HURRICANE DAMAGE: Katrina hits casinos - Friday 12th of August 2005
Louisianas largest casino, Harrahs New Orleans, survived relatively unscathed from the 145-mph winds and driving rain of Hurricane Katrina, which slammed into the Gulf Coast early Monday morning.
Casinos in neighboring Mississippi, however, bore the brunt of the Category 4 storm that flooded the gambling communities along the Gulf Coast. Lengthy closures might play havoc on the cash flow of several Nevada gaming companies.
Because of inaccessible roads and an areawide curfew, damage assessment in Mississippi will not be known until sometime today.
On Monday, gaming analysts, as well as Standard & Poors Rating Services, cautioned that shares of several casino companies also could be hurt by the hurricane.
"The potentially devastating and unfortunate weather conditions could have a significant impact on the casino-lodging operators in the area," Goldman Sachs gaming analyst Steven Kent said in a note to investors. "Any impact to the casino-hotel structures or surrounding infrastructures could result in any of these properties being closed for some period of time."
If there was any significant damage to the casinos, the operators all have insurance policies to cover losses.
Executives with Nevadas major gaming operators spent Monday scanning news reports and awaiting word from employees in the area on how their multimillion-dollar casinos in Louisiana and Mississippi held up.
Harrahs Entertainment, the industrys largest casino operator, and Pinnacle Entertainment, both with casinos in New Orleans and Mississippi, seemed to be the most vulnerable. Other Nevada companies with casinos in the hurricanes path included MGM Mirage, Boyd Gaming Corp. and the privately held Imperial Palace.
By midafternoon Las Vegas time it became clear that New Orleans was spared the brunt of the storm.
Other than some minor roof damage and water-related issues, Harrahs New Orleans, located near the French Quarter, was in fair shape.
"It looks like the property held up pretty well," Harrahs Entertainment Chairman Gary Loveman said.
Harrahs New Orleans, a 115,000-square-foot casino, reported $207.6 million in gaming revenues through July, the highest in the state.
"Our biggest concern are the casinos in Mississippi," Loveman said. "We havent been able to get in and see the damage."
Boyd Gaming spokesman Rob Stillwell said company officials had not been able to get near the Treasure Chest, a 24,000-square-foot floating casino on Lake Ponchartrain in the New Orleans suburb of Kenner.
New Orleans had been the main concern of weather forecasters Sunday night. By Monday, the focus shifted to the Mississippi communities of Biloxi and Gulfport, where state officials had credited the influx of legalized casino gaming in the 1990s with reviving a sluggish economy.
As the hurricane neared, Mississippi gaming regulators ordered casinos in Biloxi and Gulfport closed at 2 a.m. Sunday. Later that same morning, the mayor of New Orleans ordered a citywide evacuation, shutting all local businesses.
About 14,000 workers are employed in 12 casinos along the Mississippi coast. One state official said Mississippi loses about $500,000 a day in tax revenue each day the casinos are closed.
In 2004, Mississippi casinos had gaming revenues of $2.7 billion, third highest of any state, behind Nevada and New Jersey.
Unconfirmed reports out of Biloxi said MGM Mirages Beau Rivage, one of the citys premier gambling spots, had water on the first floor. The states governor said other casinos were also flooded.
MGM Mirage spokesman Gordon Absher said the 1,750-room hotel-casino was designed so water would flow around the casino and hotel tower into other parts of the property. The flooding, he believes, may be attributed to the parking garage.
"If so, then thats way it was supposed to have worked," Absher said. "The area has been sealed off, so we wont be able to set eyes on anything until sunrise. Our concern now is with our (3,000) employees and the community as a whole."
According to Standard & Poors, Harrahs, Boyd Gaming and MGM Mirage derive less than 5 percent of their annual cash flow from their Gulf Coast holdings. Casinos in Louisiana and Mississippi, however, account for about 40 percent of Pinnacles cash flow.
Company Chairman Dan Lee was awaiting news on Pinnacles Casino Magic in Biloxi, which has 378 rooms and a 50,000-square-foot casino.
The companys Boomtown New Orleans, a 30,000-square-foot floating casino on the Mississippi River on the eastern side of the city, most likely was unaffected by the storm, he said. Even so, Lee is worried business might be slow to return.
"The casino might come through unscathed, but if people have a lot of damage to their property, then they will be spending the next couple of months repairing their homes rather than visiting casinos and other entertainment options," Lee said. "Were also very concerned about our employees who may have lost homes in the hurricane."
Shares in Harrahs closed at $72.75, up 25 cents, or 0.34 percent. MGM Mirage ended the day at $43.30, up 52 cents, or 1.22 percent. Shares in Pinnacle were off 76 cents, or 3.33 percent, to close at $22.07. Shares of Boyd Gaming closed at $47.59, down 20 cents, or 0.42 percent.
"Companies with operations in the area like Harrahs will be slightly impacted, but they are insured and well diversified, so it shouldnt be too bad," Argus Research gaming analyst John Staszak said.
Harvey Perkins, vice president of analysis for Spectrum Gaming, said problems could linger after companies have properties up and running.
He said widespread property damage could cut into customers discretionary spending. State governments in Louisiana and Mississippi could have trouble focusing on gaming regulation as they struggle with recovery efforts, which could delay property reopenings.
The Associated Press and CBS MarketWatch contributed to this report
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