Connecticut-based Mohegan Sun will invest in Resorts Casino Hotel and become a minority owner as part of a new management deal expected to create a gambling powerhouse in the Northeast market.
Representatives of Mohegan Sun and Resorts said the agreement, announced Tuesday, combines the attractions and marketing prowess of three casinos in Atlantic City, Pennsylvania and Connecticut.
“We have this triangle and we will be able to capture everybody in between,” said Aaron Gomes, executive vice president of operations at Resorts.
Mohegan Tribal Gaming Authority owns the mammoth Mohegan Sun casino resort in Uncasville, Conn., and the Mohegan Sun at Pocono Downs racetrack casino in Pennsylvania’s Pocono Mountains. This is the first time an Indian-owned casino operator will own and manage an Atlantic City property.
Under the management deal, customers at Resorts and the Mohegan Sun casinos will be able to use their loyalty points at all three places beginning in the fall. Mohegan Sun executives touted the agreement as a marketing coup that will capitalize on some of the best-known casino brands in the Northeast.
“We’ve always thought that Atlantic City created great opportunities for us to do a lot of cross-marketing,” Mitchell Etess, chief executive officer of Mohegan Tribal Gaming Authority, said during a news conference at Resorts.
Analyst Israel Posner said he believes this is the first time in Atlantic City’s 34-year history of casino gambling that a three-state regional approach has been taken for casino management and marketing.
“It’s a trifecta,” said Posner, executive director of the Lloyd D. Levenson Institute of Gaming, Hospitality and Tourism at The Richard Stockton College of New Jersey.
Mary and Bob Bardonnex, of Stroudsburg, Pa., said they likely will visit Resorts and Mohegan Sun at Pocono Downs more often if they can use their loyalty points for perks at both places.
“That’s a very good thing,” Mary Bardonnex said while she and her husband played a slot machine Tuesday at Resorts.
The management deal also allows Mohegan Sun to accomplish its longtime goal to penetrate the Atlantic City market, Etess said. Mohegan Sun has been looking to expand not only into Atlantic City, but also hopes to develop one of the new casinos in Massachusetts now that casino gambling has been approved in that state.
In addition to taking over management of Resorts, Mohegan Sun will invest in the casino hotel and become a part-owner. New York real estate magnate Morris Bailey will continue as the principal owner of Resorts.
Bailey declined to disclose exactly how much Mohegan Sun will invest, but noted that the deal opens the door to millions of dollars in future capital improvements in the casino.
He stressed that the management deal is not a prelude to a possible sale. He said he has no intention of selling Resorts, despite suffering millions in losses since he acquired the casino in 2010.
Mohegan Sun intends to seek a New Jersey casino license. Etess explained that Mohegan Sun obtained a Pennsylvania casino license for its Pocono Downs property, so he anticipates no difficulties going through New Jersey’s regulatory process.
New Jersey’s Division of Gaming Enforcement, the state agency that will conduct Mohegan Sun’s background check for a license, is ready to begin the process as soon as the tribe submits the paperwork, said David Rebuck, the agency’s director. In a written statement, Rebuck said the DGE saw the agreement as “ another positive step forward for the casino industry in Atlantic City.”
Resorts’ management has been murky following the Feb. 24 death of former CEO Dennis Gomes, who teamed up with Bailey to buy the casino in December 2010 for $31.5 million. Gomes oversaw the rebranding of Resorts into a Roaring ’20s theme, a move that capitalized on the popularity of the HBO series “Boardwalk Empire,” which was inspired by Prohibition-era Atlantic City.
Gomes’ son, Aaron, has helped to run Resorts since his father’s death. Etess said he hopes Aaron Gomes will stay under the new management deal, but it is unclear whether other top executives at Resorts with remain in their jobs.
One of Mohegan Sun’s major challenges will be to blend Resorts’ disparate themes. The Roaring ’20s theme complements the casino’s Art Deco architecture. However, Resorts will take a dramatic turn when singer-songwriter Jimmy Buffett opens one of his Margaritaville-themed restaurant and casino complexes at Resorts next year.
Bailey and Etess indicated that the Roaring ’20s and Margaritaville themes can coexist. Mohegan Sun’s flagship Connecticut casino has a Margaritaville restaurant, so the company is already familiar with the Buffett brand.
Buffett’s $35.5 million, tropical-themed expansion project at Resorts will include two restaurants, a bar, retail and gambling. Construction is scheduled to begin in September, with completion by next May.
John Varca, a longtime Resorts customer from Forked River, Ocean County, said he was thrilled with the thought of a Margaritaville attraction coming to Atlantic City.
Varca said his family has been coming to Resorts ever since it opened as Atlantic City’s first casino in 1978. On Tuesday, he watched while his wife, Ellen, and his mother-in-law, Winifred Fisher, played video poker.
“This is our favorite casino,” Ellen Varca said.
Despite being one of Atlantic City’s better-known casinos, Resorts has struggled in recent years. The previous owners defaulted on their mortgage and let Resorts’ lenders take over. The lenders, in turn, sold the casino to Bailey and Gomes.
Resorts posted a gross operating loss of $13.9 million in 2011. In the first quarter of 2012, it lost $3.4 million. At the same time, Resorts has been trying to reverse a decline in its gambling revenue. Through the first six months of 2012, its revenue from slot machines and table games is down 16 percent, compared to about 7 percent for the entire market.
“We did not anticipate the degree of losses when Dennis and I bought it,” Bailey said.
Bailey, though, predicted the Mohegan Sun deal and the Margaritaville project will help put Resorts in the black. He said Resorts already has begun turning a profit.
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