Katrina Slams Gulf Coast Casinos
LOS ANGELES – Hurricane Katrina damaged casinos in New Orleans and along Mississippi's Gulf Coast Monday, possibly destroying some riverboats and leaving others closed for at least several more weeks, industry officials said Tuesday.
But the full extent of the damage in Mississippi remains unknown due to flooding in the region, said Alberto Lopez, a spokesman for Harrah's Entertainment Inc. (HET), which operates two offshore casinos in the state.
The Las Vegas-based company's casino in downtown New Orleans suffered about $200,000 of damage -- doors and a section of roof were ripped off, Lopez said, adding that power won't be restored to the property for at least two weeks.
"Early estimates that casinos could open within a few days are overly optimistic, and, at the least, we expect severe business disruption from the devastated areas for the next several months even if some of the casinos can get up and running over the near term," Susquehanna Financial Group analyst Eric Hausler said in a report.
The analyst said he expects to cut third-quarter earnings estimates, and probably fourth-quarter estimates, for affected companies once the damage is assessed.
MGM Mirage (MGG) the No. 2 gambling company after Harrah's, operates the Beau Rivage (search) casino in Biloxi, Miss., which has reportedly suffered flooding.
The Clarion-Ledger reported Tuesday that flooding had hit the second floor of the resort. Officials at Las Vegas-based MGM could not be reached immediately for comment.
Penn National Gaming Inc. (PENN), Isle of Capri Casinos Inc. (ISLE), and Pinnacle Entertainment Inc. (PNK) also operate casinos in the region.
Shares of Harrah's were down 3.1 percent at $70.48. MGM's fell 1.8 percent to $42.51, Penn's were down 2 percent at $34.20, while shares of Isle fell 2.6 percent to $22.92 and Pinnacle was off 4 percent at $21.18.
Each 10-day closure would cut earnings at these companies by 1 cent to 2 cents per share, although early indications are that business could remain depressed for several months and some casinos could be permanently closed, Hausler said.
The casinos are, however, covered by property and business interruption insurance.
Wyomissing, Pa.-based Penn National said it has not yet been able to assess damage at its two casinos in St. Louis and Biloxi. The company's Rouge Casino in Baton Rouge, La. has reopened, according to spokeswoman Amanda Garber.
Pinnacle operates Casino Magic in Biloxi and the Boomtown Casino in New Orleans. A spokesman for the Las Vegas-based company said damage assessments have not been made yet due to the difficulty caused by flooding.
Phone lines to Isle of Capri's headquarters in Biloxi were not operating.
Deutsche Bank analyst Marc Falcone said the "silver linings" of Katrina's wrath for the casino industry could include a push for enactment of legislation to allow land-based casinos, more demand for replacement slot machines and new development opportunities.