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Borgata Patrons Win Big

Posted on November 4th, 2010

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With the downward slide of business in Atlantic City, many gambling halls have been jealous of the current standing of Borgata Hotel Casino. As the casino in Atlantic City that has been reporting the highest profits and good revenue since its opening, it is so far one of the few casinos in the area that has weathered the storm of poor performances and lackluster reports. But, as of late, the casino is not the only one reporting huge figures. The patrons have recently been too lucky at the gaming tables that it seems that the casino could not take it well anymore. While business is still good, the money that Borgata has to award to the lucky winners has been bleeding the casino.

The top-grossing casino of Atlantic City has had its fortunes reversed lately as patrons have been winning so much money that they are bleeding millions of dollars from their earnings. Speculations have arisen because of the uncanny luck some gamblers have had, with a gaming analyst even broaching the possibility that there may be a cheating ring involved behind this trend. In a conference call held last week, which should have been more about the earnings report for the third quarter of the casino, Merriman Capital analyst Adam Steinberg directly inquired, “Do you think there’s some sort of collusion or do you have some sort of cheating going on, or is it just a change in consumer behavior?”

This question may have been brought about due to the events that happened prior to the conference call. One such event would be the complaint of the casino’s parent company, Boyd Gaming Corp., about the Borgatta losing as much as $9 million in hit revenue from July to September because the hold percentage of its table games has been unusually low. The term “hold percentage” refers to the ratio of gaming chips the casino has in its possession compared to the number it makes available to gamblers. For example, if a patron buys $200 in chips and loses $30 in bets, the hold percentage is 15 percent for the casino. For the third quarter, the table games in Borgata had a hold of 12.09 percent, which is lower by more than 2 percent compared to its average of 14.34 percent from the years of 2005 to 2009, according to casino figures. For the second quarter of 2010, the hold was 13.77 percent, which was a slight increase of the first quarter’s hold at 13.62 percent, but both of which have already been below historic levels.

The president and chief executive officer of Boyd, Keith Smith, asked the officials of the gambling facility to check things out to make sure that there is nothing wrong with the games. In the conference call, Smith answered by saying, “We can assure you everything is fine. We’ve done all of the diligence and looked at it. I think it is a function of luck. It happens in our business, where you can run for a number of months with a low hold.” From the months of July to September, the net revenue of the Borgata decreased from $222.6 million in 2009 to $207.7 million, which equates to a closely 7 percent drop. What made the situation worse was that gross operating profits also dropped by 19.7 percent to $54.3 million for the same quarter, according to the reports of the company. The chief operating officer of Boyd, Paul Chakmak, said, “The most significant factor impacting Borgata’s results was lower table games revenue, which was largely a function of unusually lucky play by our customers. Had we experienced historical table games hold, we estimate revenue would have been $9 million higher during the quarter.”

Josh Hirsberg, chief financial officer of Boyd also pointed out that the hold is not limited to one area of the casino. The hold figures are reflective of the entire table games area. He further explains, “It’s not throughout the market, either, so there’s something unique at Borgata at this point.” In 2007, there was a discovery of an illegal sports-betting operation that was run in the high-stakes poker room of the Borgata. The casino had to cooperate with the authorities to crack the case.