INSIGHT NEWS: A Focus on Gambling...

Nationwide Gambling Revenues in a Slump, but Tunica Faring Better than Most
By Nikki Bussey, Insight News reporter

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Photo by Nikki Bussey
It’s not home to a musically-synchronized fountains or a full-size replica of the Eiffel Tower, but financially speaking Tunica, Mississippi is besting more well-known gambling venues in this tough economy. 

 Gaming revenues have suffered a decline as they have nationwide,” said Patsy Knowles, Staff Officer for the Mississippi gaming Commission. “Mississippi revenues have fallen short of expectations 17 months in a row.”

 Even though it’s missed its mark, Mississippi is doing relatively better than competing gambling venues in Nevada and New Jersey.  

 In these difficult economic times, casinos in Tunica and Biloxi are success stories because they are not losing as much profit as casinos in other states.  

In fact, Tunica is listed on the American Gaming Association’s Top 20 Casino Markets by Annual Revenue.The list is based on 2008 casino revenue. Las Vegas and Atlantic City sit at the number one and two respectively, and the much smaller Tunica and Biloxi markets grabbed the number six and eight spots

Examination of the gross gaming revenue for casinos shows that revenue drastically dropped 17 percent in Nevada from 2006 to 2009. The newest numbers available for New Jersey were from 2008, and the revenue loss was 12 percent, while Mississippi relatively stayed the same, only dropping 4 percent from 2006 to 2009.

 
More for the Money

“Those are pretty significant differences,” said Douglas Campbell, a professor of economcs at The University of Memphis. “We obviously see a decline in gambling revenue, which is not surprising because of the recession, but we are seeing a substitution effect, essentially. Mississippi gambling is not a perfect substitute for Nevada gambling, nor is it a perfect substitute for New Jersey gambling, but if people want to go sit in the casino, once you are in the casino you can’t really tell where you are.”

Tunica not only is faring better during this recession, but it continues to draw in tourists, competing directly with Las Vegas and Atlantic City.

Campbell believes the bargain-minded gambler is substituting Mississippi for its more expensive counterparts.

“New Jersey and Nevada both have a much larger market than we do and this should account for the difference in amounts,” she said. “Tunica in particular is located in an area that doesn’t have the same type competition yet.  A lot of their customers are within close driving distance.”

Destinations like Las Vegas or Atlantic City means spending more travel funds, while going to Tunica can save money for some travelers in the area. Residents of Tennessee, Mississippi, and other border states can get the Vegas or Atlantic City experience by taking a short drive. 

Trouble looming

 Mississippi gambling hasn’t felt the brunt of the recession yet, but that doesn’t mean it won't.

 There are no indicators to show if gambling revenue will continue to decline or will rise, Knowles said. All three states saw an increase in 2006, then a decline after.

 Campbell believes the trend is tied to the housing market crash in 2007. Once the housing market crashed, everything connected to it felt the decline.

 “The housing market was its own type of gambling…with people using housing as their own sort of investment vehicle,” Campbell said.

But if the connection between the housing and gaming markets hold, then Tunica casinos could hold steady.  That's because some economists believe the Mid-South has already dealt with effects of the recession.

 Memphis Residential sales are down. In just one year, they dropped 24 percent, according to Memphis Area Association of Realtors. There were 968 sales in January 2009 and 737 this past year. However, data from the Tennessee Department of Labor and Workforce Development shows Tennessee employment has remained steady at 10.7 percent for the past year.

According to the Recession Adversity Index, conducted by MSNBC, Mississippi is in “recovery” mode, while Nevada and New Jersey are still in “recession” mode. The index is based on employment, housing starts, industrial production and house prices.

What this could mean is that the worst is over for Mississippi casinos.  At least for now. 

 Casino Health Equals State Wealth

 Knowles said she began to notice a slow steady fall in Mississippi casino revenue after hurricane Katrina.  The numbers dropped from almost $3 billion in 2007 to $2.5 billion in 2009.

Much of this decline was attributed to the rebuilding effort that took place along the Mississippi Gulf Coast after Katrina. Many of the casinos were hit, and most needed repairs, if not complete reconstuction.

Knowles said that because Mississippi government now relies so heavily casino revenues, it was a priority to rebuild quickly.

“As with any tax dollars, the state does depend on gaming tax revenues,” Knowles said. “Gaming tax revenues make up only about 4% of the state revenues.” But add to that tourism, employment and the other costs associated with running a casino - and the state has an industry that has made itself nearly indespensible.  

 Money Magnet

 Michael Sheffield, Memphis Business Journal reporter who covers the casinos, says he doesn’t think Tunica will get to a point where they don’t need to depend on the revenues from the gambling.

Sheffield says he has also noticed a move by the casinos to find other ways to bring in profit, to not “put all of their eggs in the casino basket.”

“One good thing is that they don’t do anything halfway,” Sheffield said. “When they announce something, that means it’s a done deal.”

Barely a month ago, AirTran Airways, partnered with Harrah’s Casino, and announced that it will offer flights directly from Atlanta into Tunica, possibly bringing even more profit into the area.

“One of their (Tunica) biggest feeder markets is Atlanta,” Sheffield said. “Possibilities for them are endless. It will allow people to bypass Memphis completely. That could be huge for them.”


Insight News reporters Brooke Sellers and Nikki Bussey discuss what they learned about the Tunica and how the area had been affected by the economy.
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