Argosy Gaming Company
Argosy Gaming Company
219 Piasa Street
Alton, Illinois 62002
Fax: (618) 474-7609
Web site: http://www.argosycasinos.com
Incorporated: 1991 as Argosy Gaming Company
Sales: $260.4 million (1996)
Stock Exchanges: New York
SICs: 7993 Coin-Operated Amusement Devices; 7999 Amusement & Recreation, Not Elsewhere Classified; 6719 Holding Companies, Not Elsewhere Classified
A market leader in a fast-growing industry, Argosy Gaming Company operates five riverboat gambling casinos on the Mississippi, Missouri, and Ohio Rivers that draw customers from Missouri, Illinois, Kansas, Louisiana, Iowa, Nebraska, South Dakota, Indiana, Kentucky, and Ohio. Argosy opened its first floating casino in Alton, Illinois in late 1991, went public in 1993, and opened riverboat casinos in Riverside, Missouri; Baton Rouge, Louisiana; and Sioux City, Iowa in 1994. The company’s largest gaming vessel, the Argosy VI, was scheduled to open in December 1997 in Lawrenceburg, Indiana. With one exception, each of Argosy’s riverboat casinos was historically themed in decor, and all were supported by additional land-based facilities such as dining and entertainment establishments. During the late 1990s, Argosy was the only company in the country licensed in all five cruising states.
Gambling During the 1990s
As the 1990s began, a discernible trend was sweeping through the U.S. casino entertainment industry. Increasingly, Americans were spending their leisure time and their money at gaming casinos. As each year passed, attendance at gaming casinos rose, with more people choosing to try their luck at gaming establishments and those who already frequented casinos opting to increase the number of their annual visits. A pilgrimage was in the works, and industry revenues responded by marching encouragingly forward. The less than $10 billion collected by all the casino gaming establishments in the country in 1990 more than doubled during the ensuing five years, eclipsing $20 billion in volume by 1995. At this point, midway through the decade, the strength of the gaming casino trend could be readily measured. Nine out of ten adults in the nation acknowledged casino gaming as an acceptable form of entertainment for themselves or others. This widespread acceptance prompted those in the industry to establish a growing number of new gaming facilities, so that by 1995, when the number of casino visits in the United States swelled to 154 million, nearly one-third of all U.S. households visited a casino during the year. Buoyed by these impressive figures, the casino entertainment industry found itself occupying rarified heights, trailing only major sporting events in total attendance and moving past the attendance figures tallied by amusement parks, Broadway shows, and symphony concerts.
Against this backdrop, Argosy began its corporate life, evolving from merely a concept on paper into an industry leader collecting more than $250 million in annual sales from its handful of riverboat casinos. The fertile climate under which Argosy realized this development was particularly rich for riverboat casino operators, who were grouped in a niche within the U.S. casino entertainment industry referred to as “new casino destinations.” This sector of the casino entertainment industry recorded more prolific growth than the industry registered as a whole, increasing its revenue volume from $1 billion in 1990 to nearly $10 billion by 1995. Of further importance to Argosy, the bulk of the growth enjoyed by casino operators during the first half of the 1990s was realized in the North Central and South census regions, where all of the company’s riverboat properties were located during its first half-decade of business. In this promising area of the country and under these auspicious conditions, Argosy quickly dotted the Missouri, Mississippi, and Ohio Rivers with riverboat casinos. Without exception, the company was the first to enter its markets with riverboat casinos, making Argosy the trendsetter in a rapidly growing industry.
First Riverboat Launched in 1991
The first Argosy riverboat casino opened in Alton, Illinois, where the company would establish its headquarters and superintend the operation of its other riverboats once they made their debut. Opened in September 1991, the Alton Belle Casino was situated on the Mississippi River approximately 20 miles from downtown St. Louis and was the first gaming facility in the St. Louis market and in the state of Illinois. One of the original investors in the Alton Belle Casino and, accordingly, in the Argosy Gaming Company itself was John Connors, the elder brother of tennis star Jimmy Connors. A real estate developer in neighboring Belleville, Illinois, John Connors guaranteed a $4 million loan to Argosy in early 1991 to facilitate the opening of the Alton Belle. In return, Connors received stock in the company and, several months later, a persuasive plea from his famous younger brother. Jimmy Connors visited the Alton Belle shortly after it opened and was impressed enough to convince his brother to let him in on half of the deal. In a little more than a year, the $2 million invested by each brother yielded exponential returns, providing tangible evidence that riverboat gambling had the potential to take the casino entertainment industry by storm.
