Apr. 4, 2004 - Tunica casino operators went through something last year they had not seen since the first gambling boat opened 11 years ago -- a year-to-year drop in revenues. 

Revenues at the nine casinos around Robinsonville and one down the road in Lula, Miss. -- at $1.46 billion -were off about $20 million last year compared with 2002, according to Mississippi Gaming Commission figures. 

Gaming executives offer different explanations for the decline at individual properties and profess optimism for 2004 and beyond. 

Competition inside and outside the market is a key factor. 

"There's getting to be so many other places where people can gamble, 200, 300, 400 miles away," said Dennis Forst, gaming analyst for McDonald Investments in Cleveland. 

The Tunica market is also mature. 

"There's not a whole lot (new) happening. It's stable, but that's a good thing," said Jeff Wallace, senior research analyst for the Sparks Bureau of Business and Economic Research at the University of Memphis. 

About the biggest project among the casinos last year was Hollywood Casino's $8 million remodeling of its hotel rooms. Fitzgeralds renovated more than 100 rooms of its 507-room hotel. 

"It's remarkable they have held their own," Wallace said of the market. 

"While the rest of the nation's economy seems to be recovering very well, the Tunica market derives a lot of its customer base from Memphis and West Tennessee, which have not done as well as the national economy in the last few months." 

And, when people are out of work, many don't want to engage in "conspicuous consumption" like betting, and those who do, don't bet as much or as often as when times are good, said Forst. 

But others say the gaming commission numbers that show a 1.3 percent overall revenue drop in 2003 understate what is going on in the market. 

Operating profits dropped at four of the nine Tunica properties from 2002 to 2003, four reported gains and the ninth, Hollywood, had no comparisons available, although fourth-quarter earnings were above 2002 levels. 

Gaming revenues at Sam's Town dropped about 3.7 percent, said John Phillip, general manager. Sam's Town's profits were down about 30 percent last year. 

"Tunica is a very, very competitive market," said Steve Marshall, marketing director at Fitzgeralds. 

That, plus disruption from the hotel renovation, pushed down Fitzgeralds' earnings before interest, taxes, depreciation and amortization (EBITDA) by about $1.5 million last year to $20.2 million, according to reports filed by its parent, Majestic Star Inc. of Gary, Ind., with the Securities and Exchange commission. 

EBITDA is considered a good measure of operating profitability. 

"Our competitors seem to be finding our target audience," Marshall said. 

"We've flown under the radar for a long time. The property has focused on the high-frequency retail gambler, mostly slot customers and more casinos in the market have started doing that too." 

One of them is Sheraton, whose Loose Slot Louie ad character has proclaimed increased slot payoffs for more than a year. That campaign seems to be working -- Sheraton's EBITDA grew by about $2.8 million, reaching $28 million last year. Sheraton, along with Grand Casino and Bally's, is owned by Caesars Entertainment Inc. 

Competition took its toll on the property everyone considers the market leader, Horseshoe Casino, which is about to be auired by Harrah's Entertainment Inc., which has its own property in Tunica. 

Operating income of $53.1 million was nearly $15 million less than in 2002, the company's SEC filing showed. 

"Most of that is due to promotional costs associated with maintaining market share," said Bob Mueen, general manager. "As a result our market share was down less than 0.4 percent." 

That spending is starting to pay off this year with revenues up about 2.7 percent through mid-March, Mueen said. 

Harrah's got a boost last year from a juiced-up customer loyalty program, said Gary Thompson, a company spokesman. In Tunica, that translated into an EBITDA gain of $2.3 million or more than 13 percent. 

After Harrah's completes the Horseshoe buyout, expected early this summer, both will stay open, he said. 

"You don't want to close something that's contributing $20 million (to EBITDA)," he said of the Harrah's casino. "That's a lot of money." 

As far as the market leader is concerned, Thompson said, "We're not going to tinker with the Horseshoe property." 

Caesar's, too, plans to keep all three of its casinos running, said Jon Lucas, president of the Tunica casino group. 

Bally's EBITDA was down only about $200,000 last year and that was because of unusual medical benefit payouts, he said. 

Grand added $2.9 million in profits to 2002 totals, reaching $45 million, much of it because of cost cutting. Lucas said Grand has trimmed 300 jobs, mostly by attrition or moving people to vacancies at Sheraton or Bally's, reducing the junket program and fine-tuning the direct-mail list, he said. 

While a revival in the economy would help all nine properties, it will take more than that to produce substantial growth, analysts and executives said. 

"They're stagnating in their offerings," Wallace said. "To grow they have to have something to generate more excitement beyond the local area, maybe a renovation along the lines of a Beau Rivage, a drop-dead knockout casino." 

Beau Rivage, which opened in Biloxi in 1999 as a luxury casino-resort, is considered the Mercedes of Mississippi gaming properties. 

"Tunica has potential if there is additional capital investment," said Mark Falcone, gaming analyst for Deutsche Bank in New York. That means expanding nongaming offerings, he said. 

"We need amenities so we can draw people from Atlanta, Nashville, Huntsville, Birmingham, Oklahoma City and St. Louis," Lucas said. 

He and others said those attractions are either here -- the newly opened Mississippi Riverpark and Tunica National Golf and Tennis Club -- or on the way, including the expansion of Tunica Airport, construction of I-69 through the county and the proposed auto-racing track. 

"If we could get reasonably priced air transportation into this market . . . it would increase our revenues," Marshall said. 

Meanwhile, the thinking is that the current properties will survive. 

"All the casinos are profitable, so it's certainly a viable market," Marshall said. 

And while the market can handle all those properties, Falcone said, "If some casinos shut down, it would be a healthier market overall. It's still a market that could handle nine casinos, although less could be better." 

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(c) 2004, The Commercial Appeal, Memphis, Tenn. Distributed by Knight Ridder/Tribune Business News.