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Gaming Guru

Joe Weinert
 

Atlantic City Roundup

14 October 2003

ATLANTIC CITY -- A poor showing in September could be a prelude to a challenging fourth quarter for Atlantic City casinos, a prominent Wall Street gaming analyst reported.

After leading an investor field trip to Atlantic City, Marc Falcone of Deutsche Bank Securities said he expects the industry's September revenue report, due out this week, to show a year-over-decline despite the addition of the $1.1 billion Borgata Hotel Casino & Spa. Same-store sales, meaning industrywide revenue without Borgata "will be down meaningfully," he said in a 14-page report to his clients.

Casino executives are wary of a promotional war as they try to recoup business lost to Borgata during the traditional fall and winter slowdown, Falcone reported. The Harrah's Entertainment and Trump Hotels & Casino Resorts properties are "getting more aggressive" with customer incentives while the Park Place Entertainment and Aztar casinos are holding the line, he said.

Although feeling the pinch from Borgata, Atlantic City casinos are also trying to capitalize on the "outstanding success" of Borgata's celebrity restaurateurs, Falcone said. Several casinos, including those owned by Harrah's, Park Place and Colony Capital, are in talks with high-profile restaurants, he said.

As for Borgata itself, executives there told Falcone that its table-games revenue is ahead of plan while slot revenue is lagging. Borgata's customer database has surpassed 500,000 names. An in-house survey showed customers most often citing Harrah's, "Las Vegas" and Trump Taj Mahal as the last casino they visited before Borgata, he said.

"Interestingly, the fact that many customers are citing Las Vegas as the last 'casino' they visited would indicate that Borgata is reaching some new customers," Falcone said.

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Boyd Gaming announced that third-quarter earnings will be well below Wall Street estimates. The company blamed results at its Stardust in Las Vegas and Par-A-Dice in East Peoria, Ill., but analysts said they believe there's more to the story.

"In addition to weak results at the two properties mentioned, we continue to believe that profitability ramp-up at Borgata will be longer than expected," JPMorgan's Harry Curtis said in a research note.

"We'd include weaker margins at Borgata as another property that contributed to the pre-announcement," said Joseph Greff of Fulcrum Global Partners.

Boyd spokesman Rob Stillwell denied such speculation, saying the lowered earnings were "not at all" because of Borgata failing to meet the company's expectations. The company said in July that it expected the $1.1 billion casino hotel to contribute little or no profit during the third quarter.

Boyd said it expects earnings, to be reported on Oct. 21, of 14 to 16 cents per share compared to consensus estimates of 21 cents per share.

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Republican state Sen. Bill Gormley, the casino industry's powerful ally in the New Jersey statehouse, is using Donald Trump as a political target in his re-election campaign.

Armed with polling data that shows Trump has a poor image in Atlantic County, Gormley accused Democratic opponent Tom Swift of siding with Trump and Gov. James McGreevey during the heated casino-tax fight last spring. Because the final tax bill relied in part on net profits, the unprofitable Trump casinos will pay less tax than others.

"So, when McGreevey wanted big tax breaks for Donald Trump, Swift went along," Gormley said in a radio ad.

Trump called Gormley's ad "the most disingenuous thing I've ever seen."

"Whenever he wants something, he'll call me. If he wants to find a great restaurant in New York, he'll always call me. If he wants to see a concert, he'll call me - of course he gets upset when I make him pay for the concert," Trump said.

Gormley called Trump's response "sad" and said he always pays his way for any casino events.

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Paul O'Gara, who frequently represents the Trump properties before the New Jersey Casino Control Commission, is the new president of the International Association of Gaming Attorneys.

O'Gara, a lawyer with Sterns & Weinroth, was promoted from vice president in the trade group's yearly rotation of its four officers. He became president at the group's annual conference, held two weeks ago in Lisbon, Portugal.

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Borgata is making fast in-roads with the young and cool crowd. Esquire magazine, in its November issue, named Mayobelle Taylor, one of the "Borgata Babes," its Cocktail Waitress of the Year. And it named Suilan, Chinese-French eatery by noted Philadelphia restaurateur Susana Foo, as one of the top restaurants in the country.

"The snazzy new Borgata Hotel Casino & Spa raises the stakes so high in AC that it's going to take years for the garish older casinos to catch up," Esquire said. "Taking its cue from Vegas, the place has four upscale restaurants, the best being Suilan."

(Joe Weinert covers the gaming industry for The Press of Atlantic City. He can be reached at jweinert@pressofac.com.)