Louisiana Casino/Racino Gaming Revenues Continue Their Decline

Third Quarter 2016 year-over-year gaming revenues for Louisiana casinos and racinos continued their decline.  Our charts below display both 3^rd quarter and the first three quarter’s revenue comparisons for the years 2015 and 2016.

These declines are now in excess of our projections detailed this September and in our 2015 focus on how oil and gas prices impact casino revenues.  Further, they emphasize the likely cause of declines being in large part our contention that the cause is the continuing low oil and natural gas prices. 

Our on-site visits to each of the Louisiana casinos and racinos in 2014, 2015 and 2016 have provided additional evidence of this decline.

With a continuation of troubles in the Louisiana and Texas energy sector, future declines will add further likelihood of one or more casino and racino facilities being shut some time during the next six months.

Chart 1 – What happened in the most recent 2016 quarter?

	July-Sept 2015	July-Sept 2016	Change	% Change
Shreveport/Bossier City	$183,842,352	$173,149,436	($10,692,916)	-5.82%
Baton Rouge	91,752,848	90,271,144	($1,481,704)	-1.61%
New Orleans	161,748,069	142,816,084	($18,931,985)	-11.70%
Lake Charles	231,325,746	229,587,307	($1,738,439)	-0.75%
TOTAL LA	$668,669,015	$635,823,971	($32,845,044)	-4.91%

Chart 2 – And what happened in the first nine months of 2016 ?

	Jan-Sept 2015	Jan-Sept 2016	Change	% Change
Shreveport/Bossier City	$557,441,209	$         525,826,493	($31,614,716)	-5.67%
Baton Rouge	285,733,025	280,047,900	($5,685,125)	-1.99%
New Orleans	478,344,357	440,716,466	($37,627,891)	-7.87%
Lake Charles	691,070,772	663,316,279	($27,754,493)	-4.02%
TOTAL LA	$2,012,589,363	$     1,909,907,138	($102,682,225)	-5.10%

Year-over- comparisons show continued declines in each of the four market areas with third quarter improvements in Lake Charles and a slight improvement in Baton Rouge.  The comparisons show the continued significant declines in New Orleans. 

Stay tuned.       

Louisiana Casino/Racino Revenue Declines As Predicted

Last year, we predicted this would happen: Louisiana Gaming Control Board revenue figures for the first half of 2016 show a 4.4% decline from the same months of 2015. 

The cause as we see it is the ongoing economic devastation of the oil and gas sector. In our February 2015 post we stated: “Louisiana has the largest concentration of crude oil refineries, natural gas processing plants and petrochemical facilities in the Western Hemisphere. It is America’s 3^rd largest producer of petroleum and 3^rd leading state in petroleum refining.  Louisiana is the 2^nd largest producer of natural gas. It supplies over 25% of total US production.  While Texas leads the US in most of the categories of oil and gas production, Texas does not have casinos or racinos – so in the parking lots of casinos and racinos across the Shreveport/Bossier City and Lake Charles regions, you’ll see as many Texas license plates as Louisiana plates.”

“The halting of projects, firing of workers and deferring of investments will certainly change the economies of Texas and Louisiana and negatively affect the casino and racino business in all four Louisiana regions.” We further predicted declines in each region as:

·         Lake Charles: down 2% to 3%

·         Shreveport/Bossier City: down 4% to 6%

·         New Orleans and Baton Rouge regions: down 2% to 4% each

Actual 2015 results: 

·         Shreveport/Bossier City:  down .52%

·         Baton Rouge: up 3.9%

·         New Orleans: down 3.2%

·         Lake Charles:* up 26.25%

*Lake Charles numbers include the Golden Nugget which opened in December 2014. 

So what happened in the first half of 2016?

