ATLANTIC CITY — Borgata Hotel Casino & Spa posted strong earnings in the first quarter and is predicting it will retain its position as Atlantic City’s leading casino “for years to come,” despite the arrival of a powerful new competitor.
Borgata’s net revenues were up 4 percent to $176.2 million and gross operating profits rose nearly 23 percent to $38.9 million compared with the first quarter of 2011, parent company Boyd Gaming Corp. reported Tuesday.
The results marked the second straight quarter of double-digit gains in operating profits at Borgata. Boyd said increases in the first quarter were driven by strength in Borgata’s table games, hotel business, and food and beverage sales. Greater operating efficiencies were another factor.
Up to this point, the April 2 opening of the $2.4 billion Revel megaresort has had little effect on Borgata’s business, although that could change in coming months as competition becomes more intense, Boyd executives said.
“While it is early, we would note that we have not seen any meaningful impact on Borgata’s business from the opening of a new competitor,” Boyd said in a statement.
Boyd executives said they expect to see some impact from Revel in the second quarter. By then, Revel will have ramped up most, if not all, of its hotel rooms, restaurants, retail shops and other amenities. Revel is bringing more attractions online each week as it builds toward a formal grand opening over Memorial Day weekend headlined by pop superstar Beyonce.
“We fully recognize they don’t have all their amenities,” Josh Hirsberg, Boyd’s chief financial officer, told casino analysts during a conference call to discuss the company’s earnings.
Analysts pressed Boyd executives for more information on Revel’s impact on Borgata. Keith Smith, Boyd’s chief executive officer, and Paul Chakmak, chief operating officer, said it likely would take months before any longer-term trends emerge in the battle between Borgata and Revel.
However, Chakmak stressed Boyd’s belief that Borgata will remain the “clear leader” in the Atlantic City market.
“We are confident it will remain the top-grossing resort in Atlantic City for years to come,” he said.
Boyd officials noted that April has been a strong month for Borgata, including increases in visitation, hotel occupancy rates and cash sales for guest rooms. Boyd did not disclose any revenue or profit figures for April, although those numbers will be reported later in the year as part of the company’s second-quarter earnings.
“We’re pleased with the initial results, post-opening of Revel,” Smith said.
Borgata has been Atlantic City’s dominant casino since it opened in 2003. Analysts have been debating whether Revel would become the new No. 1 casino as it vies with Borgata for younger, more upscale customers.
Borgata’s performance in the first quarter exceeded Wall Street projections, but analysts pointed to Revel as a concern for Borgata’s earnings later in the year.
“While Borgata delivered a strong performance in (the first quarter), investors are likely to remain cautious about the future impact of Revel,” Joel Simkins, of Credit Suisse, wrote in a research note.
Andrew Zarnett, of Deutsche Bank, wrote in another research note that he expects Borgata’s results to begin trending down in the second quarter “given the negative impact of cannibalization from Revel Entertainment.”
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