Q+A: Bob Boughner

By Liz Benston (contact)

Saturday, July 7, 2007 | 7:07 a.m.

Since the 1950s, skeptics have suggested the Strip was being overbuilt with more hotel rooms than could ever be filled. The concern reached a crescendo with the 1990s resort boom that established Las Vegas as the hotel capital of the country.

But even the construction boom in the early 1990s that included Excalibur, Luxor, MGM Grand and Treasure Island, followed by another spike in the late 1990s - Bellagio, Mandalay Bay, Venetian and Paris Las Vegas - pales compared with what's going on now.

The current spurt will yield 20 resorts or hotels costing tens of billions of dollars over the next few years, sating Baby Boomers with money to burn, free-spending Generation X and Y travelers and a growing number of conventioneers with company credit cards.

This boom is being driven by private companies flush with cash that figure if they can't cash in with a new resort, they can flip the land to a bigger pool of interested buyers.

Against this optimistic landscape, Boyd Gaming Corp. last month entered the construction fray, breaking ground on the second-largest building project in Las Vegas. Echelon Las Vegas, with five hotel towers including the Shangri-La, Mondrian and Delano brands, 300,000 square feet of retail space and a 140,000-square-foot casino, is to open in the third quarter of 2010.

A few months after that, more than 40,000 hotel rooms will be added to the inventory, which currently tops 133,000 rooms.

About 5,000 of those new rooms will be at Echelon Las Vegas, costing Boyd $4.8 billion.

In charge of the project is Bob Boughner, who oversaw the opening of Borgata, a $1.1 billion Las Vegas-style resort in Atlantic City built in partnership with MGM Mirage. Comparable to other high-end resorts on the Strip, Borgata commands the highest market share in Atlantic City and has attracted casino newcomers from cities such as New York and Philadelphia.

Boughner, Echelon's chief executive, is confident the resort project will compete strongly in the next wave of hotels and resorts.

Q: You served on the board of the Las Vegas Convention and Visitors Authority during the 1990s building boom. How can demand keep up this time?

In recent years there's been a significant increase in hotel room rates - and still a small increase in hotel occupancy rates. The market has always been able to absorb more rooms. Granted, the sheer number of new hotel rooms between 2009 and 2011 will be a historic record. We'll still tap our strong base of Baby Boomers, but many of the new rooms will be filled by two growing customer markets - business travelers who now only take up less than 10 percent of the rooms, and tourists between the ages of 29 and 35. And we haven't discussed the potential of increased international travelers.

Building more hotel rooms must come with some anxiety.

There's been a certain degree of nervousness in each growth phase of Las Vegas and that is more healthy than not. One of the results of being nervous is that you never become complacent in Las Vegas. Complacency leads to mistakes. Nervousness drives us to excel.

Is Echelon being built to meet the existing demand for upscale rooms?

We spent a significant amount of time studying the historical trends and talking with consumers. The market continues to evolve. Consumers' expectations - for rooms, service and other amenities - continue to increase, so resorts have to be flexible in what they offer now and in the future, or risk becoming artifacts.

Room rates will go up. Is the strategy, then, to lure wealthier customers who aren't yet coming to Las Vegas or persuade existing customers to pay more for a room?

Both. We're still getting a lot of first-time visitors, and the number of repeat visitors is extraordinary. We have to keep Las Vegas fresh for both markets.

MGM Mirage's $7.4 billion multiresort CityCenter broke the traditional casino resort mold. How did it influence Echelon?

While there will be some similarities between the two largest projects, there are differences as well. We have elected not to have a residential component in our first phase, for example.

Boyd Gaming will soon be among a select few casino giants to remain public. How competitive will the company be if your peers can raise capital more quickly or cheaply by going private?

The company has been able to meet all of the requirements for raising capital and we have no reservations about our ability to do so as a public company. This company borrows at extremely attractive rates and has been able to maintain the support of its core banks and attract new banks to be part of the lending groups. We are targeting (a return on invested capital) for Echelon in the midteens once we've hit our room rate.