| Deal$ '98: Gaming & Entertainment Finance and Investment Forum
|Prepared remarks for Mayor A.J. Holloway, for "Deal$ *98: Gaming & Entertainment Finance and Investment Forum." Panel discussion on "Crystal Balling the Future of Gaming Expansion across the Nation." Sponsored by the Institute for International Research and UNLV International Gaming Institute Monday, April 20, 1998, The Desert Inn, Las Vegas.
Good morning. I'm happy to be here this morning, and I'm honored that I was asked to be a part of this panel.
When Mirage Resorts
announced more than a year ago that it was building an 1,800-room hotel in Biloxi, some wondered if our market could support such a major hotel development. This was a legitimate question. We had already
seen the number of hotel rooms in Biloxi jump from 6,000 to 10,000 in just three years. During that same time, 11 casinos had opened, and because of poor management decisions two of them went out of
business and two others entered and then successfully worked their way out of bankruptcy.
Sure it was a legitimate question, but the answer was easy.
Barry Shier, the president of the Beau
Rivage development in Biloxi, told the New York Times that the number of visitors to Biloxi would grow with the additional hotel rooms, which also would bring jet service.
In fact, Shier added
with a smile, Mirage had a habit of overbuilding at every one of its developments.
And I think that's what we are here to address today, "Are we overbuilding here in Las Vegas and in the
gaming jurisdictions across this country?" I hear that question in Biloxi a lot: "When will the development end?"
In Biloxi, we're in a unique position for a couple of reasons.
First, our casinos float, which limits our casino development to the waterfront. Even though the bulk of the city is on a peninsula, it's a relatively small peninsula, about 13 square miles. There's
only so much land available for casino development. We have about 18 miles of waterfront property and only about 6 miles is zoned for gaming. And about a third of that is a public man-made sand beach.
There is strong opposition to the expansion of gaming onto the sand beach. So right now, we can accommodate about four or five more casino developments in the land zoned for gaming. It's along an area
called Back Bay, on the north side of the peninsula.
The other thing that's unique about the Biloxi market at the current time is that developers are taking a "wait and see" attitude.
They*re waiting to see what impact Beau Rivage will have on the rest of the market.
Frankly, I'm betting that the market WILL grow, and we'll see new visitors to our city. That's been our
For example, before Imperial Palace opened, the conventional wisdom was that IP would take business away from our existing eight casinos. .
Instead, the market grew, which, as a
matter of fact, was not because of IP but because of increased business at our existing casinos, particularly Grand Casino Biloxi. If you look at the gaming revenue figures for the Biloxi market, we're
continuing to see steady growth. We have a track record, and it's a good one. Just last month, for instance, the nine casinos in Biloxi won $51.5 million, the highest total win since we opened the first
casino in 1992. Can you imagine, March. We're REALLY looking forward to July!
What we are seeing right now, and I think it's the same thing that occurred in Reno, is the larger companies buying up
the smaller companies. You may end up with the same amount of total gaming square footage, but you'll have fewer owners. Just last month, Grand Casinos announced it had reached an agreement to buy its
smaller neighbor, Lady Luck of Biloxi. Grand has 110,000 square feet of gaming with just over 1,000 hotel rooms, while Lady Luck Biloxi offered only 22,000 square feet of gaming and had no hotel. And the
other day I read a report where Hilton was looking at Grand Casinos.
Frankly, I see all of this jockeying for position as a sign that people see great things happening and even greater things to
come in Biloxi. But, of course, there's more to the story.
Last year, I took part in a panel discussion similar to this one here in Las Vegas. Mayor Jones of Las Vegas and Mayor James Whelan of
Atlantic City and I were discussing the dramatic growth taking place in our cities. For me, the tremendous development presents a Catch 22 situation.
When you folks here visit our city and decide
to finance a resort project in Biloxi * and I'll give you my phone number before I leave this conference * you are able to be up and running and in business in 18 to 20 months. Of course, with
government, things don't move nearly that fast. Our biggest challenge is the neverending job of infrastructure -- giving you and our citizens better roads, more roads, adequate sewer lines, , etc.
And in a 300-year-old community like Biloxi, that is seeing unprecedented development, we have a huge number of infrastructure improvements to make. Right now, we have about $50 million worth of
infrastructure underway on our 13-square mile peninsula. We're buying property to widen roads and build new roads. We just dedicated a $12.5 million wastewater treatment plant that is the largest of its
kind in the country, and our voters will be going to the polls next month to vote on a $53 million program to build a new high school and three new elementary schools.
I tell you all of these
things because I think communities across the country are seeing that casinos are not a huge cash register that brings money into a city and everything else takes care of itself. The citizens of a
community must make a commitment. Government must make a commitment. It's a partnership to make this thing work successfully. If you don*t have a partnership, you're headed for trouble. Just look at New
Government leaders can make too good of a deal for themselves as far as taxation goes. It's such a good deal that it kills the golden goose. One of the reasons for the success of gaming
in Biloxi and in Mississippi in general is because we took the best parts of the Nevada legislation and made it work for us. Our taxation is about 12 percent -- that's 8 percent to the state and about
3.2 percent locally. Other than that, it's a free market system.
We don't want to be the Las Vegas of the south We want to be -- and we are -- the playground of the south. Gaming is the industry
that is driving our economy, but we don't put all of our eggs in that one basket. We promote our small-town charm, our historic sites, the sand beach, the golf courses, the deep sea fishing and the
seafood restaurants. Like I said, you can't look to casinos to carry the entire economy..
As far as the expansion of gaming on a national level, I think we all recognize that gambling is not for
every community * either because the legislation is not there or the community may not approve morally. Also, from a developers' standpoint, you would have to be concerned about what may happen with the
National Gambling Impact Study Commission. Is a federal gaming tax on the way? If so, how much will it be?
Some people say less government is good government.
These are some of the
important issues yet to be answered. Frankly, I think we are doing a good job of regulating and taxing the industry. We'll have the federal panel in Biloxi in September, and I look forward to telling our
complete story to them. But when it comes time for the federal government to formulate whatever policy it may enact regarding the casino industry, I believe that leaders in places like Las Vegas and
Biloxi and Atlantic City should have a strong voice in the process.