After years of debate, Louisiana lawmakers last week finally gave its casino operators permission to expand their gaming footprint and move its riverboats out of the water and onto drier and, perhaps, more fertile land.
The action is a giant step forward for Louisiana. It took almost a decade after riverboat gaming was introduced in 1991 for the state to remove a requirement that gambling only take place while the boat was sailing, and the state still requires its water-based gaming facilities – even the faux boats, such as the L’Auberge properties in Lake Charles and Baton Rouge – to have circulating paddle wheels.
State law also confined casinos to just 30,000 square feet of gaming space.
All that changed on May 23, when Gov. John Bel Edwards, in a photo opportunity, signed the legislation while surrounded by casino leaders.
The question remains, though, if any of the 15 casinos will take the state up on the offer.
Wade Duty, executive director of the Louisiana Casino Association, said the Louisiana Gaming Control Board may take the rest of the year to draw up regulations and design requirements.
“Right now, it’s on the regulators. By next summer, the ball will shift to the companies,” Duty said.
Local elected leaders are jumping at the prospects of additional tax revenue.
“It would change the landscape out here,” Kenner, La., Mayor Ben Zahn told a New Orleans television station. “When you have a land-based operation, obviously the footprint increases. When the footprint enlarges, our revenue increases.”
The New Orleans suburb is home to Treasure Chest, a riverboat casino owned by Boyd Gaming Corp. The boat is docked close to the shore of Lake Pontchartrain, and the site has space for development.
When Boyd Gaming CEO Keith Smith was asked about the pending Louisiana legislation during the company’s first quarter earnings call in late April, he was non-committal. Boyd has five casinos in Louisiana, including two land-based racetrack casinos that are unaffected by the legislation.
Smith said Treasure Chest already has strong business, and the 25,000-square-foot casino has been growing results “for 10 or 12 quarters in a row now,” despite operating on a “three-story riverboat.”
The legislation may offer Boyd “the ability … to do something much more compelling” and take advantage of a strong local gaming market.
In addition to moving onshore, casinos can expand to 2,365 gaming positions, which is calculated by combining the number of seats in front of a slot machine with those at gaming tables. Treasure Chest currently operates 1,016 slot machines and 32 table games. However, Duty said the new gaming positions figure might be a “6 percent reduction” for some operators.
Boyd also owns the Amelia Belle Casino, in St. Mary’s Parish, and Sam’s Town in Shreveport.
“(The legislation) could really benefit us in the long run,” Smith said.
Macquarie Securities gaming analyst Chad Beynon said in a research note that Boyd Gaming, Penn National Gaming, and Eldorado Resorts were most likely to benefit from the legislation.
Eldorado has two casinos in Louisiana and is in the process of acquiring the Belle of Baton Rouge through its $1.85 billion joint acquisition of Tropicana Entertainment. A planned sale of its Isle of Capri Casino in Lake Charles fell through last year. Company leaders have said they are now looking at improving the property’s operations.
Beynon said it’s more cost-effective for casinos to be land-based. An example is the Isle of Capri in Bettendorf, Iowa, which moved 223 feet from the Mississippi River into a land-based facility that cost $60 million to build in 2016. Revenue increased 11 percent in the next year.
Louisiana’s new law permits casino companies to move their gaming facilities off waterways by as much as 1,200 feet – a quarter-mile in distance, or the length of four football fields.
Boyd Gaming has a full plate. It is acquiring four casinos from Pinnacle Entertainment – two in Missouri and one each in Indiana and Ohio – for $575 million. Boyd is also buying Valley Forge Casino Resort near Philadelphia, for $280.5 million. Moving Treasure Chest is not on the radar.
Penn National and Eldorado are completing their own multibillion-dollar acquisitions to grow their respective companies, so moving a Louisiana riverboat casino is also not a priority. Caesars Entertainment has a separate deal for Harrah’s New Orleans, the state’s only true land-based casino.
Duty said regulators will require casinos that move onto land to include other non-gaming amenities, including restaurants, retail, hotels, and entertainment. He said the legislation grew out of task force that met for 17 months.
“It’s been a long time coming for the industry,” Duty said. “It’s not really an expansion. It wasn’t clear the legislation was going to pass, but now the casino companies can actually focus on drawing up plans once they know the requirements.”
Other states with water-based gaming have passed similar legislation, the most notable being Mississippi in 2005. Two months after Hurricane Katrina demolished the Gulf Coast casino market, lawmakers approved changes allowing casinos to move off the water if they were within 800 feet of the shore. Before Katrina, gaming had to be conducted on boats, barges or buildings on piers.
Only a handful took them up on the offer.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
