Sunday, May 29, 2011

Mohegan Sun CEO Hartmann Discusses Casino's Future

Feather News

This installment of The Tribe In The Media includes two articles from the Hartford Business Journal Online in which Mohegan Sun CEO Jeff Hartmann elaborates on the Mohegan Gaming Authority's strategic plan.

Glitz will top convenience, Mohegan Sun CEO says
By Brad Kane
Hartford Business Journal Online
May 30, 2011

As far as CEO Jeffrey Hartmann is concerned, Mohegan Sun is the preeminent gaming property in the Northeast. Period.

Even though more gambling establishments are opening in key markets across the Northeast, the beauty and splendor of Mohegan Sun will keep those crowds driving past more convenient locations to the more awesome destination, said Hartmann, who took over as resort president and CEO on Jan. 1.

“Mohegan is special,” Hartmann said. “The beauty of the facility is unsurpassed. It would easily compete with any property in the Las Vegas.”
To drive the point home, Mohegan Sun launched its new Shine advertising campaign on May 15 to keep more customers coming.

Still, the goal of the Mohegan Sun casino isn’t increased revenues, Hartmann said. The goal is the long-term viability of the Mohegan tribe and the Mohegan Tribal Gaming Authority, known as MTGA.

If that means Mohegan Sun loses its position as Northeast market leader — a title held since 2004 — in favor of streamlined operations and increased profits, then so be it.

If that mean Mohegan Sun takes on a smaller role in a larger MTGA gaming network across the Northeast, then so be it.

“We feel very good where we are in terms of how the business operates,” Hartmann said.

Hartmann is one half of a major shake-up this year in Connecticut’s casino leadership. Both he and Foxwoods President and CEO Scott Butera took over their roles on Jan. 1, at a time when the state’s resort casinos are reaching a critical juncture.

Slot machine revenue at Foxwoods and Mohegan dropped by 20 percent over the past five years. As revenue decreased, the cost of borrowing for new projects increased. And New York and Massachusetts — the main out-of-state draws for Connecticut’s casinos — are moving toward expanded gambling.

Unlike Butera who took over the top job at a casino that had six chief executives in four years, Hartmann inherits the legacy of a long-time CEO who maintains a strong presence at Mohegan Sun.

Hartmann’s predecessor was Mitchell Grossinger Etess, who started as an executive of Mohegan Sun in 1996, before the casino even opened. In 2004, Grossinger Etess took over as CEO of the Connecticut casino, and in 2006 also became CEO of the organization that runs the casino, the Mohegan Tribal Gaming Authority, or MTGA.

In ceding control of Mohegan Sun to Hartmann on Jan. 1, Grossinger Etess maintained his position with MTGA, working to open other casinos across the Northeast and expand the brand to benefit the tribe.

The conflict inherent in Hartmann’s new role is he must maintain strong visitor counts and profits at the Connecticut property while MTGA expands its brand across the Northeast and draws directly from Mohegan Sun’s customer base.

In 2006, MTGA opened Mohegan Sun at Pocono Downs in Pennsylvania, which draws slightly from the Connecticut property. By 2013, MTGA will open a third casino in the New York Catskills region, nibbling away an estimated 1-2 percent of the Connecticut property’s clients.

The kicker will come if Massachusetts approves expanded gambling. MTGA is considered the front runner for a Western Massachusetts resort casino license, and the tribe already has property on the Massachusetts Turnpike in Palmer near the I-84 interchange.

A Palmer casino would significantly erode the Connecticut property’s client base, since 20 percent of its customers come from Massachusetts.

Losing customers to a MTGA casino in Massachusetts is much better than losing customers if another casino operator gets the license, Hartmann said.

With the economic recession and states looking to pad their budget revenues through any means necessary, it is a classic political environment to open more casinos, Hartmann said. MTGA shouldn’t waste the opportunity.

Mohegan Sun will remain the premier casino in the Northeast, and the Connecticut casino will be the central property in a hub-and-spoke system for MTGA, said Hartmann.

Thanks to the diminished economy and increased competition, Mohegan Sun’s revenues are shrinking. The Uncasville property is tracking to make $720 million in slot revenues for this fiscal year ending in June, its lowest since 2002. Meanwhile, Foxwoods is gaining market share, although Mohegan maintains its advantage 52 to 48 percent.

But slot revenues and market share aren’t what matters. Profits are, Hartmann said.

The Connecticut resort streamlined its operations — laying off 300 workers last September — and saw its net income rise in the first quarter of 2011 by 193 percent over the first quarter 2010.

“We had our best April in terms of profitability since April 2007,” Hartmann said.

