The Borgata Wins Over Atlantic City

Editor's Note: This is the fourth and final article of a series looking at the changing face of Atlantic City's gaming industry.

The nine-month casino partnership between MGM Mirage (MGG Quote) and Boyd Gaming (BYD Quote) has given rise to a tide of construction across the Atlantic City Boardwalk, washing away the gaming mecca's somewhat salty reputation and replacing it with a Las Vegas veneer.

The Borgata is emblematic of the trend, bringing a decidedly upscale and sophisticated product to a marketplace that has been dominated by a now-dated gold-and-glitz aesthetic. And this place is no mere casino. It is a complex where customers can find a $41 kobe beef burger at Old Homestead, see the world's most expensive and exclusive single-malt Scotch whisky vintage collection, or spend an entire day at the world class spa upstairs -- if they can get in.

Business has been strong at the Borgata since it first opened nine months ago. The 200,000 square-foot hotel and casino, which is on the marina, away from the boardwalk, has had a dramatic effect on the Atlantic City market. In February, Atlantic City's dozen casinos generated $386.3 million in revenue, up 30.1% from last year, according to the New Jersey Casino Control Commission. Credit the strong results to the Borgata, which wasn't around last year and now accounts for 14.2% of the market's total revenue.

While the jump in Atlantic City revenue stemmed from easy comparisons to a February 2003 plagued by two blizzards, the whole market is showing signs of a comeback. Excluding the Borgata, revenue at casinos open a year ago was up 14% in February, the first "same-store" increase since the Borgata opened in July 2003.

Even more promising: The Borgata's results stayed strong over the traditionally challenging winter, a signal that the pop in business may be sustainable. And the casino isn't just lifting the market, it's dominating it, stealing market share from rivals through aggressive promotion. To entice newcomers to check out the casino, which is in the marina district away from the Boardwalk, the Borgata gives away $1,000 in slot tokens every 15 minutes from noon until midnight.

"Borgata placed second among the 12 casinos in terms of absolute total gaming revenue for the sixth month in a row, trailing the much larger Bally's, third in terms of absolute slot revenue, and first in absolute table game revenue for the seventh straight month," said Michael Reitbrock, gaming analyst for Citigroup Smith Barney, in a note.

The splashy debut of the Borgata, the first new casino to hit Atlantic City since the Trump Taj Mahal opened its doors in 1990, highlights the difference between the gaming center's past, which catered to an older crowd arriving on charter buses, and its future, targeted at a younger crowd willing to spend money away from the gaming floor.

"Atlantic City got the reputation from the bus traffic coming in, but the Borgata is able to survive without it," said Linda Kassekert, chair of the New Jersey Casino Control Commission. "There was that history based on the Frank Sinatras and the guys that frequented in the past, but things are changing now. The Borgata is a much younger crowd and that's helping."

The Borgata Steals Share in Atlantic City Since the Borgata opened last July, seven competitors have seen revenue drop from a year ago
Casino	2003	Owner	Year-Over-Year % Revenue Change
Borgata*	$266.9 million	MGM/Boyd	+100%
Bally's Park Place**	678.2	Caesars	+28.8
Showboat	377.8	Harrah's	+2.3
Atlantic City Hilton	309.4	Caesars	+0.4
Harrah's Atlantic City	451.0	Harrah's	No change
Caesars	519.1	Caesars	-1.6
Trump Taj Mahal	517.1	Trump Hotels	-3.6
Trump Plaza	318.2	Trump Hotels	-6.7
Trump Marina	259.7	Trump Hotels	-8.2
Tropicana	372.4	Aztar	-8.5
Resorts	233.1	Colony Capital #	-11.3
Sands	185.8	Greate Bay Hotel & Casino #	-11.4
TOTAL	$4.49 billion	--	+2.4%
# -- Privately held. * -- Results since open in July 2003. ** -- Includes the purchase of the Claridge. Sources: New Jersey Casino Control Commission, TSC research