A Grander Plan
A Grander Plan
Despite devastation and heartache, Katrina also brought the Gulf Coast gaming industry a rare opportunity to rebuild
Out of crisis comes opportunity, and as there has been no bigger crisis for the casino industry than the devastation caused by Hurricane Katrina, there may never again be another opportunity to develop a new world-class regional casino market in an area already known to support gaming.
"While it's a great tragedy, ultimately this will be one of those silver linings," said Tom Sykes, a principal with SOSH Architects in Atlantic City. "It is a sound market, and it demands responsible design and responsible legislation."
Analysts and operators alike see the potential for the Mississippi Gulf Coast to become a true destination resort, if unfettered by the existing restriction to build over water.
"I think the facilities to a very large degree were constrained in really becoming and incorporating the elements that would comprise a wonderful destination resort, because of their locations," said Steve Rittvo, president of The Innovation Group.
Land rush
At press time, Mississippi lawmakers in both the House and Senate had passed-albeit narrowly-a proposal supported by Gov. Haley Barbour which would allow the Gulf Coast's casinos to rebuild "shore-based" properties up to 1,500 feet off the Gulf of Mexico. While most experts had predicted that eventually the laws would be modified to allow for building on land in some fashion, some warned that the process was extremely complicated and could take a long time, and though the bills passed during the special session of the Legislature that Barbour called for, it doesn't immediately solidify the Gulf Coast casinos' rebuilding plan. The process is one likely to be debated by lawmakers and special interest groups for some time.
"I think we're in for a several year process before anyone knows exactly what to do," said Brian Ford, director of gaming industry services for Ernst & Young. "It will take great leadership to get this all sorted out. And I'm confident that leadership will come, it's just that there are a lot of competing interests."
Those include representatives from the northern casino markets, who might object to any provisions allowing only the Gulf Coast market to build on land while they remain restricted, vocal members of religious groups fearful of gaming expansion, and individuals keeping the original viewpoint that somehow water-based casinos were less "casino"-and therefore more palatable-than land-based casinos.
"I'm not used to any government being able to wrestle through all those very complex issues in a short period of time," said Ford, "and I don't want to minimize the gargantuan nature of the decision tree that is involved. But Mississippi is a very forward thinking state when it comes to controlling and regulating the casinos. If there is ever [a decision process] that will be worked out more expeditiously, it will be this. I am pleased to see the optimism, and I am personally very optimistic-it's just going to be a very interesting time."
Others seem more confident that things will get moving fast.
"I anticipate getting approvals to [open] temporary facilities very soon, even if just in tents, as soon as the infrastructure will support it," said Saverio Scheri III, managing director of WhiteSand Consulting.
He emphasized the importance of generating revenue again, and of drawing people back to the region, and he sees an ambitious schedule inside six months. "That might be aggressive, but I have a lot of faith in the industry, and in people to move quickly to get past it."
The Gulf Coast chapter of the Mississippi Casino Operators Association hoped they would be able to establish temporary casinos, perhaps within 2,000 feet of their existing sites, for as long as two or three years until permanent construction could be completed. Those could be housed in existing restored hotels, or in new makeshift buildings.
In the special session, Barbour proposed that the Gulf Coast casinos be allowed to build on or near the shore, so long as they have facilities touching the water. He emphasized that such a plan does not compromise his campaign promise to prevent the spread of gambling. It will "not have any material effect" on where the state already allows casinos, he said.
"We have learned the hard way that making them float on water is not a good idea. If we want world-class resorts that will be about much more than just gaming, if we want to build the Coast bigger and better than ever before, I believe we will fail if we don't allow the casinos to come on shore, even if only a few hundred feet." Still, opponents to land-based casinos point out that existing laws, especially a provision passed earlier this year allowing for casinos to be constructed on permanent structures in, on, or above certain waters-the so-called "pilings bill"-were sufficient for operators to build safer facilities. Some of the operators disagreed.
Jan Jones, Harrah's senior vice president of government relations and communications, told local reporters that building on land is safer than building over water, even on pilings. "Some of those barges are the size of two football fields and [Katrina] threw them across the road like they were down pillows," she said. If casinos were to remain over water, then most operators will still rebuild. But the opportunity will be missed to turn the area into something special, something that most observers and operators were anticipating.
'Bigger and better'
If the Legislature allows building within 1,500 feet of the water, that means facilities could conceivably build on the north side of Highway 90, creating contiguous resorts that would rival anything found in Las Vegas.
"I think it provides the opportunity for the Gulf Coast to ratchet itself up another notch or two," said Rittvo.
While he noted that there were some excellent facilities in the region already, most were not very efficient or convenient for consumers, connected as they were by bridges or walkways, rather than being one contiguous property. "Envision the Mirage [in Las Vegas] with one half of one side of the Strip and the other half on the other," said Rittvo.