But Mohegan Sun faces threats from many non-MTGA casinos, especially in New York. Mohegan Sun gets 15 percent of its customers from New York, more than any other New England gambling establishment.

Mohegan Sun already took a hit in convenience gaming when Empire City Casino opened at Yonkers Raceway, and faces another challenge when the Resorts World Casino opens this summer at the Aqueduct race track in New York.

“Retaining those customers is a challenge we are working on,” Hartmann said.

To keep those customers driving past convenient locations in favor of the more splendid regional destination, Mohegan Sun will invest more in the property, Hartmann said.

Mohegan Sun will start work on a new hotel in 2011, bring in high-quality entertainment, open new amenities such as the Italian restaurant BALLO, and complete a $10-million retrofit of the property’s 800-seat buffet.

To stay prominent in customers’ minds, the casino hired a new advertising agency — People, Ideas & Culture from New York City. On May 15, during the Boston Red Sox-New York Yankees baseball game, the casino launched its new Shine advertising campaign.

The old Mohegan Sun advertising campaign was antiquated, unexciting and geared for the wrong audience, Hartmann said. The Shine campaign tries to be younger and more energetic. It folds in online, interactive elements to make the property stand out and showcase its variety of amenities.

Hartmann wants the Shine theme to permeate the property beyond the advertising, so blackjack dealers, hotel personnel, restaurant servers and all employees know how to interact with the property’s customers. The product Mohegan Sun offers to patrons must be constantly refreshed.

New energy will be important as Mohegan Sun markets itself as a big-time destination, so people will drive past closer resorts to come to Connecticut.“It’s really about our time to shine, about how we are more than just slot machines,” Hartmann said.


Mohegans to build another CT hotel
By Brad Kane
Hartford Business Journal Online
May 30, 2011

The Mohegan Sun resort casino in Uncasville will start work on a 300-500-room Connecticut hotel by the end of this year, according to President and CEO Jeffrey Hartmann.

Hartmann said the resort’s 1,200-room hotel operates at 97 percent occupancy and the property needs another hotel to accommodate guests. A third-party developer will construct and own the facility, unlike the existing hotel which is owned and operated by the Mohegan Tribal Gaming Authority.

Casino spokeswoman Cathy Soper said the official size of new hotel and the timeline of its construction are dependent on the third-party developer. The Mohegans haven’t signed a deal with any developer yet, Soper said.

In 2007, the Mohegans started significant Connecticut expansion work — called Project Horizon — that included a 1,000-room hotel, a new casino and other amenities. When the recession sent gaming revenues plunging, the Mohegans suspended the project before any significant construction had begun. In 2010, the tribe had a $58.1-million impairment charge on the halted work.

Foxwoods resort in Uncasville — Mohegan Sun’s rival in Connecticut — completed its major property expansion just as the recession hit, a project that left the casino with close to $2 billion in debt.

But with the expansion, Foxwoods also has 2,100 rooms spread out over four hotels. Occupancy over the Foxwoods’ hotels runs in the high 90, said Foxwoods President Scott Butera.

Foxwoods is continuing with improvements to its various hotels, but the resort does not plan an expansion like Mohegan Sun is, Butera said.

The new Mohegan Sun hotel will not carry the Project Horizon name, as that project is dead, Hartmann said. The new hotel will be a fresh start.

The new 300-500-room hotel helps Mohegan Sun fill demand, especially when the property features major entertainment. Hartmann said when the rock band Bon Jovi held a concert in early May, the Mohegan hotel was sold out at $500 per room night.

More hotel rooms also help the Connecticut property book more meetings and conventions, Hartmann said. More hotel rooms equal bigger conventions.

The Mohegan Tribal Gaming Authority is in the midst of a significant brand expansion across the Northeast. Its Pennsylvania casino and racetrack — Pocono Downs — added table games in 2010. In early May, the authority announced a new casino property in the Catskills region of New York. The tribe also has plans for a Western Massachusetts casino in Palmer, if that state legalizes casino gambling.


Note: Last week, MTGA CEO Mitchell Etess told the Mid-Hudson News that he expects to break ground in New York by early July to build a racetrack-slot parlor. MTGA recently announced the new venture with the Catskill's Concord Hotel property owner, Louis Cappelli. Plans include a harness racetrack, a 258-room hotel, and 2,100 VLT slot machines. Etess said he fully expects to secure state approval in a matter of weeks. We presume that Etess did not mean horse weeks. See article at: http://www.midhudsonnews.com/News/2011/May/26/MoheganSun_plans-26May11.html

Monday, May 16, 2011

Mohegan Sun Slot Revenue Falls 3.3% In April, Foxwoods Slot Revenue Increases 9.3%

Feather News
Updated 3

Mohegan Sun reported today that its slot machine win for the month of April fell by 3.3 percent to $61.6 million while Foxwoods reported $57.1 million in April slot win, an increase of 9.3 percent compared to last April.

