Borgata parent betting on new hotel tower

With operating income down about 45 percent last quarter from a year earlier, Boyd Gaming Corp. is pinning its hopes on a new $400 million hotel tower at its Atlantic City casino to lift sluggish revenue.

The company reported income from continuing operations was $31 million, or 35 cents a share, for the fourth quarter ended Dec. 31, compared with $55.6 million, or 63 cents a share, a year earlier. It attributed the decline largely to increased gambling competition nationally and to a weakened economy.

Net revenue was $478.6 million, down 8.1 percent from $520.8 million for the same quarter in 2006.

"While we were able to meet expectations in the fourth quarter, we began to experience some softness and weakness in the business that began in late November and continued into January," said Keith Smith, Boyd's president and chief executive officer, during a conference call yesterday. "Fortunately, we're seeing some positive trends in February and remain cautiously optimistic that the recent trends will continue through the remainder of the first quarter."

Smith said Boyd was moving ahead on expansion projects in Las Vegas and Michigan City, Ind., while postponing one in South Florida.

It has especially high hopes for the Water Club at the Borgata Hotel Casino & Spa, which is expected to open in June, in time for the Shore's peak season.

The Water Club is the second phase of a $600 million expansion by Boyd in Atlantic City. The first phase, which added gaming space, restaurants and retail, debuted in early summer 2006.

While remaining Atlantic City's top-grossing casino, the Borgata reported only a marginal increase in net revenue to $202.7 million in the fourth quarter of 2007, up 2 percent from $198.7 million. But the casino's operating income was $35.4 million, about the same as a year earlier - reflecting the increasingly competitive landscape.

"We believe results at the Borgata continued to be affected by the heightened competitive environment in the Northeast market, as well as the softer regional economy," said Deutsche Bank AG gambling analyst Andrew Zarnett in a note to investors yesterday. "Nevertheless, we expect this downward trend to change with the opening of the Water Club expansion."

The 800-room Water Club will feature five pools, a giant spa, luxury lofts, upscale retail - and will be among three towers opening in Atlantic City this year. Combined, they will add 2,547 rooms to the current 14,575 casino-hotel room inventory, according to the New Jersey Casino Control Commission.

Since the Borgata's July 2003 opening, competitors have expanded their properties and emulated the Las Vegas-style megacasino's successful mix of gambling and non-gambling attractions under one roof.

Harrah's Entertainment Inc., which owns four casinos in Atlantic City, with three on the Boardwalk, said yesterday that its 44-story Waterfront Tower at Harrah's Marina would have its ribbon-cutting ceremony next Thursday.

The 961-room Waterfront Tower completes a $550 million expansion at Harrah's Marina that included the Pool entertainment complex that debuted Memorial Day weekend. The popular 172,000-square-foot complex features an Olympic-size swimming pool and tropical horticulture, and is open year-round.