Boyd Gaming (BYD)

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Boyd Gaming (NYSE: BYD) owns and operates 16 casinos in Nevada, Mississippi, Illinois, Louisiana, Indiana and Florida. They are also a 50% partner in The Borgata Hotel Casino and Spa in Atlantic City. Unlike other Casino operators such as Wynn Resorts (WYNN) or Las Vegas Sands (LVS) who tend to focus on higher end tourists, Boyd typically caters to the middle-income customer. Their Las Vegas properties also differ in that they target local Las Vegas residents, one of the strongest and fastest-growing gaming segments, and Hawaiian tourists^[1].

[edit] Business Overview

BYD operates properties Mississippi, Illinois, Louisiana, Indiana and Florida. They also operate The Borgata in Atlantic City through a joint venture with MGM.

BYD's revenue has grown significantly in recent years through expansion, acquisitions of properties such as the Coast Casinos, and joint ventures such as The Borgata^[2]. In 2006, revenue was $2,192 million, up nearly 26% since 2004.

BYD 2006 Annual Report^[3]

BYD has properties in Nevada, Mississippi, Illinois, Louisiana, Indiana and Florida, along with a joint venture in Atlantic City. While Las Vegas is still its largest market, the properties outside of Nevada provide some diversity to BYD's revenue.

BYD 2006 Annual Report^[4]

Similar to many other casinos, Boyd generates a majority of revenue (nearly 75%) from gaming and the rest (remaining 25%) from dining, rooms, and other items.

BYD 2006 Annual Report^[5]

[edit] Future development

• Boyd has expansion plans for its Blue Chip property in Indiana, The Borgata in Atlantic City, and Dania Jai-Alai in Dania Beach, Florida^[6].

• However, the biggest project in the works is The Echelon on the Las Vegas Strip, which is being built where the Stardust Casino was tore down. The Echelon will include 5,000 rooms, 140,000 square feet of casino space, 750,000 square feet of convention space, and other features. It is scheduled to open in early 2010^[7]. .

[edit] Key Trends and Forces

• Tourism in Las Vegas: BYD depends on the sustained growth of tourism in Las Vegas. With the development of the large Echelon project, BYD is betting on the growth of Las Vegas and continued growth of non-gaming revenues due to the large convention, retail, and dining space which is being constructed. Non-gaming revenue in Las Vegas is a lot bigger sector at $28.8 billion compared to $10.6 billion for gaming^[8]. A disruption in this trend may lower hotel and casino occupancy, and decrease future revenues.

• Airline Travel: while BYD has local customers who don't have to travel by air, many of its properties do rely on customers travel by air, especially from Hawaii. Therefore, BYD’ future profitability and success is contingent on the overall health of air travel. Terrorist attacks or other major events could reduce the number of customers willing to travel to the resorts.

• Economic Conditions: The gaming industry as a whole is vulnerable to economic conditions. An economic downturn in the US would have a negative impact on BYD's revenues. In a down economy there are fewer visitors and the visitors who do come tend to spend less money. Since BYD caters to middle income customers, they may be more affected by economic conditions. This makes BYD more vulnerable to economic conditions than Wynn Resorts (WYNN), Las Vegas Sands (LVS), and other casinos which cater to higher-end customers, who may be less sensitive to changes in economic conditions.

• Weather Conditions: some of the company's properties are located in areas that experience extreme weather conditions, including hurricanes. For example, our Treasure Chest Casino, which is located near New Orleans, Louisiana, suffered damage and was closed for 44 days in 2005 as a result of Hurricane Katrina. When properties are damaged or shut down due to weather, the company is affected adversely^[9].

[edit] Competition

BYD faces a lot of competition in Las Vegas and the other locations where it operates^[10]. While these companies have similar operations, BYD’s primary distinction is that it focuses on the middle income customer.

Harrah's Entertainment owns and operates 72 locations comprising nearly 3 million square feet of casino space as well as over 38,000 hotel rooms and suites across countries such as the U.S. Canada, the U.K., Egypt, and South America. In Las Vegas, the company owns 629,000 square feet of casino space and 20,300 rooms and suites at locations such as Bally’s, Caesar's Palace, Harrah’s, The Flamingo, and Paris. ^[11]

MGM owns and operates casino resorts in Las Vegas such as Bellagio, MGM Grand Las Vegas, Mandalay Bay, Mirage, Luxor, Treasure Island, New York-New York, Excalibur, Monte Carlo, Circus Circus Las Vegas and Slots-A-Fun. Other Nevada operations include Circus Circus Reno, Gold Strike in Jean, and Railroad Pass in Henderson. The Company has a 50% investment in Silver Legacy in Reno, which is adjacent to Circus Circus Reno. The Company also owns Shadow Creek, an exclusive world-class golf course located approximately ten miles north of its Las Vegas Strip resorts, and Primm Valley Golf Club at the California/Nevada state line. ^[12]

^Average Daily Rate = total room revenue / total rooms occupied

^^ Las Vegas Local Casinos include Barbary Coast, Gold Coast, The Orleans, Sam's Town, El Dorado, and Jokers Wild. Consolidated information was not available.

[edit] References

1. ↑ BYD 2006 10k, Item I, Pg. 1
2. ↑ BYD 2006 10k, Item Ia, Pg. 4
3. ↑ BYD 2006 10k, Item VI
4. ↑ BYD 2006 10k, Item VII
5. ↑ BYD 2006 10k, Item VIII, Pg. 110
6. ↑ BYD 2007 10q - Sept 30th
7. ↑ BYD 2007 10q - Sept 30th
8. ↑ LVS 2006 10k, Item I
9. ↑ BYD 2006 10k, Item Ia, Pg. 9
10. ↑ BYD 2006 10k, Item Ia, Pg. 4
11. ↑ HET 10k, Properties, p. 14-15
12. ↑ MGM 10k, Business, p. 1