Foxwoods gave out $8.1 million in free slot play in April to attract customers while Mohegan Sun gave out $5.1 million in free play to its slot machine patrons.

The state of Connecticut's cut of the the tribal April slot win, which is the amount lost by customers at the machines, is about $31 million.

A major credit rating agency downgraded Mohegan Tribal Gaming Authority debt last week because the authority, in part, has yet to refinance $925 million in debt that comes due next year. A lower credit rating translates into higher interest rates the authority will pay on future borrowings. MTGA currently pays $120 million in annual interest expense on its approximately $1.6 billion debt load.

"The Authority does not have sufficient funds to repay its outstanding indebtedness and its ability to otherwise refinance or replace its outstanding indebtedness is limited," according to today's MTGA quarterly report (10Q) to the Securities and Exchange Commission (SEC).

Today's SEC report covers the first three months of 2011, which is the second quarter of MTGA's fiscal year. The report includes the quarterly earnings figures announced on May 5 in addition to the authority's balance sheet and statement of cash flows. MTGA reported a respectable $25 million in profits for the first three months of 2011, up from about $20 million for the same three months in the prior year. The casino's operating expenses were lower across every reportable category.

MTGA distributions to the the tribal government, as opposed to any reimbursement payments or fees, are not deducted from the casino's reported profits.

Today on the Mashantucket Pequot Reservation, drink servers and bar porters at Foxwoods are voting under tribal law on whether they want to be represented by United Food and Commercial Workers Local 371. Last year, the same class of employees voted 190-145 in favor of the union under an election held pursuant to federal law. The results of that election are under appeal and have delayed management's bargaining with the union. Today's election is being held under tribal law and, if the employees once again choose union representation, is expected to facilitate the bargaining process.

Some employees at Foxwoods, including table game dealers, have already opted for union representation. No employees are represented by unions at Mohegan Sun.


Note:
1. SEC report at:
http://www.sec.gov/Archives/edgar/data/1005276/000119312511140966/d10q.htm

2. Moody's downgraded the MTGA corporate family debt rating and probability of default rating from Caa2 to Caa3, a designation that means there is a substantial risk of default, and downgraded all MTGA long-term debt ratings to a "negative" outlook. Standard & Poor's Ratings Services, another major credit rating agency, continues to keep MTGA on its CreditWatch list. S&P cited, among other reasons, limited clarity around MTGA's refinancing plans."


3. Beverage workers at Foxwoods voted to unionize under tribal law by a 133-90 margin on the same day this article was written.

Thursday, May 5, 2011

Mohegan Tribe Announces Venture In NY's Catskill Mountains

Feather News

The CEO of the Mohegan Tribal Gaming Authority, Mitchell Etess, announced today that the Tribe will work with the Concord Resort in the Catskill Mountains of New York to rebuild the hotel and develop the property into a $600 million racetrack-slot parlor within two years.

Etess said that the deal is the first venture of a new company called Mohegan Gaming Advisors. The owner of the Concord, Louis Cappelli, is a well-known real estate developer in New York and in Western Connecticut.

Cappelli announced his intentions to turn the Concord property into a gambling resort years ago but financing for the project's completion was not secured. Over $100 million was said to have already been spent in remediation and site preparation of the property's stalled development. Today's announcement did not shed much light on who will finance the poject.

The first phase of the project is slated to open in the Spring of 2010 and will include 2,100 VLT slot machines, room for 450 electronic table games (or presumably actual table games if ever legalized in New York), a harness horse racing track, a 258-room hotel, restaurants and meeting spaces. The 116-acre property is in Thompson, N.Y.

Etess' family once owned and operated a hotel in the Catskills that competed with the Concord hotel.

Mohegan Gaming Authority Reports $25.2 Million In 2nd Quarter Net Income

Feather News

The Mohegan Tribal Gaming Authority reported net income, or profit, of $25.2 million for the three-month period ended March 31st. The net income reflects a 26 percent increase over the same three-month period last year.

MTGA's profit increased while reporting lower revenues at the Mohegan Sun casino on the reservation and higher revenues at the Tribe's Pennsylvania casino. The press release states that the increase in net income is primarily attributable to decreased expenses.

The Tribe also announced today that it entered into an agreement with the Concord hotel in New York's Catskill Mountains. The "Mohegan Sun Concord" is slated to open in 2013. According to The Day, Etess said the Mohegan Tribe would be a small, minority equity partner in the $600 million project.