Mark Etess of Mohegan Sun

A new management agreement will combine the operations of Resorts Casino Hotel in Atlantic City with the Mohegan Sun casino resort in Connecticut and the Mohegan Sun at Pocono Downs racetrack casino in Pennsylvania. Mitchell Etess, CEO of the Mohegan Tribal Gaming Authority, discusses the deal and the new Margaritaville-themed expansion project at Resorts.

Q: Mohegan Sun is taking over the management of Resorts Casino Hotel. Specifically, what will Mohegan do to revive Atlantic City’s oldest casino?

A: The main focus of Mohegan Sun and Mohegan Gaming Advisors when it comes to Resorts is to implement our operating philosophy in terms of how we deal with our employees and how we deal with our customers and our marketing strategies and our marketing systems. Of course, the biggest aspect of us having an impact is the cross-marketing opportunities between our now three properties of Mohegan Sun Pocono Downs, Mohegan Sun Connecticut and Resorts.

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Q: From a management standpoint, what will you do to help revitalize Resorts?

A: Well, you have to go in and take a look at everything that is going on and evaluate where the weaknesses and the strengths are and adjust them accordingly to the way we like to do things and that we know creates loyalty to the patrons. We need to get people focused on the details of making sure they are checking the bathrooms to make sure they are clean and to make sure that maintenance is being taken care of.

There has been a tremendous amount of work done at Resorts, physically. It’s funny: Everybody who goes there says, “It is much nicer than I thought it would be,” because there has been a tremendous amount of work done on it. When you add the Margaritaville onto it, you’re dealing with a very new facility in many ways.

So it is a matter of changing the culture of what is acceptable from our standpoint and what is not acceptable and doing that very nicely and very comfortably and letting people know, “Hey, this is what we expect here, because when we expect it, that is what our customers are going to expect and that is what is going to make them come back.”

When you talk about a Mohegan property, you have an understanding of a certain amount of friendliness, a certain amount of attention to detail and a certain amount of guest interaction with the employees that has made us successful. We believe we can get that integrated into the culture of Resorts and change that focus and make it a little more customer-detailed that will be successful.

Q: You just mentioned the importance of the relationship between the employees and customers at Resorts. Under the new management deal, will Mohegan Sun make many changes with the employees, whether it’s with the staffing level, the organizational functions or anything else that is important in that respect?

A: We are going to look at every single thing. We have no preconceived notions of anything. We are going to go in and take a good look at everything and make the best decisions that we can make to do the best for the property.

Q: How did the management deal come together with Resorts owner Morris Bailey?

A: Originally, we started speaking about a potential marketing alliance only and how we might be able to help each other with some marketing. When we had our initial meeting, we looked at (Resorts) when we came down to Atlantic City. We looked at a few different properties that day. It was a pretty good meeting, and we felt like there were some good relationships. We had some ideas, and we then followed up with Mr. Bailey and his family a few days later in New York.

It just felt like there was a great chemistry and a great opportunity for us to work together. There is more to business than just the deals and the documents and the numbers. There’s having some feeling that this is a real partner.

Q: Mohegan will not only be Resorts’ new operator, it will also be an investor in the casino and part-owner. How large will the ownership stake be, and how much money will Mohegan kick in?

A: Well, we made the decision not to disclose that. It’s enough for us to have invested in the property and be more than just going along for the ride. We felt it was important in this case to have that investment in Resorts and show our commitment to it based on the situation and what Mr. Bailey is interested in doing. We think it was important for us. It is good for the tribe to have an investment of this kind in this particular asset. It was important from that regard, but we are not going to get into all of the specific numbers.

Q: Mohegan has played with the idea of entering the Atlantic City market for some time. Most people thought Mohegan would either build a new casino or buy an existing one outright. Why would Mohegan choose this route for having a presence in Atlantic City?

A: When we started meeting and talking to Mr. Bailey and heard of the Margaritaville and saw what had already been done to Resorts, we really felt this was the really great way for us to enter the market. (It is) based on not having to build something from scratch, which is something that we are not interested in doing right now anyway.

At this point, really, when we looked at all the opportunities there, it felt right and we wanted to get into the market. It was a good opportunity for us.

