. According to co-owners Rick Carter and Terry Green, the site’s destruction posed unique challenges.
“Like every area casino and business, we experienced the supply-and-demand imbalance of materials to labor. Rebuilding the basic community infrastructure was long and trying, but worthwhile,” Carter says.
The seven-story, 560-room Island View opened in September 2006. Phase Two, completed in May 2007, housed 83,000 square feet of gaming space-the Gulf Coast’s largest-including 2,000 slots.
Although a relatively new operator, Carter recognizes the region’s strengths. He says, “Witnessing the commitment to rebuild is a testament to how far we have come in a relatively short time.”
The 2011 Mississippi “State of the State Annual Report” claims the Gulf Coast regained almost 85 percent of its pre-Katrina gaming supply in 2007, generating a record $1.3 billion in gaming revenues. The region again experienced challenges in 2008, starting with high gas prices and a recession that continues to plague the national economy.
The April 2010 British Petroleum (BP) oil spill did not damage Mississippi’s Gulf Coast, but probably did damage its revenues that spring as local and out-of-town travelers may have postponed visits. Local and state officials designed contingency plans to battle any oil potentially washing ashore. Luckily, none did, but to compensate for any potential losses, BP paid Mississippi $15 million for future statewide marketing efforts.
A positive 2010 third quarter finally halted 10 consecutive quarters of declining revenues. From September 2010 to March 2011, gaming revenues stabilized within one percent of prior years.
What about the future?
Mississippi’s Gulf Coast and its gaming industry are rebounding. Hornsby’s latest casino hotel room data totals 5,612, or 72.1 percent of pre-Katrina numbers. She says, “So many people fleeing and never returning impacted the search for qualified employees.
McKenzie agrees that it has been tough. He says, “Initially, hiring staff was challenging, as most people were caring for their own families and situations.”
The 2011 “State of the State” analysis reports that of 30 casinos statewide, the 11 Gulf Coast casinos comprise a 46 percent market share, and directly employ over 11,200 people. Almost 16 million guests visited in 2010, more than two-thirds from out-of-state.
The gaming landscape will soon change again. Later this year, Boyd Gaming will pay $278 million in cash to buy the IP Casino Resort Spa – formerly the Imperial Palace – and join Boyd’s BConnected player rewards program. Independent operator Ralph Engelstad owned the Biloxi site and its Las Vegas counterpart. His family decided to sell both casinos after his death in 2002.
During Katrina, the building sustained superficial damage because of its back bay location. It reopened in December 2005 as the IP, rebranded to symbolize a fresh start.
Boyd Executive Vice President/COO Paul Chakmak claims the company has long desired a Gulf Coast site for cross-marketing its multiple southern venues. IP’s strategic location near I-10 eases travel from Alabama and Florida to the east, and Louisiana and Texas to the west. The Gulf Coast also draws northern customers from Canada and Boyd’s Indiana and Illinois properties.
“We visited Biloxi before breaking ground in Tunica 15 years ago. Mississippi is a welcoming business-friendly environment. As a single property, we are buying an awfully good group of people, and will inherit their talented management team,” says Chakmak.
By next summer, Boyd will spend an additional $44 million for HVAC heating/air conditioning system upgrading and casino/restaurant barge improvements on the water.
Other property openings are also pending. Singer Jimmy Buffet’s new Margaritaville Restaurant and Casino has a scheduled 2012 opening. Three miles north of Biloxi, land-locked D’Iberville will welcome the Can Can gaming complex. Included on the site will be a $75 million educational Oceanarium, with water pumped in from the Gulf.
The Gulf Coast tourist industry realizes its regional “ownership” of gaming has ended. In late 1992, Mississippi and six distant states offered gaming. Now, 22 states operate commercial or racino gaming, excluding tribal sites.
The hospitality industry must aggressively market and extend tourist options beyond locals or drive-in day visitors. Hornsby states, “Our challenge is ensuring former and new guests think of us again.”
Politically, Mississippi will elect a new governor in November. The new chief executive can significantly influence the industry’s operations, but most expect the new governor will remain supportive.
Hospitality operations rely on a cooperative government, and Shipley believes it is inevitable. He says, “Of all the jurisdictions I’ve worked in, Mississippi’s government and business have a healthy relationship. They get it.”
A new professional era will begin when the Mississippi Casino Operators Association (MCOA) officially relocates to Jackson, the state capital. The move will facilitate communications between Mississippi’s government and its multiple gaming communities.
In September, former Mississippi Gaming Commission Executive Director Larry Gregory became the new MCOA executive director. He exited the Commission after 10 years as executive director. Gregory’s regulatory expertise helped him draft the “800-feet” law.
Optimists who see a brighter future are everywhere. As Corchis says, “Despite setbacks from Hurricane Katrina, the sluggish economy and last summer’s BP oil spill, the casino resort industry remains the economic engine for both the region and Mississippi tourism.
“Of the 80,000 current tourism employees, Mississippi gaming directly employs more than 20,000, or 25 percent of these jobs. The casino resort industry also has a significant ancillary impact locally since many secondary businesses benefit from Mississippi’s casino resort industry.
“Gulf Coast gaming is pivotal to Mississippi tourism. Unlike convenience gaming elsewhere, the Gulf Coast offers a true resort destination.”
