Mohegan is casino's last Resorts

Tribe says struggles in Conn., Atlantic City won't deter it from future expansions

January 07. 2013 3:00AM

By Joshua Burd

It was more likely a question of when, not if, the company behind Mohegan Sun would find its way to Atlantic City.

Mitchell Etess, CEO of the Mohegan Tribal Gaming Authority. – AARON HOUSTON

Around 2006 — before the gaming industry began its unprecedented slide — executives from the American Indian-owned resort trekked from Connecticut in pursuit of an acquisition opportunity at a New Jersey casino. Mitchell Etess, CEO of the Mohegan Tribal Gaming Authority, said the discussions went so far that they "looked at the boilers," but the deal fell through.

"The timing ended up being good, because of the way the economy went down," but the interest in Atlantic City never faded, Etess said. "It was just a matter of if we ever found something that we thought would work out … we would seize it."

Last year, the operator's patience was rewarded. It's now four months into a landmark deal to manage Resorts Casino Hotel, but more importantly, about five months away from what Etess says will be a renaissance for the historic gaming hall.

Executives are targeting Memorial Day for the opening of the new Margaritaville LandShark Bar & Grill, which they hope will transform the Boardwalk property. In addition, Resorts and Mohegan Sun recently launched a major renovation project to make over the casino floor, hotel suites and dining options.

"People go, 'Why would you pick Resorts?' " Etess said in an interview at Mohegan Sun's flagship casino, in Uncasville, Conn. "One: it's an iconic brand — it's always going to be the first casino that ever opened in Atlantic City. And two: the expansion of Margaritaville and LandShark is going to totally redefine the feeling about Resorts."

Like Atlantic City, gaming revenue in Connecticut has fallen mightily from peak levels in 2007 — according to the Connecticut Gaming Division, Mohegan Sun's slot winnings were about $689 million in fiscal 2012, down 25 percent from five years earlier. In Pennsylvania, where the industry is growing, gaming win at Mohegan Sun at Pocono Downs was $282 million in fiscal 2012, up 62 percent from its opening year in 2007.

Etess acknowledged the struggles in Mohegan Sun's home state, which prompted more than 300 layoffs last year, but the operator "is totally focused on expansion (and) diversifying our revenue streams," he said. That includes its pursuit of a license for a new casino in Palmer, Mass., and its entrance into New Jersey.

When his team engaged Resorts last year, Etess said he envisioned "some sort of marketing alliance," especially after the death, in February, of co-owner Dennis Gomes, the longtime Atlantic City casino executive and marketing whiz. But the meetings with Morris Bailey, who bought Resorts with Gomes in 2010, quickly evolved into talks about a larger management role and partial ownership.

Such a plan was supported by research that Mohegan customers would embrace a New Jersey casino, Etess said. And discussion about the $35 million Margaritaville project "was definitely one of the things that pushed us over."

"We were aware that Atlantic City is a very competitive market," said Etess, a former Trump Plaza Hotel and Casino executive from 1988 to 1994. "Conversely, once Margaritaville comes, we're going to have a very, very unique offering."

For Bailey, a New York real estate magnate, Mohegan Sun "absolutely" filled an operational and marketing void left by Gomes. But Mohegan Sun also has given Bailey the "cross-marketing vehicle" it had sought long before Gomes' death: Resorts is now a piece of Mohegan Sun's widespread advertising campaign, alongside the Connecticut and Pennsylvania properties, and gamblers can earn and use players points at all three locations.

What's more, Bailey said, Mohegan has brought the expertise he needed before he could forge ahead on a major overhaul of his property.

"My first objective was to get an operating partner that gave me the organizational strength, because you can't do things without the input of a really good team," Bailey said.

Resorts, meanwhile, has become a high-profile first client of Mohegan Gaming Advisors, a division formed about two years ago during a company restructuring. Etess said the operator had sought management contracts for several years before that, but had trouble landing assignments without a dedicated team.

That transition at Resorts is now under way, despite an interruption by Hurricane Sandy. While interior work started months ago, construction crews are expected to start pouring the foundation for the LandShark bar within weeks, said Gary Van Hettinga, a Mohegan executive installed as Resorts' CEO.

Also key is the transition for Resorts employees, which has already begun and is focused around "bring(ing) some structure around the process of measurement, in terms of our service levels and things of that nature."

"I think the morale and the excitement is building around the project," Van Hettinga said. "They see all of the construction going on here, and they haven't seen anything like that for quite a while at this property."

The Margaritaville complex will follow the recent trend of growing Atlantic City's clout as a tourist destination. Such an approach is the only option these days, Etess said, as "people have changed their spending habits, and they're not going back."

"As gaming itself becomes more commoditized — where it's in so many places — you have to continue to evolve your offering in order to create reasons for people to go, and for them to want to come," he said of nongaming amenities like Margaritaville. "You can't trump convenience."

Correction appended: An earlier version of this story included two incorrect references to 2012 as "this year," instead of "last year."

E-mail to: joshb@njbiz.com

On Twitter: @joshburdnj


www.NJBIZ.com