	Jan-Jun 2015	Jan-Jun 2016	$ Change	% Change
Shreveport/Bossier City	$373,598,857	$352,677,057	($20,921,800)	-5.6%
Baton Rouge	$196,980,177	$189,776,756	($7,203,421)	-3.7%
New Orleans	$316,596,288	$297,900,382	($18,695,906)	-5.9%
Lake Charles	$459,745,006	$433,728,972	($26,016,034)	-5.7%
Total Louisiana	$1,346,920,328	$1,274,083,167	($72,837,161)	-5.4%

Further declines are most likely. According to Zacks Investment Management (May 7, 2016): “Does the Energy Collapse Resemble Tech’s 2000 Bubble Bursting? At last count there were 59 chapter 11 bankruptcy filings from companies in the oil and gas business. The energy sector, as a whole, has felt the hit profoundly with earnings falling (-) 56.4% in Q3 2015 and (-) 78.6% in Q4 2015. For Q1 2016, the damage is estimated to be even worse, with the current Zach’s estimate being a (-) 114.5% drop in Q1. Additionally, with a handful of other small players likely in line at bankruptcy court, it may not be long before 69 filings seen by telecom during the dot-com burst in 2000.”

Further, a recent Forbes article reads, “All told, 69 oil and gas producers with $34.3 Billion in cumulative secured and unsecured debt have gone under. Since share prices peaked in 2014, the oil bust has wiped out about $1 Trillion in equity, with the Dow Jones U.S. Oil & Gas Index off 40%.”

There’s more to come: “Despite the modest recovery in energy prices (in 2016), all indications suggest many more producer bankruptcy filings will occur during 2016” writes Haynes & Boone.  According to Deloitte: “About a third of global oil and gas companies, or about 175 of them, are at risk of insolvency.”  Bernstein Research estimates that by 2019 we’ll see more than $70 Billion in defaults amid more than $400 Billion in high-yield debt.”  -- That would indicate we’re only halfway through the bankruptcies.

We will continue to monitor and report the oil and gas sector and its effect on the Louisiana casino and racino revenues. We predict that there is more to come and that our previous projections are likely modest.

The Tunica Biloxi Tribe of Louisiana: Part 2

The Tunica Biloxi Tribe of Louisiana has a deep and rich history in Louisiana. The Tunica were known to be skilled traders and entrepreneurs, especially in the mining and distribution of salt. Salt was extremely important in the trade between the French and the various Caddoan groups in northwestern Louisiana and southwestern Arkansas. By the early 18^th century, the tribes along the lower Mississippi River were a target of Chickasaw raids for the English slave trade in South Carolina.  By the 1770s the Tunica decided to move. In the 1770s, the Tunica moved to the present-day Marksville area on the Red River. The Tribe remains today on the land granted to them by Spain. Bureau of Indian Affairs records show that the current tribe is a result of the gradual fusion of the Tunica, Ofo, Avoyel and Biloxi Tribes, which probably culminated in about 1810. Each of these Tribes has continually documented interactions with the French and Spanish authorities throughout the 1700s.

The Tunica’s trading acumen throughout their history is evidenced through the collection of artifacts that make up the “Tunica Treasure,” one of the present-day Tribes’ greatest assets. The Tribe was able to recover and preserve the artifacts that were taken from their ancestors’ graves. Though the tribe’s members were aware their ancestors had occupied the area of Trudeau, Louisiana near the present-day site of Angola State Penitentiary, they had no idea that a guard from the prison had located their burial ground and had been ransacking the graves. They learned about it from the State of Louisiana which had asked the tribe to intervene in the case of Charrier v. Bell to try to keep the artifacts from being sold. Chairman Barbry readily agreed, on the condition that the artifacts be returned to the tribe. 

Charrier, the prison guard, had stocked his home with the artifacts before filing suit against the owner of the land to claim half of what he had unearthed. Charrier’s luck turned when the courts ruled that he never owned the artifacts because the items were never given up for ownership. The attorney for the Tribe explained: It was buried with these people and never intended to be dug up and sold. The judge brought the case to what it was, a case of abandonment, and these goods were never abandoned.

