Hartford Business Journal

www.HartfordBusiness.com March16,2015•Hartford Business Journal 3 Mohegans seek more gaming markets By Brad Kane bkane@HartfordBusiness.com T he incoming president of the Mohegan Tribe's gaming division plans to expand into four or five new markets in the next five to 10 years, while significantly lowering the casino's debt, as competition in the Northeast gaming sector heats up in the years ahead. "Planning is important. We have antici- pated this additional competition for some time," said Robert Soper, who takes over as president of the Mohegan Tribal Gaming Authority (MTGA) on March 30. The next new market for the MTGA could break ground as early as next year. The Author- ity has partnered with the Cowlitz Indian Tribe of southwestern Washington to develop a casino just north of Portland, Ore., which the MTGA would operate. While the proposal has to clear one last legal appeal, the property could be under construction in 2016, Soper said. Soper takes the reins as MTGA president during a tough time for the authority. His predecessor, Mitchell Grossinger Etess, took over about a decade ago when the MTGA flagship Mohegan Sun resort in Uncasville still held a near duopoly over the Northeast market, along with nearby competitor the Mashantucket Pequot Tribe's Foxwoods Resort Casino. Soper, though, faces increas- ing competition from Massachusetts, New York, and Rhode Island casinos, and must find a way to ensure the long-term financial health of the MTGA, which is the primary funding source for the Mohegan Tribe. "The dollars they've lost at this point to places like Rhode Island and New York are not going to be recaptured," said Clyde Barrow, managing partner of gaming policy research firm Pyramid Associates. "These types of situations are the time you see leadership changes. You got to have new eyes on the situation." Pyramid estimates Mohegan Sun and Fox- woods have lost $600 million to new gaming competition over the past eight years and another $600 million because of the economic downturn. Their combined Northeast market share, which stood at 100 percent in the 1990s, has dipped to 10 percent. Market opportunities Soper said continuing to lower MTGA's debt will be important for its ability to invest in new markets and maximize profitability at its existing properties in Connecticut, Wilkes- Barre, Pa., and Atlantic City, N.J. The tribe's debt stood at $1.75 billion at the end of 2014. The tribe is now saving $50 million in annual payments after its 15-year separa- tion agreement with Mohegan Sun's original developer expired in January. "That opened up a lot of cash that we didn't have in previous years," Soper said. The MTGA would prefer to acquire its way into new markets, rather than lobby to open new casinos in politically charged environments, Soper said. The authority, for example, was successful entering Atlantic City in 2012 by partnering with the owners of the Resorts Hotel Casino in an operations agreement. Conversely, the tribe was unsuccessful in its multi-year efforts to build and own new casinos in Greater Boston, Palmer, Mass., and the Catskills region of New York that required the MTGA to lobby local and state officials, and gaming regulators. All types of deals, however, remain on the table, Soper said. "We are open-minded about all opportuni- ties as long as they are fiscally responsible," Soper said. "We are trying to allocate capital in a wise manner." While the MTGA is not generating as much revenue as it did 10 years ago, the authority has cut expenses to maximize profits, includ- ing reducing its workforce 28 percent. Its income from operations was $49.8 million in the first quarter, a 49.6 percent increase from a year earlier. More CT locations? Another new Mohegan location in Connect- icut is also a possibility. To offset the approval of three Massachusetts casinos and gaming expansions in New York and Rhode Island, the Connecticut legislature is working on a new law that would allow Mohegan Sun and Fox- woods to open up to three new locations along the I-91, I-95, and I-84 corridors that would be more convenient for Connecticut residents. "We have to get something into motion before we lose to outlying areas, so these jobs don't flee the state and go into surrounding states," said State Sen. Cathy Osten (D-Montville). These new strategic Connecticut loca- tions would offer slot and table games, mak- ing it more convenient for gamblers to stay in the state, Soper said. With MGM open- ing a resort in Springfield, Mass. in 2017, gamers in the Hartford market could get to Massachusetts faster than Mohegan Sun or Foxwoods, unless there are other options in Connecticut. "At the end of the day, no one is going to build another Mohegan Sun, but conve- nience is a leading factor when someone wants to play a slot machine or a table game," Soper said. Mohegan Sun is adding a 400-room hotel adjacent to its 1,200-room casino resort in order to get more visitors to spend the night. The new facility is expected to open in fall 2016. More rooms will help Mohegan Sun increase its revenues, said Barrow. Its current hotel has a 98 percent occupancy, so the resort is forced to turn away hotel guests. By keeping more of them on property, not only are guests paying for a hotel room, but they typically spend about $350 per day on food, entertainment, and gam- ing, which is more than triple what non-hotel Continued Robert Soper ran the Mohegan Sun Pocono resort in Pennsylvania before becoming president and CEO of the Mohegan Sun resort in 2012. On March 30, he will become president of the Mohegan Tribal Gaming Authority. 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