Journal Record, The (Oklahoma City): Analyst says Oklahoma's casinos still fall short of most compet

Even though Oklahoma's casinos are applying pressure to the Louisiana gambling market, Oklahoma sites still lag behind most competitors in overall quality, Susquehanna Financial Group analyst Eric Hausler said after a recent nationwide tour.

They're just not as well capitalized yet, although I think that time is coming, Hausler said. A lot of the Oklahoma City area facilities are relatively under-capitalized compared with what you see in California and other markets. Probably in the next five years, I think they'll catch up.

He said although Las Vegas continues to rule the market with the world's largest concentration of gambling halls, its future is linked more and more to smaller, feeder operations across the country - even the limited gaming centers owned by tribes in Oklahoma. It's Hausler's job to analyze the wide variety of assets and operating strategies of those companies and how they compare with each other. Hausler reviewed the market in one fell swoop - 60 casinos in less than a month.

After Oklahoma voters approved a measure in November that permitted the state to compact with tribes to allow non-house backed card games and electronic bingo games, four tribes signed compacts to do so with the federal government's approval. In exchange, the state receives a 10 percent cut of the action.

The first compacts legalized card games including poker and blackjack at the Absentee Shawnee Tribe, Comanche Nation, Miami Tribe and the Cherokee Nation early this year, allowing the tribes to expand their gambling product lines and casinos. Other tribes are looking at similar compacts.

For example, the Cherokee casino at Catoosa, near Tulsa, quickly announced after the vote passed that it would offer about 70 tables for poker and blackjack. Tribe leaders said 300 more employees would be needed to handle customers.

Hausler said in his market overview of Shreveport, La., gaming, The market continues to be affected by the proliferation of gaming in Oklahoma. - The introduction of table blackjack and poker into Oklahoma has made matters worse for operators. We think the market is likely to continue to suffer as the Oklahoma facilities improve their quality of product over the next few years.

Shawn Pensoneau at the National Indian Gaming Commission said that in 1988 when the federal Regulatory Gaming Act was passed, revenues totaled about $100 million; by 2003, that total had reached $15.7 billion annually, he said. Last year's figures are expected to be released later this month.

The commission reported the region comprised of Oklahoma, Kansas and Texas reported revenues of $822,000 in 2003, up from $651,000 the year before. State finance officials said revenue figures were not available for Oklahoma.

Hausler was initially unimpressed with some of the Oklahoma gaming centers, and was quoted by MarketWatch news as saying, The worst place was Oklahoma. The facilities are tent structures or trailers. They just kind of got the doors open and stuck some machines in them.

But he provided more perspective to The Journal Record.

It was a broad generalization, he said. I think Winstar (one mile north of the Red River) is a nice facility, and Thunderbird (at Norman) is a nice facility. Cherokee Casino at Catoosa is a real casino. -

Against Las Vegas, there's really no comparison. But, like I said, over time all facilities evolve. And you'll see that as the tribes get access to capital and invest in bigger and better facilities.

Cherokee Casino Resort spokesman Mike Miller said the tribe made good decisions early on to reinvest in the business.

Sometimes it's difficult for tribes to come up with the financing to do all of those projects themselves. We've managed to do that ourselves and we were able to get it done exactly how we wanted it done, he said. We feel like it's a flagship for Oklahoma, a destination-level resort with a golf course and several high- quality restaurants and entertainment stages.

Miller agreed with Hausler's assessment that the state's casinos will improve dramatically in the next few years. However, Oklahoma gaming centers may never be top competitors in the national market, Miller said, because the biggest players are located near the highest-density population centers.

Even though gaming companies are still expanding and refining themselves in existing markets, Hausler said the potential for continued geographic expansion is starting to dwindle.

Domestically, there are not a lot of opportunities to grow, between religious hang-ups and anti-gaming sentiments, he said. State governments have begun to shy away from putting more gambling into their economic mix.