After Argosy’s first full year operating the Alton Belle, sales totaled $58 million and net income reached $15.2 million, encouraging financial figures for a business taking its first steps. As the company’s 1992 balance sheet was being tallied, plans were under way in Alton to sell shares of Argosy stock to the public, a means of raising cash for the expected expansion of the riverboat gambling theme to other markets. Argosy converted to public ownership in February 1993, when the company’s stock debuted at $19 per share. In the initial public offering, the Connors brothers sold an estimated 416,000 shares, netting nearly $8 million in the transaction, but the stock they retained was worth decidedly more. Their 19 percent stake in Argosy was valued at $87 million after the public offering, an astounding return on investment that piqued the attention of investors and provided an early example of the big business that floating casinos represented.
One month after Argosy’s debut in the public spotlight, plans were announced to build a new boat and to expand into the Louisiana and St. Louis markets. Argosy relied exclusively on the Alton Belle casino for all of 1993, collecting $67.5 million in net revenues from its lone casino, but company officials did not sit behind their desks drumming their fingers and counting receipts from the company’s sole source of revenue. Instead, the months in Alton following the initial public offering were exceptionally busy, as Argosy’s corporate strategy was developed and specific plans were laid out for the ensuing four years.
At the heart of the company’s strategy was its intention to establish additional riverboat casinos where regulations allowed. By opening more floating casinos Argosy executives could lessen the company’s dependence on one market for its revenues and secure market share in a burgeoning industry niche that was still largely untapped. It was the manifestation of a fundamental business axiom, true for nearly every industry: beat your competition to market, grab the lion’s share of the business to be had, and claim a lasting hold on that market. Toward this end, Argosy executives were highly successful, becoming the first riverboat gambling operators in every market they entered during the first half of the decade. This strategy took form on paper in 1993, when company officials plotted the establishment of Argosy’s next four riverboat casinos.
The move toward diversification began concurrent with the company’s public offering in February 1993. When Argosy went public it also announced that it would own 49 percent interest in a joint venture with St. Louis Concessions Inc. to develop a dockside casino near the Gateway Arch in St. Louis. At the time, St. Louis Concessions held a lease from the city of St. Louis for the site Argosy coveted, a tract of land measuring 290 linear feet for which St. Louis Concessions paid the city slightly more than $3,000 a year. By July 1993, Argosy was willing to pay $41.8 million for the lease and scrub plans for the joint venture. Choosing to operate the property on its own, Argosy was willing to pay such a price for the site because it was already zoned for dockside gambling, which yielded greater profits than riverboat gambling. While Argosy waited for approval from the city of St. Louis and the Missouri Gaming Commission, plans progressed for the establishment of another floating casino in another market.
In December 1993, Argosy’s subsidiary, The Missouri Gaming Company, signed a contract with Alabama Shipyards Inc. for the construction of a $13 million gaming vessel to be named the Argosy Riverside Casino, which was to be located in Riverside, Missouri, five miles from downtown Kansas City on the Missouri River. Earlier, in May 1993, the company had replaced its original ship in Alton with the Argosy II, a 222-foot-long, three-deck, contemporary-styled cruiser liner that housed 652 slot machines and 39 table games and was supported by an adjacent combination sports-entertainment lounge, restaurants, and an off-track betting parlor. The original Alton Belle boat was then refurbished and moved to the Riverside site to serve as a temporary casino until licenses and approvals to operate were received.
Argosy is strengthening its presence in the U.S. gaming industry as the only gaming company licensed in all cruising states—a diversification strategy aimed at reducing exposure to risk and mitigating the impact of external forces within a given market.
