Boyd: A waiting game

That’s the economic forecast of J.P. Morgan analysts after Boyd Gaming came in slightly under its cash-flow projections for the third quarter. Borgata remained a bright spot, reaching record levels of market share in Atlantic City (a staggering 19%) in September. The gaming/non-gaming revenue balance is 55/45 (though that’s soon to change) and Boyd execs promised to stick to a “best product in the market” business model.

That’s clearly the best (and boldest) course of action when faced with a threefold threat: table games in Pennsylvania, work finally underway at SugarHouse (left) in Philadelphia, and slow-but-steady movement toward opening a racino at Aqueduct, near New York City. By the time the first of that trifecta comes into play, it will be too soon for some of Boyd’s Las Vegas properties to take up any slack from Borgata. Cash flow in the locals sector was -31% and net revenue -17%, driven down by decreased consumer spending, which had a concomitant effect on room rates, with August described as “incredibly slow.” Morgan expects an “elongated” recovery in this sector, whch translates as: not in 2010.

Morgan analysts drastically reduced their cash-flow projections for the Las Vegas locals market through 2012, while posting a flat set of 2010-12 predictions for Downtown. Continued softness was also anticipated in the Midwest and deep South.

Revenue was basically flat (-1%) in Downtown, although business from Hawaii stayed strong. Among outlying markets, Louisiana is betraying signs of saturation, although the Treasure Chest riverboat was up 2% in gross revenues and Delta Downs a massive +21%, posting record amounts of cash flow. Sam’s Town Shreveport (-1%) remains a little under the weather. In the Midwest, Blue Chip (-1%) is starting to betray the effects of new tribal competition from Michigan — a sharp decline in August was softened by a partial rebound last month — while Par-A-Dice (-2%) is going south again, following a summer quarter in which it appeared to be recovering from terrible market conditions.

At Echelon, the forecast for resumption is can be summarized in three words, “Not anytime soon.” The more optimistic timeline has work restarting in 2012, but postponement until 2014 is not out of the question. Boyd waved bye-bye to a management contract with Shangri-La Hotels & Resorts and wrote off over $13 million in costs related to its dysfunctional partnership with Morgans Hotel Group. Since it’s costing Boyd less than $20 million/year to keep the site mothballed, it can afford to take the long view.