Boyd Gaming turns its focus to regional gaming markets

Boyd Gaming Corp. is becoming increasingly more focused on the regional gaming markets.

The company hopes to close its $1.45 billion acquisition of Peninsula Gaming by December, which will give Boyd Gaming ownership of five casinos in Kansas, Iowa and Louisiana.

Add results from those casinos into the Boyd Gaming’s current regional mix of properties in Mississippi, Illinois, Indiana and Louisiana, and by next year, more than two-thirds of the company’s cash flow will come from the South and Midwest markets.

That’s not to say Boyd Gaming has given up on Las Vegas.

This month, Boyd is launching a a wave of more than 1,000 new low denomination slot machines at four its locals casinos – The Orleans, Gold Coast, Suncoast and Sam’s Town – in order to drive more business from casual gamblers.

“We have been conservative in our marketing spend, and clearly we need to be more aggressive,” Boyd Gaming Chief Executive Officer Keith Smith said Thursday, after the company announced third quarter earnings.

“This is somewhat of a strategic decision to see if we can do a better job to speak to the player that might have moved away from us,” Smith said.

Boyd Gaming Corp. suffered a net loss of $15.8 million in the quarter that ended Sept. 30, which reflected lower operating income and increased interest expense, which includes interest for financing related to Peninsula acquisition.

The decline translated into a net loss of 18 cents per share. A year ago, Boyd Gaming reported net income of $3.1 million, or 4 cents per share.

Boyd Gaming said net revenues increased 3.9 percent to $613.3 million.

In Las Vegas, Boyd Gaming said its revenues from the locals market declined to $138.8 million, compared with $145.9 million in the same quarter last year.

Boyd’s downtown gaming business slightly grew revenues to $53.5 million. The market relies heavily on business from Hawaii. The company said it saw improved revenue and profitability from its Hawaiian charter service. Changes in the weekly flight schedule grew revenue-per-seat by 12 percent.

Casinos operated in the south and Midwest, however, carried the company.

Boyd Gaming said net revenues in the two regions were $233 million, up 24 percent from a year ago from the year ago.

The results also could have been higher. Hurricane Isaac forced the closure of the IP Biloxi in Mississippi and the Treasure Chest in New Orleans in late August. Business was disrupted throughout the Gulf Coast region through mid-September.

The Peninsula acquisition will further solidify Boyd’s position as regional casino operator.

Brean Capital gaming analyst Justin Sebastiano said last year’s purchase of the IP Biloxi and the pending Peninsula deal were a good “diversification plan” away from the challenges of Las Vegas and Atlantic City, where the company operates Borgata.

Smith said the regional markets were “the strongest segment of the domestic gaming industry” and the company would explore other potential acquisition opportunities.

“By no means have we given up or are turning our backs on Las Vegas,” Smith said. “With the current market dynamics, there aren’t opportunities for a good return on investment.”

Boyd expects to begin a “beautification” of the stalled Echelon site on the Strip, which will have two phases involving landscaping and a wrap covering the unfinished buildings.

“We want to be good community citizens and make the site more appealing to Strip visitors,” Smith said.

The Borgata in Atlantic City suffered minor damage from Hurricane Sandy, losing roughly 1,000 windows. However, the building did not have any water damage and never lost power.

He said the Borgata could open immediately when the state lifts its travel ban.

However, the concern is the Borgata employees, many of whom suffered damages to their homes or are without power and water.

Because of the company’s experience in the south with Hurricane Katrina in 2005 and this year with Hurricane Isaac, Boyd has an action plan in place for employee assistance.

“We have a lot of years dealing with hurricanes. This is not our first rodeo,” Smith said. “We’ll be open again, but our most pressing highest concern is the employees.”

Shares of Boyd fell 41 cents or 6.65 percent to close at $5.76 on the New York Stock Exchange. Shares rebounded modestly afterhours.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.