ATLANTIC CITY — For the tiny Atlantic City Hilton Casino Resort, it seems the best way to compete in the land of the giants is to get bigger — a lot bigger.
After months of rumors, the Hilton finally revealed plans Wednesday to transform the smallest casino in town into a megaresort that could dominate the southern tip of the Boardwalk.

The price tag is estimated between $1 billion and $1.2 billion, or about what it cost to build the Borgata Hotel Casino & Spa in 2003, officials said.

Hilton plans to build a 1,000-room hotel tower and double the size of its gaming space from 60,000 to 120,000 square feet. New retail shops, restaurants and a 3,500-seat entertainment facility will complement the gaming operations. A 3,000-space parking garage also is planned.

“I think it's a gem of a property that would benefit from an expansion more than any other casino,��� said Anthony Rodio, regional president of the Hilton and sister property Resorts Atlantic City.

Rodio and other company representatives disclosed details of the expansion plan during a Casino Control Commission meeting Wednesday for renewal of the Hilton's operating license. The commission unanimously approved the five-year license.
The Hilton is owned by Resorts International Holdings, an affiliate of the Los Angeles-based real estate investment group Colony Capital. Colony acquired the Hilton and three other casinos in Mississippi and Indiana for $1.24 billion in 2005.

Colony agreed this month to sell one of those casinos, Resorts East Chicago in East Chicago, Ind., to Ameristar Casinos Inc. for $675 million. Proceeds from the sale will help finance the Hilton's makeover, according to Eric J. Matejevich, chief financial officer of Resorts International Holdings.

No timetable was given for the expansion. Hilton is still in the planning stages, but has hired an architect to design the project. After Wednesday's Casino Control Commission meeting, Rodio was scheduled to discuss the expansion with Nicholas L. Ribis, chief executive officer and vice chairman of Resorts International Holdings. A presentation is planned for Tuesday in Las Vegas with Thomas J. Barrack Jr., chairman and chief executive officer of Colony Capital, Rodio said.

The Hilton last underwent a major expansion in 1997, when it added 300 hotel rooms at a cost of $50 million. The property opened in 1980 as the Golden Nugget, casino mogul Steve Wynn's luxury resort. Wynn sold the casino to Bally Manufacturing Corp. for $440 million in 1987, beginning a string of ownership and name changes that tainted its opulent reputation.

Before Colony Capital took control, the Hilton was overshadowed by former sister properties Caesars and Bally's under then-owner Caesars Entertainment Inc. Colony orchestrated a turnaround by marketing the Hilton as an old-fashioned, high-stakes gambling den.

From 2005 to 2006, Hilton's gross operating profit soared nearly 80 percent to $51.8 million. Hilton's net revenue jumped 11 percent in 2006 to $294.3 million; it was the only Atlantic City casino to have double-digit growth in that category.

“The new senior management team has certainly guided the company, both locally and at the corporate level, to a significant financial recovery,��� Casino Control Commission Chair Linda M. Kassekert said.

But Rodio noted that the property's quaint gaming floor and modestly sized 800-room hotel tower have prevented the Hilton from growing even more. Hotel occupancy is about 95 percent. Every month, the Hilton turns away between 30,000 and 35,000 customers because it lacks the hotel rooms to accommodate them, Rodio said.

Hilton, located at the southern end of the Boardwalk casino district, will redevelop three blocks of adjacent property for the expansion. The new hotel tower will be attached to the existing building, while the retail, dining, entertainment attractions and parking garage will go across the street on what is now vacant property, Rodio said.

Rodio declined to elaborate on the retail component other than to say it would not be as large as The Quarter, the $280 million shopping and entertainment complex built by Tropicana Casino and Resort in 2004.

Assuming Hilton goes through with the project, the expansion would add to a $1.2 billion building boom in the casino industry. Borgata, Harrah's Atlantic City and Trump Taj Mahal Casino Resort are building expansion projects that will add 2,500 new hotel rooms next year.

Despite competitive pressures from Pennsylvania's new slot parlors and the possible loss of business related to Atlantic City's new casino smoking restrictions, the resort's $5.2 billion gaming industry is still poised for strong, long-term growth, Rodio told the Casino Control Commission.

“We are at the tip of the iceberg in terms of what this market is capable of,��� he said.