by John Branston
BILOXI, Miss. -- Can an industry that's grown from nothing to over $1 billion a year in less than five years be under-appreciated?
In
the case of Mississippi's riverboat casinos in Tunica, Greenville, and Vicksburg,
the answer is yes. At the Southern Gaming Summit here last week, most of
the hype, perhaps understandably given the venue, was about the "Gold
Coast" and the "Biloxi Boom." The riverside casinos, which
as a group take in more money than the Coast casinos, got a cooler reception
from speakers, analysts, the media, and even some casino insiders.
Keynote speaker Philip Satre, chairman of Memphis-based Harrah's Entertainment, called southern Mississippi and New Orleans the next gambling "epicenter." He said barely a word about Tunica, where Harrah's has spent $140 million on two properties, one of which will close next week. Only one casino operator, Boyd Gaming (parent of Sam's Town) participated in a panel discussion on Tunica. Some Tunica operators, including Circus Circus, which is building a 30-story hotel, skipped the conference altogether (three years old, the event has never been held in Tunica). A new survey of the economic benefits of casinos by the American Gaming Association focused on Biloxi/Gulfport and ignored Tunica/Memphis.
The very word "riverboat" has taken on a low-rent connotation ("vessel" is the preferred substitute), making it nearly as taboo on the lips of industry executives as the word "gambling."
"People on Wall Street think that we're fishing from them," grumbled one casino executive.
Overall, amid all the preaching to the choir, there was a definite note of caution in the air at last week's summit. That caution was the result of hard experience in new gambling jurisdictions.
"Gaming doesn't belong everywhere and it won't work everywhere," said Don Snyder, president of Boyd Gaming. A week earlier, Boyd took a $126 million write-down on its disappointing Kansas City casino.
The scoop on Tunica was this: It is now grossing about $770 million in annual revenue and should top $1 billion in a year or two. It is potentially a solid regional market, drawing most of its customers from within a radius of 200 miles. Financials are improving after a rough 1996, when the opening of Grand Casino Tunica trimmed everyone's earnings. Boyd, for instance, last week reported its third consecutive quarter-to-quarter gain, and its hotel occupancy improved from 59 percent in January to 85 percent in March. Grand's revenue for the first quarter of 1997 was up 20 percent over the fourth quarter of 1996. A golf course under construction, some new amphitheatres, and name entertainment like Bill Cosby give the erstwhile cotton kingdom a taste of Las Vegas.
For now, however, it is still largely a local market, with an estimated 60-65 percent of its business from Memphis and Shelby County. If that figure is correct, and both Satre and Joe Fuscaldo of Sam's Town agree that it is, then Memphians are dropping nearly $500 million a year at Tunica casinos -- more than the annual city operating budget. The Gulf Coast has a beach, fishing, 19 golf courses, tennis, shopping, and a hockey team that draws 6,000 fans a game. Tunica, in the daytime at least, offers little to do except eat, sleep, and gamble.
"Last year we had 2,000 hotel rooms in Tunica County and all there was to do when you woke up on Saturday morning was go back to the casino," lamented Webster Franklin, executive director of the Tunica Convention and Visitors Authority.
As described by casino executives in Vicksburg and Greenville, the prospects for local markets are not pretty.
"A local market will slowly spiral downward," said Ira Kershner, general manager of the Lighthouse Point Casino in Greenville.
Added Lee Witherow, general manager of Harrah's Vicksburg, "Unless you grow the market, dollar players become quarter players and quarter players become nickel players."
Casino managers say this is already happening in Greenville and Vicksburg. Play is heaviest around the first of each month when government assistance checks come in, and tapers off at mid-month. Regular players come in as often as six times a week, nursing $15-$30 on the nickel and quarter slots each time. Harrah's restaurant menus in Vicksburg have been adjusted to include more fried foods, rice and gravy, and greens and cornbread at every meal -- "even breakfast," says Witherow.
At the opposite end of the gambling spectrum from the local market is the destination market, where out-of-towners supply the cash. Destination markets have patrons in suits as well as bermuda shorts and Dekalb hats. They have boxing matches with vaguely familiar fighters. They have operators like Steve Wynn of Mirage, which is building a $500 million project in Biloxi called Beau Rivage, and Wynn-wannabes like Marlin Torguson of Casino Magic in nearby Bay St. Louis, modestly described as "perhaps the gaming industry's greatest visionary" in his convention biography.
The battle cry of would-be destination markets, as articulated by Torguson, is More Roads, More Airlines, More Golf Courses. The correlation between gamblers and golfers is absolute Holy Writ in the casino industry.
