CAPE GIRARDEAU IS ONLY ONE OF MANY POTENTIAL DEVELOPMENTS: GAMING TITANS READY TO ANTE UP FOR RICH WINNINGS AT NEW SITES

Editor's note: the following article first appeared in the Sunday edition of the Las Vegas Review Journal-Sun, May 16, 1993. It was brought to the attention of the Perspective Page by a Southeast Missourian employee who was attending a convention in Las Vegas last weekend. We reprint the article with permission from the Las Vegas Review Journal-Sun.

The reporter, Dave Palermo, cautioned on the telephone that events are happening so quickly that parts of the story may already be out-dated. For example, the Boyd Group proposal for Cape Girardeau is not included in this story. Also, he pointed out that his story focuesed on the plans of Las Vegas-based casino operators, so groups like Players International and Trump Casinos were not included. Players International operates a riverboat casino in Metropolis, Ill. Trump has expressed interest in St. Louis.

Promus Cos. Inc. President Phil Satre occasionally glanced out the window of a Harrah's limousine as it weaved through heavy midafternoon traffic on Las Vegas Boulevard, the mecca of gambling in the United States.

His thoughts during that brief ride on the Strip two weeks ago were fixed on opportunities elsewhere.

"Joliet," he said. "North Kansas City. Vicksburg and Tunica. Biloxi. Shreveport."

Texas, perhaps?

Satre waved off the notion.

"I don't think the Legislature will go for it," he said.

Windsor, Ontario?

"We're interested."

Satre was asked about New Orleans, where hotel magnate Christopher Hemmeter and Caesars World Inc. have an apparent lock on city and state approval for a $460 million, land-based casino, the Grand Palais.

"It isn't over till that fat lady is singing," Satre said. In fact, Promus may float a gambling riverboat in Kenner, La., a New Orleans suburb.

Satre, 43, once an undersized, overachieving Stanford University linebacker, is, indeed, aggressive. So is the Memphis, Tenn.-based Promus Cos., Harrah's parent corporation.

Promus is leading the charge in the nationwide spread of legalized gambling. Be it a cruise boat on the Des Plaines River in Joliet, Ill., a gambling hall on an Indian reservation near Phoenix, or a dockside casino in Tunica County, Miss., Harrah's logo is cropping up in more places than the other major gaming companies combined, at a lightning-fast pace.

"You have to take your hat off to Promus for pressing their way into an emerging market," said Steve Eisenberg, gaming industry analyst for Oppenheimer & Co. "What they've done is brilliant."

But while Promus executives have already been playing their cards, many of the larger gaming companies that have been cautiously watching the dynamics of Indian, riverboat and dockside gambling are just now beginning to make their push.

"While you haven't heard from them much, I have just as much confidence that some of the other big players -- Caesars, Circus Circus, The Mirage, even Hilton -- will be making their moves very soon," Eisenberg said.

Most of Nevada's largest gaming companies have been granted approval by state regulators to pursue business ventures outside Nevada, according to a list provided by the state Gaming Control Board.

The list includes the biggest names in the casino industry: Promus, Hilton Hotel Corp., Circus Circus Enterprises Inc., Caesars World Inc., Mirage Resorts Inc., the Boyd Group, Bally Manufacturing Corp., Showboat Inc. and International Game Technology.

Like Harrah's, gaming companies are encouraged by government officials seeking methods of raising revenues without raising taxes and a growing public acceptance of what historically has been regarded as a sin industry.

"Quite frankly, even I referred to it as a sin industry until I got to understand it," said Clint Arnoldus, executive-vice president and gaming industry analyst for First Interstate Bank.

Most of t~he more immediate opportunities are in riverside and dockside casinos in Illinois, Iowa, Mississippi, Missouri and Louisiana. The heartland has embraced floating casinos.

"The gaming industry is really on the threshold of unprecedented growth," said Arnoldus, who predicts there will be up to 95 dockside and riverboat casinos by 1995. "It may, in fact, be the growth industry in the '90s."

Until recently, the gaming industry's growth has been limited to its ability to generate travel from other parts of the country and convince customers to come back for more. The spread of riverboat gambling enables companies to tap new markets with a relatively small capital investment that, in the absence of competition, can be won back in a few years, if not months.

Fitz~eralds Hotel executives Phil Griffith and Jerome Turk raised eyebrows last year when they sold their interest in the Empress in Joliet for $50 million within a matter of weeks after the boat was launched.

While Nevada casino companies share an interest in what the industry refers to as "foreign" gaming ventures, their strategies differ.

Harrah's, the only gaming company with properties in all the major gaming locations (Las Vegas, Laughlin, Reno, Lake Tahoe and Atlantic-City, N.J.), is concerned with getting its trademark in as many jurisdictions as possible. Satre isn't out to build megaresorts in Shreveport, La., and Biloxi, Miss., similar to those on the Strip.

"We're well-positioned to take~ advantage of the situation," said Satre, noting that along with casinos at both ends of the country, Promus operates the nationwide chain of Embassy Suites and Hampton Inns.

"We're in the brand-building business with distribution as a central element. That's been our strategy from the beginning."

Other casi~no companies are more site-selective. They see riverboat gambling as a way to position themselves in metropolitan areas with the hope that, eventually, they can move on shore with major casino and entertainment spectacles to rival the MGM Grand Hotel & Theme Park, The Mirage and Treasure Island, Luxor and Excalibur.

"Our success is not necessarily going to be judged by how many projects, but by the quality and the kind of projects they are," said Marc Grossman, vice president of corporate communications for Hilton Hotel Corp. The company plans to operate casino boats in New Orleans and Kansas City, Mo.

