Casino operators watching Alabama, Florida

BILOXI, Miss. – A recession on the heels of a devastating hurricane has dealt Mississippi casino operators a bad hand over the last several years, and now operators fear the expansion of gambling in nearby states could cannibalize the industry.

Operators taking part in a roundtable discussion at the Southern Gaming Summit here Wednesday said if gaming opens up in Alabama and Florida, they may stop marketing to the three- to five-hour drive-up customer, which has been a mainstay in markets like Biloxi and Tunica.

Country Crossing, just south of Dothan, had more than 1,700 electronic bingo machines in operation before shutting down earlier this year to avoid a raid by the Governor’s Task Force on Illegal Gambling. Several thousand electronic bingo machines are currently in operation at Victoryland in Shorter, though the governor has made attempts to raid that facility as well. The issue of the legality of electronic bingo in Alabama is still unresolved.

“We all need to understand what is going to happen in Alabama and it needs to be settled,” said Virginia McDowell, president and COO of Isle of Capri Casinos.

With no voter referendum and no Supreme Court action as of yet, Alabama remains in limbo, she said, and marketing decisions for that drive-in market will have to be analyzed. She said charter flights from Atlanta might be a more useful marketing strategy if gaming comes to Alabama.

“We look at this market and pressure as far as Alabama casinos and as far as Florida casinos. We are all marketing to the same customer base and don’t see where growth will come,” she said.

Growing competition is especially a cause for concern in a state that has suffered year-over-year losses.

“From the standpoint of Mississippi,” said Anthony Sanfilippo, president and CEO of Pinnacle Entertainment, “there is more competition in Florida and Alabama. Louisiana has a strong complex of casinos. Oklahoma has more than 100 casinos. So, you have a weakened economy with so much more supply. Compared to 10 years ago, we are in a much different place.”

Scott Barber, regional president for Harrah’s Entertainment, said that, absolutely, the large-scale bingo facilities operating in Alabama affect his operations. Harrah’s customers come from Huntsville, Birmingham and Mobile, and can easily stay in-state to gamble.

“It’s not a huge part, but it is a part of our market share,” he said. And while any expansion of gaming improves the industry’s big picture, it doesn’t help Mississippi.

Pinnacle does not have a casino in Mississippi, but Sanfilippo said he would love to locate in the Magnolia State because of its low tax rate and strong support from government officials who helped the industry rebuild after Hurricane Katrina hit the Gulf Coast in August 2005.

He called it a gaming-friendly state.

“I love Mississippi,” said Sanfilippo. “Gov. (Haley) Barbour reacted quickly in a bad situation. The Gaming Control Board is made up of three thoughtful individuals who see gaming as a business. The state has a reasonable tax rate and we don’t take that for granted.”

Operators said their biggest revenue declines last year were in Mississippi and Louisiana. Properties in the Midwest did the best, particularly those in Missouri because of a change in law there.

As a way to attract new customers and increase the frequency of current customers, Silver Slipper Gaming CEO Paul Alanis said he takes a discount store approach.

“People are looking for customer value,” he said. “That’s what Wal-Mart does so well. Last year was very difficult. We see a definite up-tick this year but it is too early to call it a trend.”

While he said he fears hurricanes and oil slicks, “competition that cannibalizes the market” is Alanis’s greatest worry.

Operators said customer surveys show them that people want a whole experience – a nice hotel room, a spa, entertainment, retail availability, and beverages and fine dining.

“We talked to customers about what was important to them and it was a higher standard,” McDowell said. “We’ve elevated the experience.”

She said more and more people are enjoying the social aspect of gaming. As Internet gaming increases, McDowell said playing at home does not offer the connection of a social environment.