"We need 25 more golf courses, at least" on the Mississippi Coast, said Torguson, whose business partner is golfer Greg Norman. The gaming industry's greatest visionary also boasted of the "blue waters" of the Mississippi Sound, which is about as blue as the Mississippi River.
Tunica had its champions, too, notably Paul Alanis, president of Horseshoe Gaming, which operates the Horseshoe casino in Tunica.
Horseshoe, a private company, is not bashful about publicizing its market-leading $160 million in revenue last year, a figure the Mississippi Gaming Commission does not dispute.
"We are seeking home runs, not Texas League singles," Alanis said to all those who would take a sour-grapes attitude toward Tunica.
Tunica, he argued, is not saturated despite last year's opening of Grand Casino Tunica and Harrah's plans to close their original facility on May 19th. It is Las Vegas, he suggested, that is overbuilt. He joked that within 10 years, Hilton "will open its 18th casino on The Strip for $5 billion, patterned after Lithuania because that will be the only country without a theme casino." On a serious note, he predicted the new Circus Circus 1,200-room hotel in Tunica will have a higher return than that company's pyramid-shaped Luxor casino hotel in Las Vegas.
The industry's broad strategy for the millennium was clear. It will fight anti-gambling groups and skeptical reporters with a two-pronged economic argument. The industry creates jobs and pays a lot of taxes (although Memphis, the fourth largest casino-feeder market in the country, gets none of the latter). And casino employees have a lot of spending power, although "we have not seen a dramatic increase in perception commensurate with our economic impact, and that concerns me," Satre said. Proponents hope their economic arguments will make votes against gambling less likely to be the "free" votes that they are now for most politicians.
The skunk-at-the-garden-party award, no surprise, went unanimously to the media.
"Our opponents have sold the media a bill of goods," complained Frank Fahrenkopf, president of the American Gaming Association. "The press has been quick to pick up on it."
Snyder of Boyd Gaming called the press "probably the greatest obstacle that we have" in Missouri.
The National Gambling Impact Study Commission, whose last three members were appointed this month, is viewed by some as more troublesome than a hostile press. The nine-member commission will do the first comprehensive study of all forms of gambling since 1976.
"In plain English, they're going to screw it up," said Frank Catania, director of the New Jersey Division of Gaming Enforcement. "You in the casino industry are going to be taxed by the federal government."
In the end, after all the bugaboos had been raised and all the anti-gambling dragons slain, it was left to an industry-friendly consultant and a panel of experts on slot machines and blackjack to raise and attempt to answer the hardest question: Is casino gambling an industry without a conscience?
Slot machines account for about 80 percent of the revenue at Mississippi casinos. Players have strong loyalty to certain games -- one called Sizzling Sevens is currently popular -- and machines. In deference to customers, Harrah's will move some of its most popular machines to its newer Tunica casino when it closes the old one this month.
Casinos are constantly tinkering with their slot payback percentage and "hit" frequency to attract more players and keep them playing longer. Michael Ratner, head of slot operations for Treasure Bay Casino in Biloxi, keeps the words "think handle" on his computer screen-saver. The handle is the amount bet. Player tracking is how a casino identifies its most profitable customers. Technology has made it possible to gather a wealth of detail about the skill and betting habits of individual players so the casino can, in industry parlance, "comp with confidence."
"We know they're going to lose $200 that night," Ratner said. "Let's take it from them over a slow progressive time frame, not 20 minutes."
Two hours or 20 minutes, slots or tables, the reality of the casino business is separating customers from their money and making them enjoy it in the name of entertainment. Even casino opponents concede that most Americans buy into the concept of casinos as entertainment even if they don't want them in their towns or states. "Bad" players are the best customers in the sense that they lose the most money and cost the least to attract. Highly skilled players, in fact, can be asked to leave a casino. How, then, do casinos deal with the universally condemned fact of compulsive gambling (or "compulsive gaming" as Mississippi Rep. Tim Ford called it)?
John Angus, a Washington, D.C., consultant and attorney, suggested that the toughest issues the Gaming Impact Commission will likely raise will be about casino marketing. He grimly threw out a few high hard ones:
What are our player-tracking systems doing?
Why do we cash paychecks and welfare checks?
Why do we put ATMs near the tables and slot machines?
Why are we developing faster, simpler ATMs that work without a PIN number?
Why do we design seductive machines for video poker?
A few years ago, a Mississippi Gulf Coast attorney rose to prominence by taking another controversial industry to task for selling and marketing to human frailties. Today Mike Moore, now attorney general for the state of Mississippi, is among those negotiating terms of the cease-fire with Big Tobacco.
Nobody mentioned Mike Moore or Big Tobacco, at least not in public presentations. The questions that Angus asked went unanswered. They are likely to be heard again, in much less friendly forums.