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Andy - Las Vegas

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If any casino appeared to have survived the vicissitudes of Hurricane Katrina, it was the Beau Rivage. While nearby Gulf Coast casino properties suffered extensive damage to hotels and casino barges, the MGM Mirage property came out of the storm with its buildings intact. Indeed, scanning the photos, it seems that all the facility needed to reopen was a new set of windows and a fresh coast of paint.

But, as is often the case, looks can be deceiving.

"When you first approach [Beau Rivage], the damage looks minimal. But the property actually sustained a significant hit," said Terry Lanni, chairman and CEO of MGM Mirage during an industry leaders keynote session at Global Gaming Expo, which took place last week in Las Vegas.

According to Lanni, the storm and its accompanying tidal surge washed out the entire ground floor of Beau Rivage. In addition, walls throughout the facility leaked, leading to extensive water and mold damage.

Lanni estimated that it will take at least a year before Beau Rivage can reopen, and has hired Biloxi, Miss.-based Yates Construction to remove the debris and start the rebuilding process. The cost of rebuilding and lost earnings will be covered by insurance. Lanni said that MGM Mirage accounts for 3.5 percent to 4 percent of MGM Mirage's pro forma cash flow.

In the meantime, MGM Mirage continues to support its 3,400 employees left largely homeless by the storm. The company has extended all its medical programs, and has found jobs for some displaced employees in its Detroit and Las Vegas operations.

Harrah's Entertainment has also adopted an "employees first" mentality at its three Gulf Coast region properties that were impacted by Hurricane Katrina, offering their workers a crack at jobs in Las Vegas and Atlantic City. However, according to Harrah's Entertainment President and CEO Gary Loveman, the response to these offers has been "quite tepid."

"Many of our Gulf Coast employees are deeply embedded into the local community and the region's lifestyle," Loveman said. "Very few of them have expressed a desire to move to Atlantic City or Las Vegas."

Unlike Beau Rivage, there is no question about the damage Hurricane Katrina inflicted on Harrah's Grand Casino Gulf Coast gaming operations; hotels at each of these facilities were totally destroyed and gaming barges where pulled off moorings and deposited well inland. In addition, the company's New Orleans casino, though largely undamaged, remains closed until the city officially reopens. According to Loveman, insurance will replace lost earnings at the three properties, which he estimates to be 7 percent to 8 percent of the company's total EBITDA.

Like MGM Mirage, Harrah's is committed to rebuilding its destroyed properties. However, Loveman would like to rebuild with land-based casinos, which would require a change to current state gaming regulations that require gaming facilities "float" on water.

"Absolutely no one has benefited from the laws that require casinos operate on water," Loveman said. He added that history will look back on this rule and determine that everyone who agreed to it, "must have been on ether."

Lanni added that he did not have a problem with changing the law to allow land-based casinos, and that it was up to the state legislature to decide the issue. However, Lanni did add that if the law did change, he hoped there would be a provision that would keep casinos near where they currently are, to help revive local business communities.

One thing that Lanni and Loveman did agreed on was that rebuilding offers casino companies a chance to start with a clean development slate. Both believe that the rebuilt properties will more closely resemble the Beau Rivage in terms of layout and entertainment/amenity offerings.

Paul Doocey