At the beginning of 1994, the Alton Belle Casino, with its new riverboat, was collecting between $4.5 and $6.5 million in monthly gambling revenues, sales figures the casino had been averaging since the opening of the Argosy II. Aside from this welcomed news, however, the company’s second full year began on a sour note. The Missouri Supreme Court announced in late January 1994 that portions of Missouri’s riverboat gambling laws were constitutionally flawed, the announcement of which sent the stock values of riverboat gambling companies tumbling. Industry observers noted, however, that the ruling might help Argosy by giving it time to conclude its agreement and produce a boat for its expected operation near the Gateway Arch. But in April 1994 further bad news arrived. In an April 5th referendum, Missouri voters narrowly rejected a proposal to allow full-fledged riverboat gambling, specifically rejecting the operation of slot machines, which were by far the greatest money earners for companies such as Argosy. The company’s stock value plunged nearly 40 percent before the month was through, part of a downward slide that had seen Argosy’s stock value drop from its peak in May 1993 of $36.25 per share to $14.75 per share.
Three Riverboats Debut in 1994
In June 1994, Argosy officials announced they were losing interest in establishing a casino near downtown St. Louis, citing decreased profit potential as one of the reasons they were distancing themselves from the project. While the search was on for other potential sites, particularly in Sioux City, Iowa and Baton Rouge, Louisiana, Argosy officials had turned one project into reality: the Argosy Riverside Casino, which opened its doors for the first time in June 1994. Alabama Shipyards had completed construction of the Argosy IV, a 246-foot-long river-boat styled as a turn-of-the-century, paddle-wheel steamboat. Containing more than 35,000 square feet of gaming space, the Argosy IV housed nearly 1,000 slot machines and 60 table games and could carry 1,600 people. Argosy IV, which preceded Argosy III, was the first of Argosy’s historically themed river-boats and the first gaming facility to open in the Kansas City market.
It had been nearly three years since Argosy opened a new riverboat casino, but the debut of the Argosy IV touched off a period of rapid expansion, as the company made good on its plans developed in 1993 and implemented its diversification strategy. The Argosy III, situated on the Mississippi River in downtown Baton Rouge, was the next riverboat casino to open. Debuting in September 1994, the three-level Argosy III measured 268 feet in length, contained 28,000 square feet of gaming space, and was outfitted with 774 slot machines and 43 gaming tables, all designed in an antebellum theme.
One month later, in October, the Argosy V was launched as Argosy’s fourth riverboat casino, a three-level, 220-foot-long, stern-wheel riverboat. Located in downtown Sioux City on the Missouri River, the Argosy V was smaller than any of the other vessels operating under the Argosy banner, containing 12,500 square feet of gaming space, 399 slot machines, and 28 table games.
After the spate of casino openings, Argosy’s annual revenues shot vigorously upward, leaping from $67.5 million in 1993 to $153 million in 1994. When all four casinos had the opportunity to operate together for a full year for the first time in 1995, annual revenues surged ahead to $252.7 million and patronage reached five million visits, but the consistently rising sales totals did not allow Argosy executives to rest easy. The company had been the first operator to establish riverboat gambling in each of its markets, but, as befitted a burgeoning industry niche, competitors followed close behind. By the mid-1990s, Argosy had to contend with stiff competition from other gaming operators, who, more frequently than not, entered into markets occupied by Argosy with considerably bigger and more expensive casino projects. The time had come for Argosy executives to entrench their presence in each of their markets.
To beat back the inexorable rush of its competitors, Argosy’s directors bolstered the company’s marketing efforts to win customer loyalty and they attempted to lure more customers to Argosy’s gaming destinations by establishing entertainment, dining, and hotel complexes adjacent to their riverboat casinos. In Sioux City, the added customer draw was the adjacent Catfish Town development that included a 50,000-square-foot festival atrium, a combination sports and entertainment lounge, and dining facilities. At Riverside, construction of a larger, land-based development was under way in 1995, with the first stage of the project completed in January 1996 when Argosy opened an 85,000-square-foot entertainment pavilion. Styled with Mediterranean seaport decor, the pavilion housed dining facilities, conference and banquet rooms, and entertainment facilities, setting the stage for the second phase of the project, which was expected to include a 150-room hotel.
