We took your query to Caesars Entertainment Director of Corporate Communications Gary Thompson. When asked why Harrah’s Margaritaville Casino & Resort was halted, he replied, "Because the market wouldn’t support the investment that would be required," a determination reached "some time ago." We followed up by asking why this conclusion was reached only after construction on the $704 million megaresort was well underway? Thompson said, "There was an interfering storm called Hurricane Katrina."
However, Thompson’s memory misgives. Harrah’s announced Margaritaville on May 15, 2007 and broke ground the following August, two years after Katrina swept through Biloxi, washing Grand Casino Biloxi’s gambling barge roughly 500 feet onshore (necessitating its demolition) and causing considerable damage to the hotel, parts of which were imploded.
The "intervening storm" that forced the shelving of Margaritaville was one of red ink rather than meteorology. In October 2006, before the project was announced, Harrah’s began negotiating with private-equity firms Apollo Management and Texas Pacific Group on a leveraged buyout, a deal that eventually closed on Jan. 28, 2008. As New Orleans City Business reported in June 2010, "Analysts place at least part of the blame on investors’ decision to take the company private … at a cost of $30.7 billion, including debt and transaction costs," pushing the company to the verge of bankruptcy.
Thompson gave the Biloxi Sun-Herald another version of events earlier this month, after the former Harrah’s (now Caesars) wrote off the $167.5 million that had already been spent on construction. "That project was halted at the onset of the recession," he told the paper. "Since that time we’ve been approached by a number of sources with options for the site, including one proposal that it be demolished and the materials that are left over be used in repopulating offshore oyster beds."
The decision seems to have been prompted, in part, by an ultimatum from the City of Biloxi that Caesars either "repair or demolish the building." Also, Caesars CEO Gary Loveman has been aggressively trying to unload various company assets in order to roll the proceeds into possible casino projects in Boston, Baltimore and, yes, Toronto. A St. Louis-area casino was sold to Penn National Gaming and a South African one was also spun off. Caesars subsidiary London Clubs International is also on the block – as may be its Biloxi property.
According to Harrah’s May 2007 press release, the particulars of the project – had it been completed -- were to be as follows: "Approximately 100,000 square feet of casino floor; 250,000 square feet of retail space; approximately 66,000 square feet of meeting space; 420 new hotel rooms; 378 renovated hotel rooms; pool deck area with cabanas, bar, and tropical landscaping; full-service spa; Summer 2007 projected project start date; and Spring 2010 projected completion date." In order to make room for all this, Harrah’s swapped two hurricane-damaged riverboats on Lake Charles, Louisiana, for 18 acres of Biloxi beachfront that had been occupied by Casino Magic, another Katrina victim, owned by Pinnacle Entertainment.
Since that time, Pinnacle has been making out like a bandit at its Lake Charles casino and has moved one ex-Harrah’s license to Baton Rouge, where it will open a $368 million casino later this year. Harrah’s Biloxi project, meanwhile, progressed no further than what was described as "foundations, pilings and ironwork."
In June 2008, work on the megaresort began ominously slowing down. Thompson’s predecessor, Marybel Batjer, soothingly e-mailed local media, "We simply need to adjust the plan for the development to better align with the economic environment, market conditions on the Gulf Coast and the current financing environment." Adjusting the plan ultimately meant stopping construction later that year. "Our mayor [A.J. Holloway] used to say as long as the construction cranes are there, there’s still hope," city spokesman Vincent Creel told City Business. "Then they took the cranes away," in January 2010. A plea for joint-venture partners to bail out Harrah’s had fallen on deaf ears, sealing the project’s fate.
At that time, Macquarie Capital USA analyst Joel Simkins placed the odds of Harrah’s Margaritaville opening between 2015 and 2020 as "slim to none." Those odds went to "none" in January of last year, when singer Jimmy Buffett terminated his deal with Harrah’s and entered a new one with former Grand Casinos executive Tom Brosig. On the site of what used to be an industrial park, they built a $48 million, Margaritaville-branded casino, which opened on May 22. Ironically, former Grand Biloxi general manager Karen Sock, once tapped to head the Harrah’s Margaritaville project, is now the GM of Buffett and Brosig’s low-cost version.
But there were no hard feelings between Buffett and what is now Caesars Entertainment: A Margaritaville-branded mini-casino opened in the Flamingo Las Vegas last October.
Asked whether Caesars might reinvest in Grand Biloxi, to make it more competitive, Thompson replied coldly, "We continuously look at our properties to determine what investment to make in them." Sounds a lot like "no," if you ask us.