But even if the Legislature doesn't allow building out to 1,500 feet, but rather an 800-foot limit or even closer to shore, Rittvo thinks several operators will be able to build new facilities that manage their existing space near the water much better than before, and still create more of a resort feeling than existed pre-Katrina. "The development of the Gulf Coast was done in stages. When you do that, you try to fit things in with decisions that were made...years ago. I think there's an opportunity to start with a carte blanche. In a few instances, I would anticipate better quality, more integrated, and better conceived resorts coming out of this." Even for an operator with the most lavish existing facility, there will be a major construction effort just to clean up Katrina's mess.
"We're probably talking about a rebuilding effort of enormous proportion, but are we just going to start changing everything?" asked Alan Feldman of MGM Mirage, which owns Beau Rivage. "We already had a full-service resort, we had convention space. I think you're probably going to see us build Beau Rivage back to where it was [regardless of any law changes]. We don't see a future [for us] that is enormously different."
But that facility was the exception rather than the rule; in fact it set a new standard for the region when it opened a few years ago. That standard will set the stage for new development by others.
"I'm convinced that they will build some very magnificent properties there," said Scheri. "It's an opportunity for all of these companies to build something bigger and better than what they had."
Certainly Harrah's has stated that it hopes to build something "spectacular" if allowed on land, and other operators would likely follow suit.
Other advantages
Rittvo also thinks that this provides an opportunity for operators to focus more on market segmentation, much like properties on the Las Vegas strip.
In the Gulf Coast, "they were all pretty much the same in the beginning," and then Beau Rivage opened with a more upscale focus, and the Hard Rock was targetinga younger clientele, Rittvo said. He expects operators to continue this trend, especially those with multiple properties. Rather than have two casinos that look the same, one operator can target different market segments. "That's a set of unique opportunities that didn't exist before."
Another potential advantage for the Gulf Coast is that the entire region, commercial and residential, will be developed using a master plan.
"If you look on the bright side of this, we'll see a very unique redevelopment process along a coastal region that will have lots of input on how to prevent this kind of catastrophe again," explained Glen Schostak, a senior client partner in the travel and hospitality sector of Korn/Ferry International. "It's a great opportunity to develop an area and a region that's really going to be purpose-built for a resort/integrated casino environment, which will end up being a much better place than it was before."
He added that more recent residential and commercial construction weathered Katrina better than older buildings, proving that current building codes have had a positive impact. He noted that the extra cost and effort to secure the Beau Rivage paid off in that it was not completely destroyed as were other casino barges.
"There's another example of if you use the right construction techniques, these facilities can withstand natural disasters." Of course, that doesn't come without a cost, and he expects that the redevelopment is going to be significantly more expensive than the original properties.
The new look
Given the opportunity to build from scratch, and the expectation that the casinos will be allowed on land, it opens up a whole new possibility of resort design for the region, said Sykes.
"I think the land provision is a done deal personally. Especially in a storm-prone environment, I can't see allowing the elements like the casino become a battering ram to your towers and garages. It's nice to hear it from an architect, it's important to hear it from an owner, it's essential when you hear it from the financing industry. And that's who's going to chant it next."
So, what might new casinos look like? Well, Sykes thinks operators should take full advantage of the unique characteristics of the Gulf Coast region and build something that lets people know they are not in Las Vegas or just any other casino.
"It's an absolutely beautiful environment," he said, yet the older designs on the barges hid the people inside the casinos. The big barges also hid the shoreline from other elements of a property, such as restaurants and hotels.
"Good design starts to explore what makes [a location] unique. I'm hoping that architects get a chance to explore good design opportunities knitting those places back together again."
Sykes said he would like to see land-based properties expand their facilities and utilize open spaces.
"Aesthetically, it literally opens up great vistas and opportunities," for both the gaming and non-gaming activities.
And it's not just about looks. Land-based operations also make casino back-office management more efficient and better controlled, with better access for things such as cash exchanges from armored cars than the barge environment offers.
Not only will new casinos have an opportunity to develop a unique look, especially if allowed on land, they will also have a chance to utilize the latest and greatest gaming technology.
"Most of us in the industry are looking at bonusing and promotional systems, downloadable technology, and server-based gaming as sort of the next frontier," said James Maida, president of Gaming Labs International. However, whether new Gulf Coast casinos will be able to implement those technologies as they become available depends of course on when they are ready to open, so it's hard to predict exactly what the casino floors will look like.
Still, Maida agreed with others that if allowed to build on land, the facilities will be able to offer more amenities, which go hand in hand with the need for more technology, new games, and the latest systems. CJ
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