THE BACK PAGE: A dose of reality and vision
Casinos and bingo represent an interesting combination of sectors that have distinct personalities and challenges but also have more in common all the time, a phenomenon fueled in no small part by the development of Class II tribal gaming as a national and increasingly global brand. If you weren’t able to make it to the sunny South in early May this time, don’t worry, we’ll do it again next year.
One of the informational highlights of the event was an executive roundtable discussion. Here was the line-up: Paul Alanis, principal and chief executive officer, Silver Slipper Gaming; R. Scott Barber, regional president, Mid-South Operations, Harrah’s Entertainment; Virginia McDowell, president and chief operating officer, Isle of Capri Casinos; Anthony Sanfilippo, president and chief executive officer, Pinnacle Entertainment.
So you can hear more from them than from me, here are the highlights:
The economy: Alanis said he’s seen an uptick this year, but it’s too early to say it’s a trend. Barber said Harrah’s is seeing renewed strength in the non-gaming side. “The light at the end of the tunnel is a light and not an oncoming train,” said McDowell. Sanfilippo offered some useful context for why things will remain quite challenging for years to come: “Our industry is in a much different place. Corporations that were extremely healthy became overleveraged, and we have so much more supply now than we had 10 years ago.”
Markets: Missouri performed best for Isle of Capri because of changes in the loss-limit law, but almost all of its markets continue to be plagued by double-digit unemployment. Barber said Harrah’s is seeing its steepest declines in Louisiana and Mississippi. McDowell said any new projects in Mississippi would be a zero-sum game, not least because of competition from Florida and Alabama. “Governments are so needy that they are squeezing all the juice out of the lemon,” said Alanis. McDowell worries that debt pressures on state governments are leading to an inability to invest in the kinds of infrastructure and amenities that end up supporting the gaming industry.
Credit markets: Maybe there’s hope, but it might depend on the day. Sanfilippo reported that Pinnacle was able to secure $350 million in a bond offering prior to the show when it had originally sought only $250 million. And this on very good terms: 10 years at 8.75 percent. However, he questioned whether he would have been able to get anything had Pinnacle done the offering two days later, after the Greek debt crisis exploded.
Slot machines: Lots of animation from the panelists on this front. “The machines have become very expensive, well above the inflation level,” said Alanis. “We spend on conversions, a couple of thousand dollars apiece, rather than on new machines.” Alanis, along with the other panelists, is also looking for more of a wow factor. “We need a James Cameron or a George Lucas to get in this business. There’s no interactivity with the games.” Slots are “ripe for innovation and thinking outside the box,” added Barber. He said Harrah’s recently pulled bar-area slots from one of its properties in favor of darts and billiards, and revenue per square foot went up. Wii games, bowling tournaments, all of these things are on Harrah’s radar right now.
Of course, the one black cloud at the event was water-borne - the oil spill off the Gulf Coast that was growing at an estimated 5,000 barrels per day. “We’ve had hurricanes and now oil slicks,” said Alanis. “We don’t have locusts yet to worry about, but you never know.”
At the outset, operators on the Gulf were battling a perception problem more than anything: that the Mississippi Coast was closed, waiting for a massive oil slick. But of course things were wide open. Fears of a blackened coast and oil-fouled air needed to be counteracted with a coordinated communications campaign, and BP eventually came up with $500,000 to run a handful of tourism damage-control ads in three coastal states. As this disastrous story continues to unfold, and as storm season approaches, the industry and its supporting associations on the tourism side shouldn’t be bashful about asking for help to reassure customers. BP’s first-quarter profits alone were $6 billion. They can afford to do much more.