In Louisiana, the Belle of Baton Rouge opened September 30, 1994, followed by the now-Hollywood Casino three months later. But the silver anniversary celebration has been somewhat tarnished by declining revenue, which analysts attribute to a lack of investment from owners into their properties, the city’s smoking ban and more competition from casinos in Mississippi, which has lower gaming taxes and legalized sports betting.
Louisiana Gaming Control Board Chairman Ronnie Jones said, “From my standpoint as a regulator, I worry in particular about the Baton Rouge market and the northwest Louisiana market.
According to the Gaming Control Board, the Baton Rouge market peaked at $308.8 million for the fiscal year ending June 30, 2017 and fell about 25 percent to $235.6 million for the fiscal year ending June 30, 2019, representing total revenue at the Belle, Hollywood Casino and L’Auberge Baton Rouge, which began operations in 2012. In 2019, the three casinos’ total revenue fell 16 percent from $280.1 million for fiscal 2018. In contrast, Louisiana’s 15 riverboats brought in $1.86 billion in 2019, a 3.3 percent drop from 2018.
Since fiscal 2017, Belle revenue fell 48 percent to $32.6 million; Hollywood revenue declined 21.5 percent to $55.1 million’ and L’Auberge by 15.8 percent to $148 million.
Jones said in the Shreveport-Bossier City market he’s concerned about oversaturation from six riverboats and slots at Harrah’s Louisiana Downs racetrack. But in Baton Rouge, the issue is competition. The modern, spacious L’Auberge is comparable to any Mississippi Gulf Coast property, observers note. But the Belle and Hollywood are aging properties. For example, at the Belle, visitors must walk quite a distance from the parking garage to the hotel to reach the casino.
SunTrust Robinson Humphrey Analyst Barry Jonas said, “I don’t think people truly appreciate the disadvantage the Belle has or the distance it is from the hotel to the boat.” Increased competition and declining business have resulted in few upgrades in recent years to the Baton Rouge riverboats. According to the Louisiana Gaming Control Board, Belle and Hollywood spent $1.7 million each on capital improvements in fiscal 2018. L’Auberge spent $3.2 million, the same amount it spent on its Lake Charles casino.
Another issue is gaming taxes. A Spectrum Gaming Group report indicated taxes are considerably lower in Mississippi. For example, at Hollywood Casino Gulf Coast in Bay St. Louis, the effective gaming tax rate is 11.6 percent, compared to 26 percent in Louisiana. Also, unlike Mississippi, Louisiana casinos must pay sales tax on comped hotel rooms, meals and entertainment. Spectrum Senior Vice President of Analysis Matt Roob said,
“Louisiana has not kept regulations current in the face of changing demographics and changing competition.”
The Spectrum report also noted while Louisiana’s other gambling attract visitors from nearby markets like Houston or Dallas, Baton Rouge casinos primarily attract locals. In fiscal 2018, out-of-area visitors from another state or from more than 150 miles away made up 17 percent of the gamblers at the Belle, 19 percent at L’Auberge and 22 percent at Hollywood.
Also, Roob noted, gambling “is not new anymore. To a certain extent, gambling has become like going to a movie. It’s lost its novelty over time.” As a result, casinos now have to compete for limited entertainment dollars with new attractions like Topgolf, the Main Event bowling alley and Red Stick Social.
Jones noted Las Vegas casino resorts now generate more revenue from non-gaming features like restaurants, golf courses, spas, entertainment and retail, than from gambling. Jones said, “I hope the legacy boats see the opportunity to move onto land,” which the legislature approved in 2018. He wants operators to invest in major amenities including hotels, spas, upscale restaurants and pools. “Hopefully, we can get gaming off of the riverboats,” Jones said.
The Belle of Baton Rouge could move onto land since it has an 80,000 square foot atrium next to the riverboat. Former owners Tropicana Entertainment previously discussed the move with local tourism officials. However, Eldorado Resorts bought Tropicana in October 2018. Belle General Manager Jim Rigot said Eldorado is analyzing “any and all options” for the Belle, including selling the property.
Complicating the issue is Eldorado’s $17 billion merger with Caesars Entertainment, which should be completed in the first half of 2020. Caesars operates several Gulf Coast properties, including Harrah’s in New Orleans and Biloxi. SunTrust’s Jonas said, “They’ve got bigger fish to fry” than worrying about moving the Belle. Jonas said Eldorado may use the Caesars acquisition as a chance to “prune” its portfolio and sell off less profitable casinos. “
Hollywood Casino General Manager Jeannie Magdefrau said the owners appreciate that the legislature voted for allowing casinos to move onto land, but noted Baton Rouge isn’t a “build-it-they-will-come” market. She said, “We’re not a destination market. To allow us to go onto land, we have to find the right fit, the right size and get a reasonable return.”
Penn National spokesman Eric Schippers said L’Auberge also has no plans to move onto land, since it just opened in 2012. When the Louisiana Gaming Board approved plans for L’Auberge in 2007, landowners Pinnacle Entertainment proposed a multi-phase development including residences, hotels, championship golf course, retail, full-service spa, tennis club and equestrian center. None of those amenities has been built. Schippers said, “We will add as an expansion makes sense.”
Meanwhile, earlier this year L’Auberge opened an area where gamblers can smoke while they play slots. Baton Rouge banned smoking in public places effective June 1, 2018. Hollywood also has put in a smoking area. The Belle has not due to structural issues; also, Rigot said, officials would prefer to direct those funds toward eventually moving onto land. Since the smoking ban has been in effect for more than a year, gaming analysts believe the market soon will rebound.
The tide could be turning. According to the most recent gaming board numbers, both L’Auberge and Hollywood posted year-to-year gains in August winnings. “I’m hoping they’ve hit bottom in the Baton Rouge market but I can’t say with certainty,” Jonas commented. He said after visiting with Belle and L’Auberge officials, he believes the Baton Rouge casino market looks healthy for the long term, especially due to low unemployment and revitalization activities in downtown Baton Rouge.
