Connecticut-based Mohegan Sun will take over the operation of Resorts Casino Hotel as the oldest casino on the East Coast looks to revive its fortunes under new management.
Mohegan Sun’s management deal with Resorts, expected to be formally announced today, will bring the first Indian-owned casino operator to Atlantic City.
The Mohegan Tribal Gaming Authority owns the colossal Mohegan Sun casino resort in Uncasville, Conn., and a Pennsylvania racetrack casino called Mohegan Sun at Pocono Downs. It has been looking to branch out to Atlantic City for some time.
Resorts owner Morris Bailey has called a news conference today to announce what the casino says will be an “exciting new partnership.” Although Resorts declined to divulge details in advance, multiple sources confirmed that Resorts is entering into a management deal with Mohegan Sun.
Jennifer Ballester , a Mohegan Sun spokeswoman, would neither confirm nor deny the agreement with Resorts during a brief interview Monday.
In an interview last month, Ballester said Mohegan Sun has been looking for opportunities in the Atlantic City market. In 2007, a delegation of Atlantic County officials met with Mohegan representatives in Connecticut to discuss the possibility of a new Mohegan Sun casino in Atlantic City.
“It’s a market that we’re definitely interested in,” Ballester said. “It’s basically on our radar.”
Resorts’ management has been murky following the Feb. 24 death of former CEO Dennis Gomes , an Atlantic City casino veteran known for his zany publicity stunts and marketing innovations. Gomes oversaw the rebranding of Resorts into a Roaring ’20s theme after he and Bailey, a New York real estate magnate, teamed up to buy the casino in December 2010 for $31.5 million.
Resorts, which opened as Atlantic City’s first casino May 26, 1978, has struggled in recent years. Previous owner Colony Capital LLC, defaulted on the mortgage and let lenders take over the casino. Bailey and Gomes stepped in to buy the property from lenders at a fraction of the $140 million that Colony paid in 2001.
Despite its retheming, Resorts has continued to lose money. The casino 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, 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.
The Mohegan Sun deal will represent the second major development at Resorts in recent weeks. On July 24, Resorts announced a partnership with singer-songwriter Jimmy Buffett for one of his Margaritaville-branded casino and entertainment complexes at Resorts.
As Resorts’ new manager, Mohegan Sun will have to blend together the property’s Roaring ’20s and Margaritaville themes to capitalize on their strengths. Mohegan Sun’s flagship Connecticut casino has a Margaritaville restaurant, so the company is already familiar with the Buffett brand.
Following the Buffett announcement last month, Resorts executive Aaron Gomes acknowledged that discussions had taken place for a possible new management agreement at Resorts. However, at that time he did not disclose that it was with Mohegan Sun.
“We get offers and talk to people. There’s constantly something going on, but that’s like any business,” said Gomes, who served as Resorts’ second-in-command under his late father and is currently executive vice president of operations.
The management deal will be scrutinized by New Jersey casino regulators. Mohegan Sun likely will have to go through the state’s casino licensing process, which includes an extensive investigation of its executives and finances.
Mohegan Sun is expected to explain whether Gomes and other senior members of the Resorts executive team will stay under the new management structure. Another key question is whether Mohegan’s involvement will go beyond the management deal, including the possibility that the casino will be rebranded into a Mohegan Sun.
Michael Pollock , a casino analyst and managing director of Spectrum Gaming Group, said the expected link-up between Resorts and Mohegan Sun reflects a growing trend in the casino industry for companies to combine their brands.
“In part, companies and operators are learning how to leverage their experience, their brands and their databases, among other assets, to capture new markets,” Pollock said. “You’re going to see a lot more cross-pollination in this industry.”
Mohegan Sun’s gigantic Connecticut casino has been a success by any measure. Mohegan Sun and the Indian-owned Foxwoods Resort Casino in neighboring Ledyard, Conn., have created some of the most powerful casinos in the country. Both, though, have felt the pressure of the sluggish economy and competition from casinos in surrounding states.
Mohegan Tribal Gaming Authority reported last week that its profit plunged more than two-thirds in the third quarter, largely a result of tighter consumer spending and tougher competition from casinos in New York and Atlantic City. Mitchell Etess , CEO of Mohegan Sun, told analysts during a conference call that the newly opened $2.4 billion Revel megaresort in Atlantic City cut a little into Mohegan Sun’s Connecticut business.
Staff Writer Jennifer Bogdan contributed to this report.
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