As Argosy entered its fifth year of business, plans were under way to complete another project conceived in 1993, a joint venture with Indiana Gaming Company to open a casino and entertainment complex in Lawrenceburg, Indiana. Designed to be the largest vessel in the company’s fleet and one of the largest floating casinos in the country, the Lawrenceburg riverboat—the Argosy VI —measured 408 feet in length and contained nearly 75,000 square feet of gaming space. It was an enormous project, projected to increase by 28 percent the total number of slot machines and gaming tables operated by Argosy and expected to increase fleet capacity 33 percent. The three-level, side-wheel riverboat was scheduled to open no later than December 1997.
As construction of the Argosy VI was under way, Argosy executives grappled with the serious threat of mounting competition. In Alton, the company faced fierce competition from four other casinos operating in the St. Louis metropolitan market and braced itself for the establishment in 1997 of an additional competing casino complex, which was to include four dockside gaming vessels containing 120,000 square feet of gaming space. In Riverside, the gaming market expanded from three operators and four casinos to five operators and seven casinos in the space of a year. Although the company entered 1997 as the only riverboat casino operator in Sioux City, the opening of two riverboat casinos in the Omaha, Nebraska market and the expansion of the nearby Native American casino portended direct competition in the years ahead. To seek an advantage over the growing presence of gaming establishments in its markets, Argosy was concentrating on marketing and erecting support facilities, such as hotels, entertainment pavilions, and restaurants, to draw customers to its casinos. Along these lines, a tropicalthemed, dockside summer entertainment venue dubbed Argosy Island opened in Alton in early 1996, concurrent with the completion of a 50,000-square-foot, five-story atrium festival center in Catfish Town next to the company’s Baton Rouge casino.
As Argosy charted its course for the late 1990s and the next century, further development of support facilities adjacent to the company’s casinos was expected. The most ambitious of these plans called for the construction of hotels next to the company’s casinos in Riverside, Baton Rouge, and Lawrenceburg. As the company’s management studied the viability of these projects, it awaited the completion of the Argosy VI, the next, and largest, member of the Argosy fleet. During the interim, a temporary riverboat casino was moved to Lawrenceburg. The temporary vessel, The Spirit of America, opened in December 1996, and on that celebratory note the company embarked toward the late 1990s.
Alton Gaming Company; Windsor Argosy Casino Group Ltd. (Canada; 90%); The Missouri Gaming Company; St. Louis Gaming Company; The Indiana Gaming Company; Argosy of Louisiana, Inc.
“Argosy, Prime Plan To Build All-Suites Hotel Near Riverboat,” Travel Weekly, April 15, 1996, p. 70.
“Argosy Will Build Gaming Vessel,” Travel Weekly, December 16, 1993, p. 28.
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——, “Casino Owner Seeks Site Near Gateway Arch in St. Louis,” Knight-Ridder/Tribune Business News, July 27, 1993, p. 7.
——, “Gambling Stocks Suffer After Missouri Gambling Amendment Defeated,” Knight-Ridder/Tribune Business News, April 6, 1994, p. 4.
——, “Missouri Gambling Ruling Takes Bite Out of Casino-Company Stocks,” Knight-Ridder/Tribune Business News, January 26, 1994, p. 1.
Irwin, A. Heather, “Argosy’s Riverfront Plans on Back Burner,” St. Louis Business Journal, June 6, 1994, p. 4A.
——, “Voters Deflate Connelly’s, Connors’ Stock,” St. Louis Business Journal, April 18, 1994, p. 1A. Monk, Dan, “Argosy Could Be Rolling by November: Rising Sun Competition Ups Ante in Lawrenceburg,” Cincinnati Business Courier, October 21, 1996, p. 8.
Palmeri, Christopher, “Smashing Returns,” Forbes, March 15, 1993, p. 20.
Simpson, Cam, “Indiana Riverboat Casino Project Investigated for Misconduct,” Knight-Ridder/Tribune Business News, March 21, 1996, p. 3.
—Jeffrey L. Covell