Borgata Case Study: Betting Big

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A billion-dollar casino is Atlantic City's latest bid for glory. Can Borgata hit the jackpot?

Robert Boughner walks the casino floor at Borgata Hotel Casino & Spa -- the megaresort whose July opening was the first such new construction in Atlantic City since 1990 -- and notes the designers' scrupulous attention to detail.

"Try this," the CEO says, showing a visitor a high-backed, leather-upholstered chair bolted to the floor in front of a slot machine. "We went through nine designs before we settled on this one. Check this out: The seat here is shaped like a butt."

The slots' handles are ergonomically correct, too. The display is at eye level, and there's a footrest below. For those whose eyes stray from the spinning wheels, there are "Borgata Babes," the smoking-hot cocktail servers ("male and female," a press release notes) costumed by SoHo fashion designer Zac Posen. You could sit discomfort-free for hours -- until you tally your losses later, that is.

Twenty-seven years ago, Boughner joined the Boyd Gaming Corporation (one of Borgata's parents) as a time card manager. Today, Boughner (pronounced Boog-ner) is still one of the guys. Dressed in a baggy shortsleeved shirt, his wavy hair brown but for an assertive channel of gray coursing down from the top, the 50-year-old is, in dress and manner, less formal than you'd expect. At least, given the crafted look of the place: expansive marble floors, muted tones beneath psychedelic bursts of numerous spindly glass sculptures hanging from the high ceilings.

Borgata is one of the most ambitious tourism-related ventures the East Coast has ever seen. At a cost of $1.1 billion in equity and debt capital, the joint venture of Boyd and MGM Mirage Corporation, the casino is certainly the most expensive. (The East's first Vegas-scale venture, the Mohegan Sun Casino in Uncasville, Connecticut, cost $300 million when it went up in 1996.) Erected on a 40-acre swath of reclaimed land on the marina, Borgata's sleek, golden exterior -- smooth, elegant, and without edges -- looks from a distance like an architectural interpretation of a Brancusi sculpture.

The big stats are as impressive as the fine details: 2,002 rooms and suites; a 135,000-square-foot casino; 11 restaurants including Suilan by Susanna Foo, the James Beard Award-winning chef; a 2,400-seat event center; and a 1,000-seat theater whose opening acts included comedians David Spade and Dennis Miller. There's a techno nightclub, hip, contemporary bars, a 50,000-square-foot spa, and a barber who shaves with a straight blade and offers billiards in the waiting room.

Borgata, Boughner says, is reaching out to the audience he calls "Atlantic City rejecters," a chunk of the 30 million adults within a two-hour drive who might not see the resort town as a worthwhile destination. "We value our existing customers," Boughner says. "But we know there are others looking to trade up."

The Atlantic City casinos have room to grow. The southern New Jersey town is the country's second-largest gambling resort, bringing in $4.3 billion from gaming in 2002, compared to $7.6 in Clark County, home to Las Vegas. But while gambling accounted for only about half of overall casino revenue on the Vegas Strip, it made up 85 percent of income for Atlantic City casinos. If Borgata's restaurants and shows can balance the ratio of gaming to other attractions, it stands to do well.

Atlantic City's growth is, however, threatened by competition from Illinois, Indiana, Louisiana, Mississippi, and Connecticut -- and by proposals that would allow slots into markets closeby, such as the Catskills in New York, and at racetracks in Pennsylvania. The town isn't exactly in crisis, but it does have to protect its market. Analysts say that can only happen if the city diversifies its appeal- something it's failed to do for most of the 25 years since Resorts International inaugurated the casino era here in September 1977.

"Necessity says they're going to have to go for a bigger nongaming experience," says David G. Schwartz, coordinator of the Gaming Studies Research Center at the University of Nevada Las Vegas and author of Suburban Xanadu, a history of casino resorts. "There's just too much competition with slots in other areas. There is a limited number of people who make day trips just to gamble, and if southern New York comes online with 1,600 slots, it'll take a portion of Atlantic City's market away."

The model for maintaining your market and broadening your appeal is Las Vegas, which legalized casinos in 1931 and has remained the premier gambling destination.