Caesars World has a similar strategy in terms of sites, restricting itself to metropolitan areas and resort destinations. But it has accepted the role of operator rather than owner, entering into partnerships with Hemmeter in New Orleans and the Agua Caliente Band of Cahuilla Indians, which plans to open a multi-million-dollar card club in Palm Springs, Calif.

The company also is looking closely at Windsor, across the water from Detroit. It is one of about 24 companies that have expressed an interest in the potentially lucrative location.

"Our focal point is to be well positioned in major metropolitan markets," said Jack Leone, Caesars vice president of corporate communications.

Mirage Resorts is seeking to build a multi-million-dollar casino in Bridgeport, Conn., and a riverboat in West Dundee, Ill., some 35 miles from Chicago.

ITT Sheraton, which recently hired Hilton Nevada Corp. President John Giovenco, began its entry into the gaming business by signing a contract with New Orleans Steamboat Co. to operate a casino riverboat near that city's French Quarter.Showboat Inc. is looking at Windsor and hopes to float a gambling boat on Lake Pontchartrain south of New Orleans.

The smaller companies are looking at secondary markets, primarily in Mississippi, Louisiana and Missouri.~~~~

The Boyd Group, the largest privately held gaming company, has a contract with the Choctaw Indians near Jackson, Miss., and also is pursuing dockside gaming in that state.~ (The Boyd Group has also proposed a $37.5 million riverboat and casino development in Cape Girardeau. Mo.).

Elsinore Corp., which owns the Four Queens Hotel, also has a contractual agreement with an Indian tribe near Palm Springs.

Andrew Tompkins' Lady Luck is operating a riverboat in Natchez, Miss., and hopes to operate another on the Gulf Coast.

Palace Station has purchased a boat for St. Charles, Mo.

Michael Gaughan, owner of the Barbary Coast and Gold Coast, is a partner in a boat in East St. Louis, Ill.

Sahara Resorts Inc. has an application to operate a boat in Moline, Ill.

Jack Binion, president of Binion's Horseshoe, is pursuing gambling boat ventures in Mississippi and Louisiana.

The Becker Gaming Group, o~perators of Arizona Charlie's, was chosen by city officials for the right to float a casino in Jefferson City, Mo.

Circus Circus Enterprises, one of Nevada's most successful gaming companies, remains an industry curiosity because of its slow pace in seeking ventures outside Nevada.

"They have been noticeably quiet," said one gaming industry analyst who asked that he remain anonymous.

Much of the criticism for the company's lack of inertia has been leveled at Circus Circus Chairman Bill Bennett, who is still smarting from a failed, and expensive, attempt to launch a $2 million gambling entertainment complex in Chicago in partnership with Caesar's World and Hilton.

Bennett, who could not be reached for comment, mentioned his disappointment in the Chicago venture when taking parting shots at former Chief Financial Officer Glenn Schaeffer, who resigned in February.

The company's absence is likely to be temporary. Circus Circus has a possible business venture in Tunica, just south of Memphis, and has joined the rush for Windsor. It also has a partnership with Trillium Corp. for a floating casino, golf and entertainment complex on 850 acres in Riverside, Mo., a suburb of Kansas City."I don't think Circus has been moving too slow," said Mike Rumbolz, a former Nevada gaming regulator recently hired by the company to oversee its foreign gaming ventures. "I think we've been appropriately cautious. We're been proactive as well as monitoring things, depending on the location."

Circus Circus, which has been profitable marketing itself to middle-income families, is looking to establish operations that are similar, but smaller, than its "megastores," the company's term for Circus Circus, Excalibur and Luxor theme resorts.

"I'd say we're between the two," Rumbolz said of the strategies adopted by Harrah's and Hilton. "In reviewing the potential of a particular location we're looking at more than simply a riverboat. We're looking at an entertainment center."

"For every action, there's a reaction," Raymond "Skip" Avansino, president of Hilton Hotel Corp., said last week. "Those are Barron Hilton's exact words."

Hilton would not be interested in chasing a potential casino project in northern Indiana, Avansino said, because the reaction may be a more lucrative project in Chicago.

Hilton would not be interested in an Indian casino near a major city, Avansino said, because the reaction would be a casino in the nearest metropolitan area.

Hilton would not be interested in operating a casino riverboat in Tunica, Avansino said, because the reaction may be a casino in nearby Memphis.

The advantage to foreign gaming is the ability to operate at least temporarily in a monopolistic environment. The disadvantage is that legalized gambling is proliferating so fast casino companies have a difficult time predicting where competition will surface.

Companies investing in limited-stakes casino riverboats in Iowa were stung when Illinois permitted boats with no limits directly across the Mississippi River.

Floating casinos in Mississippi are expected to be hurt by legalized gambling in Louisiana.~

G~ambling ventures in Shrevepor~t and other western Louisiana locations may be hurt if casino gambling were legalized in Texas.

"We have always been a prudent company and one of conservatism," Avansino said. "We owe it to our stockholders to seek out long-term opportunities that will have a high return on investments.

"We're not looking at the froth on the river," he said of the potential proliferation of riverboats in regions of Louisiana, Mississippi, Missouri and other states. "We're not going to be in Tunica. We're not going to be in Biloxi."

Of the nine boats expected to be launched in Tunica, feeding off, Memphis' market area of 3 million residents, "three or four will survive," Avansino said.

"We will be aggressive in selected areas," Avansino said, including Texas and St. Louis, where Hilton operates two hotels. "We're monitoring" Chicago, he said.

The company is committed to a riverboat near the Hilton Hotel in New Orleans and two others in Kansas City, Mo., which granted Hilton an exclusive contract. Hilton is one of those interested in Windsor, although it is keeping a keen eye on the prospects of legalized gambling in Detroit.

There are many opportunities internationally.

"The key word is `globalization,'" he said.~