The tribe built an underground museum in anticipation of the artifacts’ arrival, attempting to create a symbolic site for the items. However, when the items arrived they were in a seriously deteriorated condition. The resourceful tribe created a conservation lab by transforming a refrigerated eighteen-wheeler trailer into controlled environments suitable for artifacts storage and restoration processes. Since the time of original restoration, they have a beautiful museum to continue to restore and display these treasures. 

Because of what the tribe was able to do and the stand they took in preserving those artifacts, federal legislation was enacted – the Native American Graves Protection and Repatriation Act. The Act established that ancestors’ remains and any other grave items that can be identified as belonging to a particular tribe and are held by museums and federal and state agencies must be returned to the tribe from which they came.

The Tribe has a second historical museum a short distance from the new one housing the Tunica Treasure. The historical museum is located at the site of the Marksville Mounds.

Today, the Tribe boasts a membership of more than 1,200 who reside primarily in Louisiana, Texas and Illinois. Many live on 1,717 acre Tunica-Biloxi Indian Reservation located just south of Marksville in east-central Louisiana. The 2010 US Census lists 951 persons self-identified as at least partly Tunica-Biloxi with 669 of those identifying as solely Tunica-Biloxi ancestry. Others are descendants of the Ofo, Avoyel and Choctaw.

The Tribe owns and operates the Paragon Casino and Resort, the largest employer in Central Louisiana. The Casino opened for business in 1994 and has expanded ever since. The full-service Class III casino offers one of the largest slot machine floors in Louisiana, a poker room, numerous table games and an off-track betting parlor. The resort offers more than 500 hotel rooms and suites with an indoor pool with a swim-up bar, a 200 site R.V. park, a full-service spa, three screen cinema, retail shops nine food service areas and restaurants, a championship golf course and live entertainment in their Main Showroom concert stage. In April, 2016 Tunica-Biloxi Gaming Authority, owner and operator of the Paragon Resort, retained Mohegan Tribal Gaming Authority to provide gaming, hospitality and entertainment consulting services to the Marksville complex.

Through its compact negotiated with the State of Louisiana, the Tribe has been able to assist local governments with distributions of more than $40 Million since the opening of their gaming business.

Sources:  The Historic Indian Tribes of Louisiana From 1542 to Present by Fred Kniffen, Hiram F. Gregory, and George A. Stokes; Nations Within, The Four Sovereign Tribes of Louisiana by Sarah Sue Goldsmith, Risa Mueller and Tim Mueller; The Southeastern Indians by Charles Hudson; The Tunica-Biloxi web site; Wikipedia; and other web sources.

Our Nation, Not a Trash Dump

Part 1: Earl Barbry, Sr. and the Tunica Biloxi Tribe of Louisiana 

The Tunica Biloxi Tribe of Louisiana was federally recognized in 1981 by the United States Bureau of Indian Affairs, Department of the Interior. They were one of only two federally recognized in the southeast during the 1980s out of more than 30 who had petitioned via the Bureau of Indian Affairs. The Tunica-Biloxi effort for recognition lasted 47 years even though it had retained part of its command land base, many religious practices, their cultural identity, and tribal government. The Tribe had been led by a Chief and Sub-Chief well into the 1970s. Tribal members also kept craft practices, their cemeteries and autonomy throughout their history. The Bureau of Indian Affairs had simply neglected its obligation to the tribe to provide a review of their petition for federal recognition.

The federal recognition endeavor began in the 1930s with Eli Barbry, who made his way to Washington DC with a handful of tribal members in a model T-Ford in the 1930s. The effort for federal recognition continued for four decades through efforts of Chief Eli Barbry. Eli’s grandson, Earl Barbry, Sr. came from a long line a line of Indian chiefs but never intended to go into politics himself. He became one of the great leaders of the Native American movement in the southeast.

