New Orleans Casinos Want You

In a tight economy, even Harrah’s aims to cozy up with locals.

JANE SANDERS ILLUSTRATION

Following a difficult start-up period for casino gambling in Louisiana, three casino survivors in the New Orleans area have, for the most part, coexisted peacefully and profitably during the past decade. Engaging in what you might call benign competition, each carved out a separate piece of the marketplace and catered to a specific clientele. Overall, each has seemed pretty content with its respective niche. But don’t bet on a lasting peace.

Times are tough in the gambling business. Casinos around the country are struggling to lure gamblers who are clutching their cash more tightly in the face of ongoing economic recession. Every gambling hall in the country is searching for ways to peel off business from its neighbors. That includes the local players.

When the dust finally settled after the 1990s start-up of casino gaming in Louisiana, two riverboat casinos were left standing in the local area: Boomtown Casino on the Harvey Canal and Treasure Chest Casino on Lake Pontchartrain in Kenner. In part owing to the physical distance between them, the two casinos drew from separate audiences and built up a loyal, local clientele.

Similarly, the sprawling Harrah’s New Orleans Casino, a giant land-based hall in the business district, seemed to go its own way. While it developed local followers, its primary emphasis was on drawing gamblers from outside the immediate area. The casino’s parent company, known as “Big Harrah’s,” used its popular gambler incentive program to cross-market the New Orleans casino with the company’s other properties in Las Vegas and around the country.

The three local casinos built business steadily throughout the years and, somewhat surprisingly, continued to increase revenues even after Hurricane Katrina. In fact, all three reached new revenue highs during the early years of the Katrina recovery.

But what the flood couldn’t do, national recession apparently could. Gamblers in both the local area and from a wide radius around New Orleans arrived in fewer numbers in recent years. And the customers who did enter local casinos left less cash behind than did their predecessors.

In addition, the local threesome had to fend off a new contender when the Churchill Downs-owned Fair Grounds Race Course and Slots opened a slots casino at the track in 2008. While the track lies closer to Harrah’s than to the suburban gambling halls, the combination of horse racing and slot machines at the Fair Grounds probably took a toll on all three locations.

Recent numbers tell the tale. Reports for October 2010 show that revenue at the three established casinos improved from a year earlier, but their year-to-date performance lagged. For the first four months of the current fiscal year (beginning July 1, 2010), Boomtown Casino, with about $48 million in revenue, was off its 2006 high by 24 percent; and Treasure Chest, with revenue of $36 million, was down 18 percent. Meanwhile, Harrah’s pulled in just $116 million during the period, off more than 16 percent from a peak it hit in 2007.

When the economy begins to improve, the chances are good that all the casinos’ fortunes will begin to climb as well. But the local operators are unlikely to sit still and wait.

A few months ago, Harrah’s New Orleans announced it had installed a new general manager in New Orleans. Dean Real, formerly the assistant manager of a Harrah’s property in Iowa, took the helm in August. One of his first actions was to address a pressing payroll issue. The casino had fallen short of its contractual obligation with the state to employ at least 2,400 workers. Real quickly increased employment to comply with the contract.

In a published report, Real acknowledged that Harrah’s New Orleans has been under financial pressure. “We’ve struggled with revenue,” he said in a September interview with The Times-Picayune. As an antidote, he said he would depart from the casino’s tradition of marketing primarily to a non-local audience and would begin promoting the casino to locals as a seven-day-a-week destination while focusing national marketing efforts on special events. He also suggested that Harrah’s will try to improve its live entertainment line-up by bringing in bigger names and, perhaps, opening a larger theater space than the casino now offers. Real wasn’t available to comment for this article.

Despite the stumbles of recent years, Harrah’s has continued to build its presence in downtown New Orleans. In 2006, the company fulfilled a long-time goal of opening its own hotel, across the street from, but connected to the casino via tunnel. The 450-room Harrah’s New Orleans Hotel has become an important part of the casino’s marketing within and outside the region.

Harrah’s also engineered the conversion of Fulton Street – which runs alongside the hotel – into a pedestrian mall replete with restaurant and bar options. That development created a large new center of activity that contributes to the feeling of a “casino city” within the city.

As it has expanded its local footprint, Harrah’s has continued funneling millions of tax dollars into state and city coffers. In fact, a recent payment of $6.4 million to the city – to make up for previous underpayments – is helping New Orleans address a serious gap in its current budget.

Any way you cut it, Harrah’s continues to wield powerful marketing clout as a gambling entertainment provider in New Orleans. That means its rivals nearby and in the suburbs will have to work harder to retain their customer base, even as economic conditions improve.

It won’t be easy. In months to come, the smaller Boomtown, Treasure Chest and Fair Grounds casinos may find that, while competing with a 100,000-square-foot casino set on luring high-stakes gamblers from afar can be intimidating, going head-to-head with a Harrah’s dynamo bent on drawing locals through its doors could create far bigger headaches.
 

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