Recession catches up to Louisiana casinos
NEW ORLEANS (AP) – Amid the gloomy economic news of the past 18 months, Louisiana’s gambling business is in a definitive recession of its own.
To hear the people who promoted casinos tell it in the early 1990s, this wasn’t supposed to happen. Casinos were touted as a recession-proof business – supposing there really is such a thing. The pitch had its appeal, considering the 1980s oil bust had wiped out vast segments of the state’s economy.
Promotional balderdash of long ago aside, the casino slump has gone right along with Louisiana’s economy.
For a short while, Louisiana defied national casino trends.
While Nevada began having problems two years ago and New Jersey casinos quickly followed with double-digit drops in gambling winnings, as late as January 2009 Louisiana’s casinos were still posting year-to-year gains.
Then, casino revenue fell, first with single digit losses, then capping out the year with 16.7 percent less revenue in November than in November 2008, and a December-to-December fall of 15.8 percent.
Those figures dipped as unemployment rose. While the casinos rolled in January, the jobless rate stood at 5.1 percent. Between July and October, as gambling money slumped, the rate was between 7.4 percent and 7.8 percent before falling to 6.7 percent in November. But November was a short-lived reversal: the rate jumped to 7.5 percent in December.
There are about 47,000 more unemployed people than a year ago without disposable income casinos love. And the number of Louisiana households receiving food stamps rose from 306,724 in July to 329,623 in December.
But that doesn’t present the full picture.
After coastal casinos began reopening after Hurricane Katrina in 2005 – and with Mississippi Gulf Coast competitors wiped out for a time – Louisiana experienced a wagering boom as recovery workers poured into the New Orleans area and residents had their pockets lined with hurricane relief money.
Casino analyst Robert LaFleur of Susquehanna Financial Group suggests an underlying cause of the recent drop-off has been a slowdown in recovery work and recovery money coming into the state. Even though Louisiana casino revenue jumped 7.5 percent from November to December, it’s too early to predict the gambling business’ immediate future, LaFleur said.
“It’s going to take an economic recovery with people more confident about their jobs and the value of their houses before they will have some free money,” LaFleur said.
If one doesn’t care about casinos, remember: the state gets just over a fifth of the revenue take. And the current dip comes as Louisiana tries to deal with a projected $1 billion budget shortfall for the next fiscal year.
There’s no guarantee of what a recovery will mean in terms of money. The reason: more and more competition for the wagering dollar.
Shreveport-Bossier City, which has five riverboat casino-hotels and a casino at the Louisiana Downs race track, has been catching grief from an expanding array of Indian reservation gambling outlets in Oklahoma – now numbering 58 with more on the way. Once little more than glorified bingo halls, those casinos are now offering a wider array of games, LaFleur said.
To gauge the effect on getting Texas players, the northwestern Louisiana market took in $74.4 million in December 2007. A year later, that number fell to $69.1 million. In December 2009, revenue totaled $58.3 million.
Over the next couple of years, internal competition also will increase. Pinnacle Entertainment Inc. is putting a second riverboat in Lake Charles and a third in Baton Rouge. Plans are in the works for more casinos along the Mississippi coast, Alabama is toying with video bingo and the Seminole Indians are into the casino business in Florida.
To the west is casino-less Texas, which could easily chop into Louisiana’s take by merely allowing slot machines at race tracks in Dallas-Fort Worth, San Antonio and Houston.
So far, Louisiana has dodged that competitive bullet. But when then-Gov. Edwin Edwards first proposed casino gambling in the 1980s, he presented a vision of a wagering oasis between New Jersey and Nevada, which the state would have been at that time.
That, like, the idea of a recession-proof business, didn’t stand the test of reality.