Making the News

Star Ledger

Originally Published:Thursday, June 19, 2008

Michael Pollock, publisher of Michael Pollock's Gaming Industry Observer, said even in "a baffling economy like the one we're in, there are going to be people at the high end who can still afford a certain level of luxury."

Casino royale: Additions at A.C. hotels try to lure patrons with luxury

By Judy DeHaven
Star Ledger

Miles of marble. Floor-to-ceiling water views. An indoor oasis of bamboo, ficus and palm trees. A two-story spa with heated massage tables. Fresh flowers in every hotel room.

Introducing the Water Club, Borgata's latest addition, which officially opens June 27. It offers no casino, only opulence: Five pools, 40 different types of marble, 60 kinds of wood, a $10,000 weekly flower budget, spa tables that cost $25,000 apiece and high-tech phones in every room that allow guests to do, well, just about everything.

Since opening in 2003, Borgata has helped redefine the Atlantic City gambling experience by doing what no one else attempted to do attract a younger and wealthier clientele to a city long known for its blue-haired bus patrons. Now, the resort is making a $400 million bet on a new hotel tower it hopes will out-Borgata the Borgata.

But this still is Atlantic City, where the casinos have been taking a beating from Pennsylvania and New York, high gas prices and a slowing economy. Last year, revenue fell 5.7 percent, the first time in its 29-year history, and revenue has dropped 5 percent for the first five months of this year.

Despite the flagging economy, industry observers insist a higher-end market is out there, waiting to cough up big money for a stay at the Water Club or any of the other upscale projects being planned for Atlantic City.

Lehman Bros. analyst Jane Pedreira said Las Vegas has several upscale options Wynn Las Vegas, the Venetian, Bellagio, Caesars Palace and the Mansion at the MGM Grand among them.

"What does Atlantic City have?" she asked. "That's the problem. They have grind and they have middle market."

Three multibillion-dollar casino resorts have been proposed for Atlantic City, and one from Revel Entertainment is under construction. But at least one project has been tabled because of the credit crunch, and Revel does not yet have its permanent financing.

The Water Club is one of three casino hotel expansions opening in Atlantic City this summer. Harrah's started opening floors of its water-themed, 960-room hotel called the Waterfront Tower in March. Now completed, its hotel at 44 stories, it's the tallest building in Atlantic City is part of a $550 million expansion that includes an Elizabeth Arden Red Door Spa and a pool that attracts sunbathers during the day and a party crowd at night.

And the Trump Taj Mahal will begin opening its $255 million Chairman Tower named for company chairman Donald Trump on Labor Day weekend. The company said the 782-room tower was designed with the business traveler in mind.

The Water Club is part of a broader $600 million expansion the Borgata, co-owned by Boyd Gaming and MGM Mirage, started planning shortly after it opened. Two years ago, the casino opened the first phase of that project a casino and restaurant expansion that gave it Atlantic City's largest poker room and three celebrity-chef restaurants: Wolfgang Puck, Bobby Flay and Michael Mina.

The Water Club is the final phase. Larry Mullin, Borgata's chief operating officer, said the strategy was to prepare Borgata for the future. In the short run, analysts say more hotels will transform Atlantic City from a daytrip to an overnight destination and help it compete against slot parlors in neighboring states.

Mullin said Borgata could not afford to sit still. The planned resorts, he said, will be raising the bar again.

"I look at everything competitively," he said in a recent interview. "I assume they (the competition) will do something great."

Mullin said Borgata is still trying to entice "rejecters" of the Atlantic City market, people who have not yet been given "a compelling enough reason to visit us, as well as the customer in the market looking to trade up."

"Clearly, this hotel is geared for the higher end," he said.

At $400 million for 800 rooms, it is more expensive than the Harrah's or Taj additions. And Mullin said it will employ an additional 800 people; in contrast, the new Taj tower which does not include a spa will add another 200 workers.

"It's unusual for a hotel of any type to have that type of intensive labor force," said Bob McDevitt, president of Local 54 of Unite Here, which represents 14,000 casino hotel and restaurant employees. "The product they're trying to put out is a first-class product, and they can't do that without a lot of service staff.

"And if you're going to get into that level of service, you're charging a pretty penny for the room," he added. "You're really going to step it up."

Standard rooms called "smart rooms," equipped with the latest in technology, including iPod docking stations and wireless high-speed internet access will cost 25 percent more than the typical Borgata room, which already has the highest city average at $143.72.

On a typical weekday in July, for example, the Water Club's asking price for a standard room with a king bed is $329; at the Borgata it's $279. Saturday nights run $539 to $609 at the Water Club, versus $459 to $529 at Borgata.

And those are starting rates. The corner, bi-level suites, complete with your own media room, baby grand piano, mini fitness center and spa area could run as much as $15,000 on peak nights if you want to pay cash. Mullin said instead of reserving the rooms only for the best gamblers, as most casinos do, Borgata hopes to sell roughly half of the Water Club's rooms to cash-paying customers.

Those customers will have exclusive access to the Water Club's spa, which features Asian stunted bamboo growing along the indoor walkways and heated massage tables overlooking water views. The minimum massage and facial lasts 80 minutes compared with the usual 60 and prices start at $210.

Michael Pollock, publisher of Michael Pollock's Gaming Industry Observer, said even in "a baffling economy like the one we're in, there are going to be people at the high end who can still afford a certain level of luxury."

Pedreira, the Lehman analyst, said Borgata is trying to mimic the success casino mogul Steve Wynn had when he opened luxury casino hotels in Las Vegas.

"Wynn didn't cannibalize Las Vegas," she said. "It set a higher price point and drew out a higher end clientele.

"I think (Borgata) doesn't want to cannibalize their own client base," she said. "They're trying to go higher so they can have their cake and eat it too grow their market without cannibalizing."


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