Despite early Wednesday’s landfall of Tropical Storm Harvey, the majority of Louisiana’s casinos have remained opened, although heavy rains and, with them, the potential for flooding, are hitting the region.
The storm dumped a record amount of rain on southeastern Texas this week, causing catastrophic flooding in the Houston area, and was bearing down on Southwestern Louisiana’s casino markets overnight, including Lake Charles and Shreveport. The area was expected to get the worst of the storm Tuesday and Wednesday with upwards of 20 inches of rain.
Central and Southern Central Louisiana are expected to get between 5 and 10 inches of rain. Some New Orleans streets were seeing water accumulate.
Reno-based Eldorado Resorts closed its Isle of Capri Lake Charles at midnight. On its Facebook page, the casino said it would reopen once the storm passed. State police would also need to approve the casino’s reopening.
SunTrust Robinson Humphrey Gaming analyst Patrick Scholes told investors in a research note Tuesday that the storm would cause Louisiana’s casino market “to feel ongoing weakness due to poor visitation.”
Lake Charles – home to Pinnacle Entertainment’s L’Auberge property and Tilman Fertitta’s Golden Nugget – is a two-hour drive from storm-ravaged Houston, its largest feeder market.
Meanwhile, Boyd Gaming Corp., which operates five casinos in Louisiana, halted simulcast racing Tuesday at its Delta Downs Racetrack, Hotel & Casino.
Nomura Securities gaming analyst Harry Curtis said Tropical Storm Harvey would only have a “limited” impact on Boyd.
Curtis said the “worst-case, near-term negative impact” to Boyd’s casinos would be a decline of less than 3 percent in third quarter property-level cash flow. Boyd’s five Louisiana properties – which include two in the New Orleans area – account for roughly 20 percent of the cash flow for Las Vegas-based Boyd’s 24 total resorts.
It’s a different story for Pinnacle, said Scholes. He cited Louisiana Gaming Control Board statistics that show 84 percent of L’Auberge Lake Charles customer base comes from 150 miles outside of the area.
“We would expect casino spend to decline as the Houston area recovers,” Scholes said. “We see the near-term impact as worse than it otherwise would be due to the upcoming holiday weekend.”
Scholes added that, “Vinton (home of Delta Downs) and Lake Charles figure to source more from Houston and East Texas than other Louisiana markets.”
Louisiana Gov. John Bel Edwards said in a news conference Tuesday to “prepare and pray” as Harvey arced again over the Gulf of Mexico to pick up more rainfall potential. The storm made landfall before dawn Wednesday near Cameron, La., a marshy port about 20 miles east of the Texas border.
Baton Rouge and New Orleans are not in the direct path of the storm, according to forecasts, Scholes said.
There was a “silver lining” for Louisiana’s gaming markets, the analyst added.
“In the medium term, we believe there can be a whiplash effect. Construction jobs and FEMA money can benefit local casinos,” Scholes said.