In the 1970s Earl Barbry, Sr. learned that the tribe had crafted a deal with the city of Marksville to rent the Indian reservation land as a garbage dump. In exchange, the tribe would receive fifty dollars a month and a road would be built into the reservation land. Barbry attended a tribal meeting where the deal was to be approved. “I guess because so many of our people were raised in poverty, fifty dollars seemed like a lot. This was discussed, how it would be a good deal for the tribe,” he recalled. Then it was his turn to speak: “I just reminded them of how the city had treated them like trash all their lives, and now they wanted to allow them to dump their trash on our land,” he said. Barbry said his love for the land is more than just property ownership. “This is the only thing that keeps us apart from everybody else. This is our nation.” By the end of the meeting, the decision to reject the dump proposal was made, and Barbry’s entry into the tribe’s politics was a foregone conclusion. Shortly after, he was appointed to fill an unexpired tribal council term as vice chairman. In 1978 he became chairman and remained chairman through reelection until his death in 2013.

Something Old, Something New, Something Broken, Something Blue: Part 2

Some Things Are Broken

2015 was a bad year for a few places.  We’ll do our best to be kind:

• Isle of Capri closed its Natchez, Mississippi casino in November. 
• Harrah’s Louisiana Downs is broken. After a few years of significant drops in gaming revenues, 2015 took another dive with a whopping 25.9% drop. Our visits to the racetrack and casino found the main restaurant operating limited hours, the facility looking shabby and poor crowds at the races and casino. This place needs a new owner.
• The Tunica Roadhouse was even more disappointing. Our room had dresser drawers that wouldn’t close or couldn’t close, the window curtain was falling down, the floor had a three-foot round stain (hopefully not bullet wound related). That’s for starters. We arrived at about 9:00 pm, no food service. Had a discussion with the hotel registration person who said she would contact the manager. No call. 
• I think greyhound racing is broken. Each visit to a greyhound racino leaves me feeing worse than the last. The dogs just look sad, perhaps even mistreated, although I believe the dog owners and race track owners and operators do care and do their best to care for the animals. Most greyhound racino owners and operators want to de-couple, allow the casino to stay, get rid of the dogs.

Some Things Blue

These things are not yet or not quite broken, we'll call them blue.

• Tunica, Mississippi casinos are blue. Nearly every month in the past two years the gaming revenue numbers for the Mississippi River Counties are down, nearly every month the Gulf Coast Counties revenues are up. Tunica area has 9 of the 16R River Counties Casinos and carries the bulk of the downside. Billions of dollars have been spent on the Mississippi Gulf Coast Counties plus the Louisiana Gulf Coast. None has been invested in new facilities in Tunica. In addition, the Southland Park Racetrack and Casino in West Memphis Arkansas 40 miles north of Tunica has expanded its casino facility and has grown revenues tremendously over the past two years. Tunica is not broken, but it is blue.
• Harrah’s New Orleans is blue with 2015 gaming revenues down $33.8 million, 9.88% for the year due largely, we believe, to the smoking ban in New Orleans. It’s still a great facility and still generated over $300,000,000 in gaming revenues in 2015, but it is unfortunately blue.
• A major source of Louisiana casino and racino revenues comes from persons working in the oil sector. The Texas and Louisiana oil sector is blue.  Low oil prices have caused a number of problems for this area and it likely will affect gaming revenues more in 2016 than 2015.  We will provide a detailed note on this later this quarter, but suffice to say, thousands of jobs have been lost plus hundreds of companies have closed their doors.  Hundreds of loans to these companies are in default. A major source of gaming revenues from oil sector employees has likely been lost. These potential gaming revenues from oil sector employees could seriously damage casinos and racinos in the Louisiana markets.

Something Old, Something New, Something Broken, Something Blue: Part 1

Something Old, Something New

Good News! Something New is the largest category. Bad News! There is a lot of Old, Broken and Blue News too!

