Competition breeds added benefits - Friday 12th of August 2005

After six years of relative stability, the Coast casino market is entering a new era of expansion and increased competition.

The soon-to-open Hard Rock Biloxi will lure gamblers from existing properties. Other new casino projects, such as Bacaran Bay and Silver Slipper, are moving forward. The worlds three largest casino companies, formed through corporate mergers this year, are also in a position to heat up the market.

Keith Crosby, the general manager of the privately held Palace Casino, remains confident even though the Hard Rock may appeal to the same crowd that patronizes its nightclub Z.

"Were going to keep doing what were doing," Crosby said. "The bottom line is its not bricks and mortar. Its smiling faces and handshakes and treating the customers right. Thats the difference. I told our folks the other day, theres nothing Beau Rivage has got that we aint got. Why would I be worried about Hard Rock?"

Hard Rock plans to pull customers from Beau Rivage, its nearest neighbor. The companys marketing strategy is to "capitalize" on its bigger neighbors customer base and simultaneously "provide synergies" to attract new customers to both properties. Beau Rivage and Hard Rock in downtown Biloxi will form a new casino cluster that will rival Casino Row.

"This new cluster, which will make up more than 30 percent of the total casino hotel rooms and approximately 20 percent of the gaming positions in the Mississippi Gulf Coast market will enable customers to park once and visit both hotels and casinos," according to the strategy Hard Rockss parent company, Premier Entertainment, outlined in a filing with the Securities and Exchange Commission.

Analyzing the future

During the last wave of casino expansion, which occurred in 1999 with the opening of Beau Rivage and Imperial Palace, only one casino closed. This time around, one Biloxi casino, the President, is already destined for closure. By years end, Biloxi will have the same number of casinos - nine - as it did before the opening of Hard Rock.

But whats in store beyond then?

Daniel Davila keeps close tabs on the Coast as an analyst on leisure and entertainment companies for the investment firm Sterne, Agee & Leach Inc.

"Do I think the market can sustain it?" he said. "The short answer is yes."

The introduction of beachfront condominiums, the expansion of the airport and the quality of the casino developments are all positive factors, said Davila.

"I would say that it looks like its the right kind of capacity coming on. Its not just capacity for capacitys sake... It takes the right kind of supply to drive demand."

Davila gave the example of Borgata, the $1.1 billion casino resort that Boyd Gaming opened in Atlantic City. It has fueled growth in that citys market, where monthly revenues from all casinos surpassed $500 million for the first time this summer.

"Bacaran Bay is a very well thought-out concept, not unlike some of the concepts youre seeing in Las Vegas," Davila said.

The resort will feature condominiums, a wedding chapel, a bowling area and a golf course within short driving distance.

Bracing for competition

Expansions arent limited to new casinos, however. This autumn, Isle of Capri will complete the third phase of a major expansion when it brings in a new $90 million casino. Casino Magic Biloxi recently did an interior renovation, and Imperial Palace is scheduled to follow suit.

Beau Rivage, which is owned by the worlds second largest casino operator MGM Mirage, will open a new golf course next year. The resort also has room for expansion because it owns a nice chunk of downtown property from U.S. 90 north to Howard Avenue.

Penn National, which is about to become the third largest casino company because of a pending merger, has plans to build a land-based food venue at its Boomtown Casino in Biloxi and has hundreds of acres it can expand on at Casino Magic Bay St. Louis. The Bay property will soon have a nearby competitor when the Silver Slipper opens next year.

Harrahs Entertainment, the biggest casino company in the world, has Grand Casinos at Biloxis Casino Row and in Gulfport, where it owns vacant land that could be developed.

In 2007, its Gulfport property will become a Harrahs and its Biloxi property will become a Horseshoe.

"Were excited that the Hard Rock is coming to town and to the market," said John Payne, president of Harrahs Gulf Coast properties. "I think it makes the market more attractive from a national perspective. Clearly, our gaming customer core is the largest in the world, and we have the largest data base with over 40 million people. We are going to aggressively market the two new properties we have on the Coast."

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