Q: Some have speculated the management deal is simply a prelude to a sale. Could the deal eventually pave the way for Mohegan to buy Resorts?

A: I think Mr. Bailey made it clear that is not the intention. He is in this for the long haul. I believe there is no plan for us to buy Resorts from Mr. Bailey at any given time. That is not what this is about, and that is not our intention.

Q: Does Mohegan have its eyes on any other Atlantic City casinos?

A: No, not right now. Honestly, we are involved in Resorts. We are focused on Resorts. We are dedicating our resources to Resorts. We are doing a lot of research and organizational activities based on that. We feel it is a great opportunity for us to improve Resorts and help the property. That is our sole relationship right now.

Q: Much has been made that Mohegan Sun will be the first Indian-owned casino operator to come to Atlantic City. How will that change the Atlantic City market?

A: I don’t think the fact that we are an Indian-owned casino has an impact on the Atlantic City market. I think the fact that we are an Indian-owned casino company is very interesting and has an impact on our industry.

I think the fact that we have been able to establish ourselves as a commercial operator — we already have a casino in Pennsylvania outside the reservation — and now we are venturing out into managing a commercial casino is kind of flipping the tables, where historically the tribes were reaching out to commercial operators to help them, says a lot for the development of Indian gaming over the years.

It really says a lot for the development the Mohegan tribe has been able to do through the Mohegan Tribal Gaming Authority and their investment in Pennsylvania and having the foresight to set up Mohegan Gaming Advisors and proceed with these contracts.

So I think from an Indian gaming standpoint, that is what is important. It’s showing how our business model has expanded and how the industry has kind of switched. I think our entering Atlantic City is significant, but not because we are an Indian casino. I think our entry into Atlantic City is significant because we are a major player. We operate two of the most significant casinos in the Northeast. It creates this triangle of marketing, this regional development, and it is extremely powerful, I think, from a marketing standpoint. And I think it also says that a respected operator like ourselves — and we are a respected operator — is going to Atlantic City at this time is also significant.

Q: Mohegan is jumping into an Atlantic City market that has seen gambling revenue plunge for five-plus years. It will also manage a casino that has been losing money — nearly $14 million in 2011 alone. Isn’t the timing bad for Mohegan?

A: We don’t think so. We think the time is the right time for us to be there. We think we can have a very positive impact on the bottom line of Resorts or we would not be going in there and doing it. This is a very important contract for us because this is the first significant commercial management contract. We have a big management contract with a tribe out in Washington state that is waiting for approval from the federal government. But we believe it is important for us to succeed in this and we would not be entering into it if we didn’t think we could turn things around.

Q: Could you explain in simple terms that the customer will appreciate how Resorts will effectively combine with the Mohegan Sun casinos in Connecticut and Pennsylvania though the cross-marketing deal?

A: At Mohegan Sun Connecticut and Mohegan Sun Pocono Downs, our marketing system is based on points. You earn points as you play and you can use those points however you want to at Mohegan Sun. They are a form of tender around the property and at Pocono Downs as well.

If you have 20 points, that’s $20 for things you can go buy for yourself. You can buy yourself something at Tiffany’s. You can go buy yourself four hot dogs. You can buy your hotel rooms. Anything like that.

At Resorts, they also have comp dollars that are available for use at the facilities that can be converted to different things. Now, all of the comp dollars that are earned at the individual properties will be able to be redeemed at the other property. So if you are a person who goes to Atlantic City and you go to Resorts and you save up your comp dollars, you can then use them for a trip here to Connecticut for an overnight stay or go see a show in the arena or catch WNBA basketball if you want to or go use them at Tiffany’s if you want. Same thing with a Pocono Downs person.

Q: Next year, Jimmy Buffett will open one of his Margaritaville-themed restaurants at Resorts. Mohegan Sun in Connecticut already has a Margaritaville restaurant. Based on your experience with Margaritaville in Connecticut, what do you think the brand will do for Resorts?

A: Well, Margaritaville has been very successful here in Mohegan Sun. What we know is (that) it creates a tremendous amount of excitement and a tremendous amount of energy. But that is here in the middle of the countryside. I don’t think you can estimate at all how much power that Margaritaville on the Boardwalk and on the ocean is going to have for Resorts.

