Vol. 5, No. 9, September 2008
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Interview: Larry Mullin
Larry Mullin, President Borgata Hotel Casino & Spa
Casino Connection: What demographic are you targeting with the Water Club?
Mullin: We’re looking for the customer who’s looking for a trade-up experience. Atlantic City has made some great strides upgrading its product, but there’s much more competition. Now daytrippers have a choice between New York, Atlantic City or Pennsylvania, but that convenience doesn’t include what we offer in retail, restaurants, nightlife and entertainment, as well as great hotels. We’re not necessarily reaching out for the most price-sensitive customer here. We tend to have younger customers with a lot more discretionary income who are looking for a new experience.
Why did you dedicate so much space and valuable real estate to the Water Club’s the 32nd-floor spa and pool?
We could have taken that space and just added more rooms, but the notion was to offer someplace special. That spa area, with 16 treatment rooms, a workout facility and the pools, says loud and clear, this is something you would not normally be offered.
The opening had to give you a little bump over the summer.
It’s been a great reason to make another visit to the Borgata. We’ve been open five years; it’s no secret that convenience is a premium for people trying to stretch their dollar. To make a decision to come out to the Water Club, you need something compelling like this. It’s been great for us.
Will the total smoking ban in October and the economy affect price points?
So far we haven’t seen too much resistance to our rates. Like any business, you have your ups and downs and at times you adjust your pricing. We could offer a lot more for a lot less, but at some point we’d have to compromise on what we’ve put in here, and we see that as detrimental to the design and positioning of this new hotel.
What’s the overall significance of the Water Club to the future of Atlantic City?
The fact you can invest in a quality product like this and get a decent return on it. We don’t measure our return on the first quarter or month or on the first year. It will be defined in the next few years, as it was with Borgata. But if you don’t have a product like this, you run the risk of being run out of business. People are looking for quality and value, and I think we offer both.
Before the Water Club, there was an expansion to Borgata that included restaurants by Bobby Flay and Michael Mina, and the poker room, which was a major step up. Are those the sorts of things you need to dominate the market?
You need everything. The market is not as vibrant as it was a few years ago, I think because of the economy, and not what we see competitively. In the last 40 years, the economy has been down six times, and it does come back. The challenges now are unlike anything before because of the credit market, which doesn’t give people a lot of confidence to invest. We’ll be measured in years to come by the return we show. People will say, “How did the Borgata and Water Club make their mark, and what do we do to meet that bar?”
Do you think Atlantic City is actually in a pretty good position to come back as the economy rebounds?
I think Atlantic City’s position is as good as anybody’s, if not the best for the short-term and mid-term. We have a new train service coming on at the end of the year from New York City.
We have three nice new hotels in place—the Water Club, Harrah’s and the Taj Mahal’s second tower—and the biggest thing missing here has been the ability to have guests stay longer than a day trip.
At the same time, we’ve got great restaurants. We just opened (the Japanese sushi restaurant) Izakaya, and it’s been tremendously received. People who invest in convenience markets, unless they’re willing to invest at the rate you see here, will have challenges over the long term. Right now, they’re bottom feeding.
Harrah's did a great job repositioning itself with the Pool and its retail. Trump Marina may be repositioned as a Margaritaville. Are you excited about that?
I’m excited about all of that. Again, it’s new investment, new ideas, new things to bring people to this marketplace, which has always been great. I think the biggest challenge Atlantic City has faced has been its reputation. We’ve worked hard at Borgata and Atlantic City has worked hard to change that, bringing in product like you see in Las Vegas and at great resorts--the kind of dining, entertainment and nightlife that give people a reason to be excited about coming.
This is New Jersey, after all, and the state government has a lot of budget issues. Are you fearful that government will again look to the gaming industry for more taxes, or do something more harmful like put slots at racetracks?
I’m always fearful of that. We live in a state that has challenges. But I believe the senior leaders, who have been here quite often, understand what’s going on.
But if any of those things happen, I believe you’ve killed the golden goose. And although you may see as the other forms of gambling and more convenience, at end of day we are in the tourism business. And even though gambling is very important, it’s a partnership and we hope to grow with them and that will be determined by how well we execute here.
Neither one of us is an economic expert, but do you have a sense about how long the economic downturn will last and what will be the catalyst for change?
For one thing, it’s larger than Atlantic City. It’s a world issue and the U.S. is still the leader. I think it comes down to the election; a lot of eyes are on the election and a lot of money will come back to the market based on the outcome. That’s the first thing that will change. The other big thing, obviously, is oil. Our industry, like every other, is dependent on oil, but we’re not dependent on air travel. There will be a willingness to spend a little more to drive to a destination like this. So I’m optimistic that, longer term, Atlantic City will be something to be reckoned with.
The main competition for Atlantic City right now is Pennsylvania. Are you concerned about the slot parlor hotels that are planned for Philadelphia?
I think there will be a cannibalization within Pennsylvania. At some point, it will start leveling off; its already happening. Make no mistake, it’s a big business up there--they’re doing $120 million a month, and that’s a lot of market that would otherwise be in Atlantic City here. But if they don’t continue to improve the product, like we did, people will eventually move to where they find the best value. Price is a part of it, and convenience is a part of it. But at the end of the day, it comes down to the whole package.
