“It all started with greed,” intones Bob Boughner, chief executive of the Borgata casino in Atlantic City, at the beginning of his March 25 talk at Wharton. Boughner waits a beat, then two. “I was hoping to get a laugh out of that. It really started with opportunity, not greed. They’re not the same.”


The opportunity was a call from Steve Wynn, then chief executive of Mirage Resorts, to Boughner’s boss, Bill Boyd, chairman and chief executive of Las Vegas-based Boyd Gaming. Wynn wanted to do an Atlantic City joint venture with Boyd. Mirage would kick in the land; Boyd Gaming would run the casino. Each company would own 50%. It took only four hours for the management team at Boyd Gaming, where Boughner was then chief operating officer, to decide to proceed. “Two weeks later, we had an agreement to do a $500 million deal,” he says.


That deal soon grew to $750 million. By the time the Borgata opened in July, 2003, it had reached $1.1 billion. Boyd Gaming and Mirage, which merged with MGM Grand in 2000 to form MGM Mirage, have brought a plush Las Vegas-style hotel and casino to careworn Atlantic City. Boughner shepherded the project through design and construction, then left his post as Boyd’s COO to run it.


The Borgata has shaken up its hometown, which had historically catered to an older, less upscale crowd than glitzy, gaudy Vegas and hasn’t always proved fertile ground for other casinos. During the last week of March, The Wall Street Journal reported that the auditor of Trump Hotels & Casino Resorts had questioned that company’s ability to continue doing business without a cash infusion. “Trump Hotels’ casinos, including the Taj Mahal and Trump Marina in Atlantic City, N.J., are struggling with competition from the Borgata, a trendy new casino that opened last year and has been drawing crowds,” the Journal reported. “The Borgata is stocked with hip restaurants and shops and is aiming for younger and more-affluent guests. Trump Hotels has been unable to respond because it lacks cash to update hotel rooms, shops or eateries.”


Boughner’s research had suggested to him that a flashier casino would roil the Atlantic City market – and bring big profits to its owner. “Every level of the market, from the bluest of collar to the whitest, was ready to trade up. But every operation in Atlantic City had commoditized itself. There was nothing distinctive about any of them. The market was junk that hadn’t been reinvented since the ’80s. The last new project was 1990. That was great for us – easy pickings.”


So far, his projections have proved, if anything, too conservative. The Borgata’s revenues have grown monthly. Its first- and second-quarter results beat Boyd’s estimates. In its second quarter, it had $176 million in gross revenue, including $122 million from gambling. Its gaming take was the second highest in Atlantic City, behind only Bally’s Park Place, which is larger. Boughner is already pondering a $200 million expansion of his 125,000 square foot casino, which employs 4,800 people.


Boughner’s employer, Boyd Gaming, also has thrived lately. Its stock returned 439% for the five years that ended on March 31, compared with 197% for the Dow Jones casino index. In 2003, the company had net income of $40.9 million, or 62 cents a diluted share, compared with net income of $40 million, or 61 cents a share, for the prior year. Its sales were $1.3 billion, compared with $1.2 billion in 2002.


Before the Borgata opened, Atlantic City had catered to people who were 60 years old or older. But Boughner says he believed that that market was tapped out: “Everybody who wanted to play quarter slots on Wednesday afternoon was already coming.”


He designed the Borgata for younger gamblers in hopes of drawing new customers to Atlantic City, sensing that even the casinos that were trying to lure those customers had misjudged them. “Many of our competitors had assumed that individuals of, say, 25 to 39, were raised with computers and therefore they’d be more likely to play slot machines. Our view is that people who face a machine all day crave interaction. They love the notion that they can sit with friends, high five, have a cocktail and play a game in a convivial atmosphere.”


The Borgata’s poker room has proved especially popular, and Boughner is considering tripling its size. Poker lately has enjoyed a vogue, with, for example, celebrities playing each other in televised tournaments. Poker earns the casino about $100 per seat per day, Boughner notes. That’s less than slot machines – which earn about $250 a day – but the game draws customers who are eager to spend money in the Borgata’s restaurants and bars, which charge more and, Boughner says, provide better fare than others in Atlantic City. The Borgata has marketed itself as a “trade-up destination” and prices its food and drinks accordingly, charging, for example, $7 for a Heineken beer, where its competitors might charge $6.50.


Initially, competing casinos in Atlantic City downplayed the threat that Borgata posed, Boughner says. “Their attitude was, ‘The customers may try it, but they’ll come back because they’re loyal to us.’ Translate that: ‘We’ve been bribing them with free [expletive] all these years, so they’re going to keep coming.’ There was denial followed by patience followed by panic. One company, now two, actually invested capital, which was smart as a way to fend off new competition.”


Even for business people outside the gambling industry, the Borgata’s popularity provides a lesson about how to approach a big, bold project. “If you know an industry, you don’t need a consultant to tell you whether to do something,” Boughner explains. “What you need is to draw upon your experience. You may have to connect the dots, but it doesn’t take that long.”


And despite what he said at the outset of his speech, Boughner admits that greed has played a role in his casino’s success, though he insists it hasn’t been his or Boyd’s. “The only greed I’ve ever really run across in this business is the greed of the players, which absolutely sustains us.”


Boughner has worked for Boyd Gaming his whole career, since 1976. He went to the University of Nevada Las Vegas, thinking he would go into the hotel industry. But during school, he worked part-time at a casino – emptying quarters from slot machines – and got hooked on the gaming business.   


In response to students’ questions, Boughner also weighed in on a variety of opportunities and challenges for the casino industry.

  • On whether it would grow in Europe: “I see enormous potential there. England is considering an overhaul of its regulatory approach. If the regulations change, I believe you’ll see $4 billion in investments in four years.”
  • On competition from Internet gambling: “I don’t fight it at all. Sitting at home in your gym shorts in front of a computer in a dark room playing poker with some clown in Minneapolis isn’t that fulfilling. My feeling is that it should be regulated and taxed. That creates a level playing field. And the tax rate should be very burdensome because there’s no infrastructure cost or job creation.”
  • On restrictions on political giving by casino-industry executives: “I can make a political contribution in the state of Nevada. I can’t do that in New Jersey because I happen to be in the gaming industry. Tell that to GlaxoSmithKline or Pfizer. If you make Viagra, you can contribute the governor’s race. But if you give them a place to use it, you can’t.”
  • On how to beat the house: “Don’t go to win and it may happen. Go for the party. Say to yourself, ‘I can afford to lose $100 or $500 or whatever,’ and just spend that much.” As for roulette: “Don’t play it.”