Boyd Gaming: Echelon resort likely delayed through 2009

Published Tuesday, Oct. 28, 2008 | 2:22 p.m.

Updated Thursday, Oct. 30, 2008 | 7:13 p.m.

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Boyd Gaming Reports Third Quarter Results

Boyd Gaming, which hoped to resume work on its stalled Echelon resort on the Strip next year, says the deteriorating economy will likely delay those plans through the end of 2009.

Boyd halted construction on Echelon August 1 after joint venture partners weren't able to secure financing for two key hotels and a mall on the site.

During a conference call to discuss the worst quarterly declines in company history, Boyd executives said the company will explore alternatives in the coming year, including the possibility of building Echelon on a smaller scale, developing the project in phases rather than all at once as originally planned and securing additional business partners.

"We remain committed to having a meaningful presence on the Las Vegas Strip," Boyd Gaming Chief Executive Ketih Smith said.

The company has dissolved its deal with mall developer General Growth Properties, which is selling its resort malls in Las Vegas amid the economic downturn. The company has modified a development agreement with boutique hotel operator Morgans Hotel Group that could be resumed once the economy improves.

Boyd executives said the company has enough cash to weather the downturn and is doing its best to reduce debt, including the purchase of more than $100 million in company bonds.

"We're one of the few gaming companies to have a strong balance sheet during these turbulent economic times," Smith said, adding that the company remains in compliance with debt limits and other terms imposed by its bank lenders.

Today, Boyd reported a 73 percent decline in income from continuing operations in the third quarter, compared with a year ago, as consumers reined in spending nationwide. Excluding one-time gains and charges, earnings fell 64 percent and revenue fell 13 percent over that period.

The results were worse than Wall Street expected.

"Overall, our conservative results proved not to be conservative enough, as all markets were weaker than expected," David Katz, a stock analyst with Oppenheimer Equity Research, said in a research note to investors today.

Earnings at Boyd's Las Vegas locals casinos fell 26 percent, as increases in play among higher-rated gamblers was outpaced by spending declines among lower-rollers. Executives said their casinos are facing increasing competition on top of the worst decline in business in a generation.

The opening of the Eastside Cannery next to Boyd's Sam's Town casino on Boulder Highway didn't bring "anything particularly compelling to the area so it didn't drive a tremendous amount of new traffic," Smith said, instead stealing business from other casinos.

"It appears the bottom has really fallen out in the locals market after almost two years of weakness," Morgan Stanley stock analyst Celeste Mellet Brown said in a research note today.

Earnings at Boyd's downtown casinos were down 33 percent over the same period in part because of reduced air service from Hawaii, where many downtown customers originate. Earnings were down 31 percent in the company's Midwest and South region, as hurricanes forced two Louisiana properties to close for more than a week.

Earnings were down 18 percent at the company's half-owned Borgata resort in Atlantic City but revenue was up slightly on the addition of the Water Club, a luxury hotel tower.

Discussion: 6 comments so far…

By stevem

10/28/08 at 3:05 p.m.

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If you listen REALLY closely you can hear real estate agents' phones ringing all over the valley from people that bought all those foreclosure homes for rental income calling to get them listed so they can dump them.
By neiman1

10/28/08 at 8:08 p.m.

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The Casino will never be built. Gambling will be down for years in Las Vegas and jobs are vanishing. The price of gas is down today because the economy of the world is dumping, but it will rise again because we haven't added any supply. With Obama we wont start looking for any for at least 4 more years. Now he wants to raise taxes on Corporations and take money out of our employers while the income is down. This city will crash under Obama and that idiot harry Reid.
By denro

10/29/08 at 7:35 a.m.

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I suspect Boyd will ultimately build a smaller project. IMO, they got caught up in the City Center mentality with the still expanding economy at the time. As we are now in a different financial and economic era, a more reasonable development proposal makes sense. Sad to see the Stardust go down, I remember it sitting as an empty concrete hulk month after month in the mid-fifties after Tony Cornero died and before the Desert Inn group took it over for completion. It looks like deja vu all over again.
By harske

10/29/08 at 12:54 p.m.

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I would have loved to have been a fly on the wall at some of these meetings a few years back. I can't imagine that intelligent and profitable groups like Boyd, MGM/Mirage, and the rest of them didn't have contingencies in place for this. But as frightening as it appears, it really looks as though everyone in the valley was totally caught up in the "up, up, up..." mentality, and even the boards of some of the biggest gaming companies around put all their eggs in just a few expensive baskets.

The real sad part is that you still have an overwhelming sentiment that "No worries, it'll come back soon" resounding through Vegas. I applaud the optimism, but just ask the auto workers in Michigan and the steel workers in Pennsylvania how far that thinking got them in '70's. When you're rationale is that "it's always turned around before", you set yourself up for some pretty disastrous consequences. Those who don't learn from history are doomed to repeat it.

I think ultimately Vegas will return to being a premiere destination, but those who think it's a short term down turn are only fooling themselves.
By jgr6b1

11/12/08 at 4:59 p.m.

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dear neiman 1,
as you stated yourself, the city has already crashed,courtesy of good old "w".
By patti88

1/10/09 at 9:45 a.m.

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well - i had gone to the stardust for about 5 years and loved it - my casino host said when they were going to blow it up that it was a mistake - that they owned it completely - no morgage on the property - all they had to do was just add another tower for the extra rooms - it was such a great place - the people also. I still miss the stardust - I happened to be there the night it went to dust - i was at the stratosphere - the OLD las vegas is gone - the new one - well what can I say - its the times and think that alot of people are still coming there but not bringing as much cash to spend and maybe not coming as much - i use to go 3 times a year - now down to 1 - coming nascar weekend - staying at another smaller casino - the palace station - i like the smaller ones - that glitz and glammer - who needs it - maybe one or two casinos is ok - but not all - i like the old downtown - las vegas club - golden gate - its going to be a wait and see - on when this will kick back up - lets keep our fingers crossed that it picks up - hey - go dale jr at the nascar race!!!

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