Casino officials cite volatile marketplace
Published 6:49 pm Friday, October 27, 2006
Harrah’s Entertainment Inc. has put plans for a new casino resort in Biloxi on hold.
High construction costs, a volatile marketplace and uncertainty over a proposed Choctaw casino were cited as factors, said company officials.
Gary Loveman, the company’s chief executive officer, had pledged in September 2005 that Harrah’s would build something “spectacular” if Mississippi changed state law to allow coast casinos on land. He said Wednesday plans for Biloxi are on hold. The company had been expected to release details on its expansion plans midyear.
Loveman, in a conference call with investors, did not say whether the proposal of two private equity firms to buy the company played into the Biloxi plans. At the onset, Loveman said he and other executives would not comment or answer questions about the proposed buyout. He did mention “spiraling construction costs” as a concern.
“We continue to look at our options in Biloxi,” Loveman said. “We don’t have anything to tell you right now.”
Harrah’s has entered into an agreement to buy the Casino Magic property next to its Grand Casino property and continues to acquire small parcels of residential and commercial land on Point Cadet for future development. Deed transfers continue to be recorded at the Harrison County Courthouse in Biloxi, including one that was filed as recently as Monday.
“Over some period of time, there will be something new,” Loveman said. “We have a very competitive land position that is as good as any or better than any. The time at which we would wish to pursue — that is really the question.”
Anthony Sanfilippo, president of Harrah’s operations in the central United States, told The Sun Herald newspaper that construction costs are one concern.
“We have seen in the last six to nine months extreme escalation broadly, not only on the Gulf Coast, but throughout the U.S. in the cost of materials and cost of labor. We continue to work on a master plan that will allow for future expansion.
“We look closely at economic conditions on the Mississippi Gulf Coast, which also include the potential changing landscape in new casino projects. Specifically, we’ve been watching the evolution of the potential Choctaw casino and the impact such a project may have directly on Biloxi,” Sanfilippo said.
The Mississippi Band of Choctaw Indians have proposed a casino near Ocean Springs. The tribe wants a vote in Jackson County on the issue in 2008. Opponents want a faster vote.
Harrah’s, which had the most slot machines and table games on the coast with two casinos before Hurricane Katrina, sold its Gulfport property for $55 million to Rick Carter and Terry Green, who converted the Oasis Hotel into one of the coast’s largest casinos and are continuing to expand.
Harrah’s reopened the Biloxi Grand Casino inside its hotel on the north side of U.S. 90 in mid-August. Its opening apparently did little to grow the market that month. Gross gambling revenues dipped from the month prior.
Harrah’s does not report earnings by property. Instead, the company lumps revenues into regional totals. Company executives did say Biloxi revenues have been “encouraging.”
Harrah’s Entertainment reported third quarter earnings of $178.3 million or 96 cents per share. Analysts were expecting earnings of 99 cents per share. Loveman said Atlantic City properties were weak because of a three-day shutdown over a state budget impasse and aggressive marketing by the company’s competitors.
“Clearly, Atlantic City was our Achilles’ heel this past quarter,” Loveman said.