Our notes and comments are based on our ongoing research including annual visits to each of the 74 casinos/racinos in the nine southeastern states.  Some of the revenue numbers are good, a few are very good.  Some of the revenue numbers are not so good, some are bad and very bad.  So, here goes:

Some Things Old – After visiting casinos and racinos for the past three years, first-hand views tell us a lot. Yogi Berra summed it up well: “You can observe a lot by just watching.”  What is becoming old at a number of facilities is the same old slot machines with worn gaming floor carpets, grumpy looking employees, being greeted with a grunt, table dealers with an empty table standing with their arms crossed…nothing cheerful. This gets old to patrons and it shows on their faces too. Then there’s the food: nothing has changed except the prices, and yes, the prices are up. We’ll get into a few good examples of food and drinks pricing and quality along with some sketchy rooms in the Broken and Blue sections of this note. Far too many of the casinos and racinos we visited last year gave the appearance of Some Things Old. 

Some Things New – We’re delighted to point out the New. Many of the older facilities had a cheerful staff, great crowds enjoying their visit to the gaming floors, restaurants and hotels. In a number of cases this was an upgrade. In addition to the operations displaying a good attitude toward the facility and patrons, the number and quality of new facilities and additions was a good surprise. New facilities and major expansions in 2015 include:

• Harrah’s Cherokee Valley River Casino Hotel in Murphy, North Carolina which opened in September. The complex includes a 300-room hotel, five food areas, and a gaming floor with 1,000 slots and 100 table games. Murphy, North Carolina is in the western N.C. area near the Great Smokey Mountains National Park.
• The Scarlet Pearl in D’Iberville, Mississippi opened for business in December. This facility includes a 300-room hotel including suites and penthouse rooms, six food and bar areas, a gaming area with 1,300 slots and 45 table games and a poker room. It features a 36-hole miniature gold the grounds. The complex sits on the waterfront in the Biloxi Back Bay area.
• The Island View Casino Resort in Gulfport, Mississippi added an 18 story beach front tower hotel which opened in April. The new addition includes 405 rooms, a spa, gulf-front pool area and food areas including a beach grill and other casual dining.  
• The Silver Slipper Casino and Hotel at Bay St. Louis, Mississippi opened its new 90-room Gulf front hotel in May.
• Beau Rivage owners added to their complex in Biloxi, Mississippi with a 5,000 seat MGM baseball park in June. The new facility directly across the boulevard from Beau Rivage, is home to the Biloxi Shuckers, a AA Southern League team.
• Boomtown, New Orleans, Louisiana opened their new 120-room hotel in June adjacent to their riverboat casino facility.
• Arkansas – Oaklawn Park in Hot Springs and Southland Park each expanded its gaming facility to include new food areas along with table games and poker rooms in early 2015.
• The Seminole Tribe of Florida Immokalee facility opened its new 90-room hotel and expanded the food and gaming areas in mid-2015.

We also saw significant changes in several of the gaming floor make-up, including new slots and slot arrangements, more table games and reconfigurations of slots and tables on gaming floors.

Some things new had a very good year in Southeastern gaming!

Top Ten Casinos and Racinos in the Southeast: Part 2

5. Harrah’s Cherokee Casino Resort, Cherokee, North Carolina

This was our 4^th place pick for 2014.  We still love the magnificent complex with its beautiful architecture and campus-like grounds. It’s a great atmosphere. Plus, the facility is imbued with the rich Cherokee history throughout their amenities on site and in the Cherokee area. The hotel and meeting room areas provide Cherokee art work paintings and sculptures throughout.  The hotel has 1,108 rooms and a top-rated spa. The gaming area houses over 3,300 slots, 100+ table games including an Asian gaming area, and a 20-table poker room. The 10 restaurant and food and bar areas include Ruth Chris Steak House, Brie Restaurant and a Noodle Bar restaurant along with bar and lounge areas adjacent to the gaming floor. The complex includes a retail store area and 3,000 seat event area hosting top-name entertainment. This magnificent complex is all seated on a beautiful campus-style land with a river flowing through. The Cherokee area provides numerous activities including brook trout fishing and white water rafting and offers fun for all ages.

