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Boyd Gaming's Keith Smith On Challenges Of Locals' Casinos

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Boyd Gaming CEO and president Keith Smith talks about the challenges of locals' casinos.

Regional gaming companies have been reporting better than expected earnings due to improving local economies and Boyd Gaming is at the top of the list.

Even The Borgata in Atlantic City saw its second quarter revenue jump five percent.

But there are questions about the Las Vegas locals market and whether it has fully recovered from the recession.

Now, Boyd Gaming is planning to improve its non-gaming amenities across its properties in seven states. Even The Borgata in Atlantic City saw its second quarter revenue jump five percent.

INTERVIEW HIGHLIGHTS

You reported some modest increases in second quarter revenues from your Las Vegas properties. Revenues jumped 3.2 percent to $153 million in the second quarter. What are conditions like currently in the locals gaming market?   

 “I think in general we see improving conditions as you look at the second quarter and then you look back to the first quarter and back to the fourth quarter of last year. You see improving trends. You see the customers coming out maybe with greater frequency and a willingness to spend a little more money.”

Boyd’s three downtown Las Vegas casinos grew revenue by five percent in the second quarter.  How is the Fremont Street market?

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“Downtown Las Vegas is doing very well. It is very much a core part of our business of Boyd Gaming. Frankly, it’s the founding of our company in downtown Las Vegas with the California hotel and casino. We have a strong foundation downtown because we do operate three properties down there: The California, the Fremont and the Main Street Station”

Boyd Gaming has made a name for itself by catering to locals and tourists in Southern Nevada. Describe your average customer.

“We clearly cater to, what I would call the mid-market, so certainly not the very high end of the market but clearly the mid-market. When you look downtown, a predominant share of our business is the Hawaiian market. These are customers who come both from the islands of Hawaii, or what we refer to as geographic Hawaiians, and those who live in the United States and here in Las Vegas and come to our properties in downtown Las Vegas.”

You’ve decided to add 20 non-gaming amenities to your properties nationwide, with a large portion of the concepts added to you Las Vegas casinos. What type of amenities do you plan to add?

 “As we look throughout the rest of the next, let’s say, 12 to 18 months you’ll be looking at some new restaurant concepts at the Orleans, some new product at the Suncoast, some additional work at the Gold Coast, a new concept or two there, so it will be spread across. They will be bars, they will be restaurants, they will be remodels, they will be kind of new names and the goal really here is to freshen up the properties and make sure they are competitive not just for today but for the next ten years”

The Borgata in Atlantic City saw a revenue increase of 5.1 percent in the second quarter. Are you optimistic about the Atlantic City gaming market?

 “The Borgata in Atlantic City truly is a market leader. It’s led the market since 2003 when we opened it and it continues to lead the market today. It’s been a great product. And we don’t just compete in Atlantic City with the other properties there we compete along the entire East Coast for casino customers we do a great job”

“Atlantic City went through an unfortunate, what I will call right sizing, with the closure of four properties, and since that point in time, the remaining properties have found firmer footing and the business has grown at the remaining properties and so you do see same-store revenue growth at those properties. Borgata, I think, is achieving more of its fair share of that revenue growth because we have a market-leading product. We have a great management team there”

Are you concerned that with casinos in Pennsylvania, Maryland, Delaware, New York, Massachusetts and Atlantic City the East Coast gaming market is over saturated?  

“I think it is becoming a little saturated but the product is different. So when you look at Atlantic City you truly see full-scale resorts and a resort environment. A place to go down and spend the weekend. Where some of the product being built are more limited-type products because of their very high tax rates. So putting the product closer to the population is always created more customers and those customers always tend to gravitate or go to places like Las Vegas and Atlantic City that have a more full-scale resort environment and have more product”

Are you looking at other markets to expand in to?

 “I think we have a great interest in looking to expand our business and as other states do legalize casino gaming. I think we would be very interested in expanding. Whether it’s in the east, whether it’s in the south, whether it’s in the west, we have limited opportunities to expand the business because we have to be invited in after legislation is passed.”

Do you view gaming via the Internet as an opportunity for growth?

"I think it is an opportunity to grow and I think it is an important part of the future of the business because it is a way to introduce our product to a new generation, to a different type of customer, somebody who clearly spends much more time online and once we are able to introduce our product to them, then we can offer them the amenities that we have in our brick and mortar casinos."

You’ve joined MGM’s Jim Murren and Joe Asher of William Hill saying that daily fantasy sports is gambling, and should be regulated. That point of view is in stark contrast to the opinion of the NFL and other professional sports leagues. So, why are daily fantasy sports gambling?

“Well, when you think about how daily fantasy sports operates quite frankly, it’s not all that much different than what we do at our sports books, when we go to set a line on a football game. We look at the teams. We look at the players. We make an assessment about how they will perform and we set a line. When people pull together fantasy sports teams, they’re looking at players and they’re trying to pick the best and get the best teams so that they can beat somebody else’s team and therefore win some money. It is very analogous. It is something that should be regulated”

Nevada is still no closer to having skill-based slot machines on casino floors, The Gaming Control Board is still discussing the new regulations. But, once these skill-based games are approved, how will they help Boyd attract millennials?

“I think we’re on the verge of launching skill-based gaming. Now, what that product ultimately looks like and how it evolves over the years is going to be interesting to see. It is about providing another amenity another form of entertainment for our guests both our current customers as well as the millennials “

Guests

Keith Smith, CEO and president, Boyd Gaming Corporation

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