Monday, November 01, 2010
Executives at Atlantic City Borgata Say Huge Losses at the Tables Are Not Related to Casino Cheating...What Do I Think?
Borgata Hotel Casino and Spa’s gamblers have been incredibly lucky at the gaming tables. That’s good for them, but bad for Borgata.
Borgata’s luck has been so poor lately that it has cost Atlantic City’s top-grossing casino millions of dollars in revenue and prompted some intriguing speculation. One gaming analyst wondered about the possibility of a cheating ring.
“Do you think there’s some sort of collusion or do you have some sort of cheating going on, or is it just a change in consumer behavior?” Adam Steinberg, of Merriman Capital, bluntly asked during a conference call last week on Borgata’s third-quarter earnings report.
Steinberg posed the question after executives at Borgata’s parent company, Boyd Gaming Corp., complained that the casino took a $9 million revenue hit during the quarter because of its unusually low table games hold percentage.
Keith Smith, Boyd’s president and chief executive officer, responded that Borgata officials checked things out “to ensure that there is nothing wrong with the game.”
“We can assure you everything is fine,” Smith said. “We’ve done all of the diligence and looked at it. I think it is a function of luck. It happens in our business, where you can run for a number of months with a low hold.”
In the third quarter, Borgata’s net revenue shrank to $207.7 million, a nearly 7 percent decline from $222.6 million a year ago. Even worse, gross operating profits plunged 19.7 percent to $54.3 million for the quarter, the company reported.
“The most significant factor impacting Borgata’s results was lower table games revenue, which was largely a function of unusually lucky play by our customers,” said Paul Chakmak, Boyd’s chief operating officer. “Had we experienced historical table games hold, we estimate revenue would have been $9 million higher during the quarter.”
The “hold percentage” is the term for the ratio of gaming chips the casino keeps compared with the number it sells to gamblers. For example, if a blackjack player buys $200 in chips and loses $30 in bets, the hold percentage for the casino is 15 percent.
Borgata’s table games hold in the third quarter this year was 12.09 percent, more than 2 percent lower than its average of 14.34 percent from 2005 to 2009, according to figures released by the casino. The hold was 13.77 percent in the second quarter this year and 13.62 percent in the first, also below historic levels.
“The hold is not limited to one area of the casino. It’s kind of throughout the table games area,” said Josh Hirsberg, Boyd’s chief financial officer. “It’s not throughout the market, either, so there’s something unique at Borgata at this point.”
Dave Coskey, Borgata’s vice president of marketing, said the casino conducted an internal review in September and found no irregularities with the table games. For security reasons, he would not divulge the exact nature of the checks.
“As a responsible gaming company, typically, we’ll examine and review our procedures and controls whenever there is a variance in any phase of our operation,” Coskey said in an e-mail statement. “That kind of examination isn’t unusual — it’s a part of our business and just one of the ways that we verify the integrity of our operation.”
In the end, Borgata officials concluded that gamblers simply had a hot streak.
“We’ve always said that Borgata can be your lucky place. Our customers proved that during this month,” Coskey said.
While security checks this time did not uncover anything wrong, Borgata has not been immune to illicit gambling. In 2007, authorities broke up an illegal sports-betting operation that had been run out of Borgata’s high-stakes poker room. Authorities praised the casino for its cooperation in helping them to crack the betting ring.
My Take: Well, the Borgata, as we all know, has been the locale of some high-profile poker cheat and illegal-betting cheat scams, so we can't rule out something "cheaty" going on here now. If there indeed is organized cheating going on, whether or not it may involve Borgata personnel, I would bet every nickel that it's got something to do with the casino's high-stakes baccarat tables, which are the usual suspects these days in major continuous brick and mortar casino cheat operations.
So, I'd say it's fifty-fifty that at least some big time cheating is happening at the Borgata casino.