Inside Gaming: Harrah's New Orleans sees revenue drop under smoking ban

Hurricane Katrina couldn't crush the spirit of Harrah's New Orleans Casino 10 years ago. The aftermath of the massive storm shuttered the property near the Mississippi River and entrance to the famous French Quarter for just six months while the city recovered, reopening for Mardi Gras in February 2006.

But a citywide ban on smoking in most public venues within Orleans Parish that went into effect April 22 has done more damage to the property on paper than any storm surge or 100-mph winds.

Harrah's New Orleans officials warned city leaders last spring that a smoking ban would curtail casino revenue up to 15%, costing the parish millions in gaming and sales tax dollars.

Their predictions rang true.

The smoking ban was blamed for a 16% decline in gaming revenue at Harrah's New Orleans during May. In June, Harrah's New Orleans produced $20.7 million in gaming revenue, a drop of 30.7% from a year ago.

Harrah's New Orleans General Manager Dan Real does not expect the drastic decline to recur monthly.

"Rather, we expect to see continued volatility in month-to-month revenue comparisons as we adjust to the operational challenges the smoking ban has presented," said Real, who also serves as Caesars Entertainment's southern regional president.

Customers seem to be making the best of the situation.

"It doesn't bother me," said Marty Montgomery, a New Orleans resident who visits the casino three or more times a week. "It's no big deal."

Montgomery smoked a cigarette while sitting on a bench in an outdoor smoking area designated by the casino near the St. Peters Street entrance. Even on a humid summer afternoon, Montgomery didn't mind the inconvenience.

"I think I'm smoking less," he said. "I'm not sitting at the table going through a pack."

Jimmy Trotti didn't oppose leaving the casino either. A resident of Carrollton, Ga., some 400 miles east of New Orleans, Trotti normally gambles at casinos in Biloxi, Miss. He was surprised on his first gambling visit to New Orleans that he had to take a cigarette break standing on the casino's outdoor steps overlooking the intersection of Canal Street and St. Peters Street.

"You can't smoke anywhere in Atlanta, so this isn't really that big of a deal," he said.

Harrah's New Orleans has also adjusted with the times. The casino posted giant signs at its entrances, welcoming guests to the "best smoke free casino in the south."

"Our key focus remains on developing first-class outdoor smoking patios that will provide a more convenient alternative for our smoking guests to relax, while preserving the smoke-free environment for our non-smoking guests," Real said.

Fairness has been an argument.

Boyd Gaming Corp.'s Treasure Chest Casino and Pinnacle Entertainment's Boomtown Casino New Orleans are located in nearby Jefferson Parish and are exempt from the city's smoking ban. Boomtown saw revenue grow almost 4% in July while the Treasure Chest was up 7.3%.

The smoking ban cost Harrah's New Orleans its place as the state's second-largest gaming revenue producer, surpassed by the Golden Nugget Lake Charles with $21.5 million in July. Pinnacle's L'Auberge Casino Resort Lake Charles remained No. 1 with $27.7 million.

Real said Harrah's New Orleans is talking with state gaming regulators about reducing the casino's mandatory employment requirement of 2,400 workers.

"While this made sense 15 years ago, the playing field has clearly changed," Real said.

He cited gaming industry competition, casino floor advances and the smoking ban.

"I have guaranteed that the reduction in work force, if approved, would take place through natural attrition," he said. "There would be no layoffs as a result of the change."

Harrah's New Orleans opened in 1999 at the site of the former Rivergate Convention Center and is the state's only land-based casino.

During its Hurricane Katrina closure, the porte-cochère served as the staging area for the New Orleans Police Department. A year after Katrina, Harrah's opened a 26-story, 450-room hotel tower adjacent to the casino.

Casino smoking bans are not unusual. Of the 23 states with commercial casinos, 18 outlaw smoking. Macau implemented a partial smoking ban in its casinos last year and is considering a full ban that would take place in 2016.

The challenge is for casino markets where smoking was common and then banned.

"We have managed the smoking ban in a strategic and proactive manner," Real said.