Boyd Gaming Ups the Ante on the Blue Chip

Back in his dad's day, Boyd Gaming board chairman and CEO William Boyd recalls, customers had narrower expectations for a casino operation.

"People came to Las Vegas to gamble, although a lot of times they didn't admit it, but there wasn't a lot else to do," says Boyd, whose father was the legendary company founder, Sam Boyd. "You know we had some floor shows and of course you could get a drink and you could swim in the pool, but there weren't a lot of amenities. They might have had a couple of retail stores in the larger places --- a men's and a ladies' store and a gift shop --- but that was about it."

Times change and the casino industry certainly has changed. Boyd and company CEO Keith Smith stopped at the Blue Chip Casino in Michigan City, Ind., recently to talk about big plans for a hotel development that goes far beyond the amenities of old.

"We think it's going to be great for the market," Boyd said of the 22-floor, 300-room project that is due to open in late 2008. "It's going to be a Borgata-style hotel, and we think it's something the market hasn't seen before."

Borgata style is something for a touchstone for Boyd Gaming. The Borgata in Atlantic City, which opened in 2003, was the company's first venture into the luxury hotel market, and it was like nothing Atlantic City had seen before. Its success has encouraged Boyd to implode the Stardust on the Las Vegas Strip. In its place is rising Echelon Place, a $4 billion high-end hotel, casino, shopping and entertainment complex that is expected to open in 2010.

And Borgata is the reference point for Boyd and Smith when they discuss plans for the Blue Chip hotel.

"We have 180 or so hotel rooms [in Blue Chip's current hotel]," says Smith. "These new 300 rooms will be a step up from that, they'll be a trade-up from those rooms. They'll be what we call a Borgata-style room, a much nicer room."

And, says Boyd, there will be more: "In addition to just the hotel, we're going to have a spa, we're going to have meeting rooms, we're going to have an additional restaurant and a nightlife type of place. We're going to have some additional amenities to make it a destination resort, if you will, rather than what we offer now, although we're very very proud of what we have and what happened in our first $170 million expansion."

That expansion brought the 65,000-square foot casino, with all games on a single floor, replacing the old boat that sent players up and down the stairs in search of their favorite games. Along with new restaurants, it was a big step forward, but that wasn't the end-point for Boyd's plans. Neither is the new hotel.

"There was a Phase II to that [casino expansion], and this hotel was the Phase II to the project," Smith explains. "This hotel has been master-planned to expand into another phase, and add more rooms. So it's the natural evolution as we continue to build this business and we continue to operate very successfully in Northwest Indiana."

That success has surprised some. When the original Blue Chip partners opened the casino in 1997, analysts feared business would be seasonal. Blue Chip was another 45 minutes farther from Chicago than its competitors in Gary, Hammond and East Chicago. There are plenty of visits to the Indiana Dunes, Lighthouse Place Outlet Mall and other attractions during warm weather months, but would the customer base sustain the operation during the winter?

As it turned out, business has been strong year-round, with enough demand to spark the expansions by Boyd Gaming, which bought the property in 1999.

"It's interesting to note that our site here is the last site that anyone seemed to want," Boyd says. "They wanted all the sites closer to Chicago. But I think what was overlooked is that it's the closest site to a lot of folks in South Bend and southern Michigan. It's turned out to be a great opportunity for our company."

Boyd and Smith think the opportunity will continue to be great even when competition arrives this fall. The Four Winds Casino in New Buffalo, Mich., will give players an option just a 15-minute drive away.

"We're not afraid to compete," says Smith, who adds that Blue Chip is well-positioned as a first-class product that's getting even better. "We compete in some of the most aggressive or competitive markets in the country, when you look at places like Las Vegas, Atlantic City. We're not strangers to competition, we're not afraid of competition and it's our view that as long as it's a good quality competitor and it's close to us, it helps the overall market."

It's only natural that Blue Chip guests will take a peek at the new guys.

We feel that there will be a lot of first-time trial of Four Winds. We would expect that," Boyd says. "But we think that after that occurs, that our customer will return to the nest."