"When MGM Grand opened in 1974, they did such a good job of selling the idea that they sold it out for three years and let its sales staff go," says Denis Rudd, industry analyst and author, with Lincoln H. Marshall, of trade textbook Introduction to Casino and Gaming Operations. "Steve Wynn opened the Golden Nugget. Then he opened The Mirage, and they were getting a hundred, two hundred dollars a room, which was unprecedented. Then came Bellagio, another upgrade for the Strip. They were going for a higher market and had to convince people they'd give them more amenities, so they built an art museum. Now Boyd and MGM Mirage are getting together to do the same thing in Atlantic City. They're all fighting for the whales -- the millions of millionaires in the world."

Tourism officials say Borgata ("little village" in Italian) is part of a broader effort to diversify Atlantic City's attractions, with openings next year including the Quarter at Tropicana, a New Orleans-themed entertainment and retail complex, and the Walk, an open-air complex of restaurants and factory outlets connecting the Convention Center to the Boardwalk. A minor league baseball team, the Surf, plays at the 6,000-seat Sandcastle Stadium, and a minor league ice hockey team, the Boardwalk Bullies, has digs at Boardwalk Hall, the old Atlantic City Convention Center, where recent performers included Britney Spears and Andrea Bocelli. The hope is that the city will morph into something more than Vegas's ugly sister. "Atlantic City is doing a rebranding," says Nancy Byrne, executive director of the New Jersey Office of Travel and Tourism. "It can be more uniformly appealing to a larger audience."

In the gaming industry, that audience has a voracious appetite for losing. Casinos grossed $25.7 billion in 2001, tripling the industry in just over a decade, according to the UNLV's Gaming Studies Research Center. The gaming industry as a whole, including casinos, lotteries, pari-mutuel betting, legal bookmaking, bingo, and card games, took in $63.3 billion in 2001 -- a figure that doesn't even take into account the massive illegal betting around events such as the NCAA basketball championship or college and professional football.

"It's a matter of exposing people [to gambling] to get them hooked," says Rudd. "Once they taste it, they want more. The pent-up desire is enormous. It's just part of the culture. What's the first thing you hear in any school yard? 'Wanna bet?'"

Borgata has glitches in the opening weeks. It's too popular, and the staff can barely keep up with demand. There aren't robes in closets or snacks in minibars. One guy is upset after waiting an hour for his car. Surveillance cameras catch people stealing linens and towels from the rooms.

Despite the woes, Boughner becomes animated when he steps on the casino floor. Clearly, he prefers doing his business to talking about it. It's here that he can illustrate how details add up to the total experience.

"Look at this," he says, stopping one of the Babes, who is carrying a tray filled with dirty ashtrays and empty glasses. "What do you see?" He shakes a glass. "No plastic cups. We serve in glass." He points above the roulette tables and notes that despite a fair population of smokers, the air is odorless thanks to a new ventilation system.

And technology isn't just in the air; it's embedded in the whole operation, notably in the form of smart cards, to limit the exchange of hard cash in the casino. Since labor is any business's biggest expense, and gaming's biggest labor allotment goes to handling money, analysts say smart cards reduce overall operating costs by 25 to 40 percent. All Borgata slots are cashless.

The cards serve another purpose, allowing casinos to build a customer database including credit history and gambling and entertainment preferences. "You can track them and build information," says Rudd. "Is [the customer] a nickel player? What are his betting habits? You can learn what he wants."

A house of smart cards, in other words, provides a solid financial foundation. Says Schwartz, "The question is whether Borgata is going to change the whole paradigm [for Atlantic City]. If you look at people like Steve Wynn who really created something, they didn't just want to increase market share. They had a vision for something completely new. That's what Atlantic City needs."

Of course, it all comes back to the core business: gambling. Build a good enough experience, and they will come -- and play the slots.

Boughner's focus is on a simple if ambitious goal: get his Boyd and MGM Mirage bosses a percentage return "in the high teens." Says Boughner, "If it does well, we'll have realized the ultimate, which is to successfully conceive, design, develop, staff, and manage a billion-dollar enterprise. That is not something many people in our industry get to do."
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