Borgata Still Dominates in Atlantic City Despite Financial Woes

ATLANTIC CITY, New Jersey — (Reuters) - Ten years after it brought a hefty dose of Las Vegas glitz, glamour and luxury to Atlantic City, the Borgata Hotel Casino & Spa still dominates the market: One of every five dollars gamblers lose in Atlantic City goes into the Borgata's coffers.

Its challenge over the next 10 years is to maintain that leadership position in the 12-casino market as ever-increasing competition in nearby states and the approach of Internet gambling have the potential to reshuffle things.

"The reason we come here is because it's reminiscent of everything Las Vegas is like, and we love Vegas," said Anthony Corso of New York City in between hands of blackjack last week. "It's very clean, very accommodating, the dealers are really friendly. It has a refreshing atmosphere compared with many of the Boardwalk casinos. It's just enticing here."

Tom Ballance was hired in 1998 as the casino's first employee and worked his way up to his current job as president. He says the Borgata's success is very simple.

"I don't want this to sound like a dumb answer, but people just have more fun here," he said. "This place is just better than anything else in the market."

Joe Lupo, the casino's senior vice president, said extensive market research showed one dominant theme: Atlantic City casino customers wanted something more.

"We changed the market by offering something different, what the Atlantic City rejecters wanted but weren't getting here," he said. "People told us over and over they were looking for a trade-up experience. So we gave them an experience and amenities that Atlantic City just didn't provide."

Since it opened shortly before midnight on July 2, 2003, in the city's Marina District, about a mile from the Boardwalk, the Borgata set out to recreate the high-end Vegas experience in an East Coast resort better known for cheap buffets and senior citizens who ride the bus into town to play penny slots for a few hours before returning home. It was designed to resemble an Italian village.

It took the concept of sexy beverage servers to a new level by naming its servers "Borgata Babes" and pouring them into form-fitting, cleavage-baring corsets, short skirts and high heels. Its strict requirements about weight and body fat led to a lawsuit on behalf of several servers that was settled out of court, but the Borgata Babes remain as popular as ever. Each year, 12 are chosen to appear wearing minimal lingerie in a Borgata calendar that sells well.

The Borgata broke the mold of Atlantic City casinos in several ways. It was the first casino here to end the use of coins in its slot machines, having them instead spit out paper tickets that players redeem for cash instead of carrying around cups full of coins. While some said they missed the traditional clank of coins spilling into trays after a winning spin, many more quickly took to the new technology, which has now become the industry standard.

"Candidly, we were concerned," Balance said. "If people didn't like it, we had all our slot machines stocked with coins. We were prepared to go back if necessary. We had coins in the hoppers for two years before we took them away."

The Borgata brought celebrity chefs to open restaurants in the casino including Bobby Flay and Wolfgang Puck. It opened Atlantic City's first non-gambling casino hotel, The Water Club, in 2008.

It is unquestionably the market leader in terms of casino revenue. The Borgata averages $45 million to $55 million a month, more than twice what most of its competitors take in. Its best month ever was August 2008 when it took in $77.1 million, and May 2006 was the last time any other Atlantic city casino had a better month than the Borgata.

Andrew Zarnett, managing director of Deutsche Bank, predicts Borgata will continue to be the market leader in Atlantic City, even as competition in neighboring states continues.

"Borgata was successful thanks to a great location, well-executed design and talented management," he said. "Helping its success was a large investment in market research from the outset of development, which helped management understand the customer and implement a well-formulated plan."

It also hasn't hesitated to spend money on upgrades and maintenance to the shiny gold glass tower that sends dazzling rays of reflected sunlight through the neighborhood during the day before being illuminated in purple lights at night. It cost $1.1 billion to open the casino, and close to another billion has been spent since then, including on the opening of The Water Club.

The Borgata opened as a joint venture between two large casino companies: Boyd Gaming and MGM Resorts International. MGM decided in 2010 to sell its stake and leave New Jersey rather than cut ties to an Asian business partner in Macau. The partner's father is suspected by New Jersey regulators of having organized crime ties to Chinese gangs, but MGM and the family of Pansy Ho deny the allegations.

But this year, MGM petitioned New Jersey casino regulators to reconsider, saying Ho's control of the Chinese company has lessened and her father, Stanley Ho, is old and sick and not a threat to wield undue influence over her. That request is still being considered. Its stake in the Borgata was never sold and has been overseen by a trustee.

The Borgata is going all-in on Internet gambling, viewing it as vital to maintaining its leadership position. It will face stiff competition from the four Atlantic City casinos owned by Caesars Entertainment, which has the well-established World Series of Poker brand.

This year, the Borgata wired its hotel to let customers gamble from their rooms, laying infrastructure that can also be used once Internet gambling becomes legal by the end of this year. It has lined up online firm Bwin.party as its Internet gambling partner.