It is really going to redefine Resorts — what it means from an entertainment standpoint, the kind of people who are going to want to go there. I think it will mesh brilliantly with the existing clientele because it isn’t something that is overwhelming. Parrotheads (Buffett’s fans) are actually slightly older in demographic than you would think. They are acutely right within the demographic of the casino profile.

There is a lot of research on people who use Jimmy Buffett products and go to Margaritaville and go to Jimmy Buffett concerts. They have high disposable income. They are educated. They are exactly the kind of people you want to come in. ... Jimmy Buffett is a huge celebrity. People who believe in his stuff are extremely dedicated and loyal. It’s going to be a home run.

Q: Buffett’s project will represent a $35 million expansion at Resorts, so Margaritaville will have a major presence. As Resorts’ new manager, how will Mohegan Sun blend the new Margaritaville theme with Resorts’ existing Roaring ’20s theme?

A: I don’t think they are quite as disparate as people think they are. I think the Roaring ’20s theme is nice, but not overwhelming.

I think in some ways it represents the future of Atlantic City and the past of Atlantic City, and it is a great combination. But I think it will be a very smooth transition from the Boardwalk and the ocean Margaritaville into the traditional Resorts atmosphere.

I think it is going to make it very comfortable for the existing customers. If you turned the whole thing into Margaritaville, I think you would alienate the vast majority of your existing customers. I think the vast majority of the existing customers are going to be able to enjoy the Resorts that they know and the new customers are going to be able to enjoy the Margaritaville and the enthusiasm and the fun that takes place there.

If they want to transition into the traditional casino, they will be able to do that. So I think it will be a very clear demarcation, yet it will be a very smooth demarcation. I think the two things are going to mesh wonderfully.

Q: Mohegan Sun will now compete head-to-head with the new Revel megaresort in Atlantic City by virtue of its management agreement with Resorts. What are your impressions of Revel so far? Why do you think Revel is struggling in the early stages?

A: I think that it is obviously a new and dynamic property. I think any time you try to do something different, it is difficult to get the uptick. I think that some of the decisions they made, which may be extremely solid decisions for the long run, had led to some short-term, ramp-up issues. I think they will ultimately overcome those.

I think the most important thing about Revel is they are attempting to change the perception of Atlantic City from just the gambling. You know, “Get off the bus, gamble, get a roll of quarters and get back on the bus and go home.” They are showing that there are other things that you can do in Atlantic City.

They are not the first place to have celebrity-chef dining. That is something that has become a trend. But I think they have refocused Atlantic City — the offerings of Atlantic City — and they are making people think differently about what that is.

Q: Sports betting and Internet gambling are both proposed in Atlantic City, but not yet legal. How do you feel about both, and are they necessary for Atlantic City to thrive?

A: I think clearly if there was legalized sports betting in Atlantic City, you don’t make that much money on the actual (gambling) action. What it would do is create a lot of very busy weekends in Atlantic City when major events were taking place. The complexion of Super Bowl weekend would be completely different. The complexion of (NCAA) Final Four weekends would be completely different.

People seem very confident that it can happen. I am not really going to get into a debate about that. All I can tell you is, if there was legalized sports betting in Atlantic City or here in Connecticut, it would be very meaningful.

As far as Internet gaming, I think the question is, “What has Internet gaming become? Is it necessary for Atlantic City to succeed?” No. I think it is necessary for our industry to take advantage of revenue that has been earned illegally out of the country to revenue that now can be earned legally in America. It makes sense that companies are a part of that, and it would be great if Resorts is part of that as well.

Q: Do you have a timetable in mind when you think Internet gambling will become legal?

A: No one really knows. There are so many questions about Internet gaming. Will it be a state bill first? Will it be a federal bill first? Will the federal bill trump the state bill? I think the challenge with Internet gaming is that you need to be prepared as much as you can to take advantage of it as quickly as possible.

But it’s not like you really know what you need to prepare for, because your decisions may be different if you knew that it was going to be federal or if you knew it was going to be inside the state. So I wouldn’t be foolish enough to try to put a timeline on that. But I don’t really think it’s a question of whether it’s going to happen. I think it is going to happen. It is just a matter of how and when.

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