4. Island View Casino Resort, Gulfport, Mississippi

Island View has jumped up to number 4 this year from 8^th place in 2014. The privately owned complex opened their beautiful 18-story beachfront tower hotel with an additional 405 rooms in April 2015.  The new structure includes a new Gulf-front pool area, restaurant and bar. This brings the number of Island View rooms to 976, and 10 food service areas including their award winning Carter Green Steakhouse featuring steaks and Gulf Coast Seafood, Island View Buffet (one of the best of the 74 casinos and racinos we visited), and the new Beach Grill. The casino area has 2,000 slots and 45 table games with extensive choices of games. They provide top area entertainment at their 550 seat “View” showroom and at their “Sunset Bar and Deck.”

3. TIE - Seminole Hard Rock Hotel and Casino, Hollywood, Florida/Seminole Hard Rock Hotel and Casino, Tampa, Florida

Hard Rock, Hollywood – up from number 5 in 2014. This impressive casino and hotel complex includes a 4.5 acre water park, 400-room AAA 4-diamond hotel and spa, 130,000 square feet of gaming area.  The gaming space housed 2,200 slots, 135 tables and a 40+ table poker room.  The hotel and casino area is just the beginning. There are numerous restaurants and lounges within the complex. Their entertainment district includes additional food and entertainment areas plus a Hard Rock Live arena which provides top entertainment. The complex is owned by the Seminole Tribe of Florida and operated by Hard Rock International, a wholly-owned subsidiary of the Seminole Tribe of Florida.

Seminole Hard Rock Hotel and Casino, Tampa, Florida – Came in 3^rd on our Top Ten list last year. This complex has the largest gaming area in the southeast with 4,500 slots, over 200 table games and a world-class poker room. Their 214 room hotel and spa has achieved a AAA Four Diamond rating each year for the past 9 years. Eight restaurants include the Seminoles’ signature Council Oaks Restaurant, Hard Rock Café, their award-winning buffet and a large sushi area. This is topped off with five lounges located throughout the gaming areas. Other amenities include live entertainment at the Hard Rock Café, Council Oaks Bar and in the lounge areas. This too is owned by the Seminole Tribe of Florida and operated by Hard Rock, International.

2. The Golden Nugget, Lake Charles, Louisiana

When an entity is established that positively and significantly affects markets in the local area, the state and even the region, it has to be considered for one of the top spots. This grand complex features a 740-room hotel including luxury suites with private balconies, coupled with a world-class spa and fitness center, an upper-end retail shopping area, and a large outdoor pool area with a lazy-river. It also includes a 30,000 square foot meeting space and event center entertainment. The grounds surrounding the hotel and casino complex have a 7,000 yard championship golf course, tennis courts and marina.  The Landry restaurants areas include their Saltgrass Steak House, Vic & Anthony’s Steakhouse, Landry’s Seafood, the Grotto Restaurant, Lillie’s Asian Cuisine, Cadillac Bar, the Claim Jumper, the Buffet and the Blur Martini.  The gaming area houses 1,600 slots, 72 table games, a 6-table poker room plus a high-limit area with 13 blackjack tables plus roulette and slots. We featured the Golden Nugget, Lake Charles prior to its opening on our blog in December 2014. The 2015 numbers are impressive with $240 + million in gaming revenues, a 139% jump from 2014 to 2015. What a great 2015 and what a fantastic facility!

1. The MGM Beau Rivage, Biloxi, Mississippi

Our #1 pick the second year in a row is an amazing facility with gorgeous rooms, excellent restaurants, a large casino area with a 16-table poker room hosting significant tournaments, and entertainment facilities and calendar of events among the best in the southeast. Their pool area overlooking the Gulf of Mexico is our favorite in the Southeast. To top it off, they added the new MGM park in mid-2015 – a 5,000 seat facility located directly across the street that hosts the Biloxi Shuckers AA baseball team plus a number of school and university baseball tournaments each year. A great addition for MGM and Biloxi.