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Mohegan Tribe Handing Over Vegas Casino Ops Back to Virgin
By Jeff Osienya May 07, 2024 IndustryAfter nearly three years of making history in Las Vegas, the Mohegan Tribe is bowing out of the operations of the famed Virgin Hotels. The tribal nation could not generate enough profit with the venture and will thus give control back to Virgin.In a joint news release with Virgin Las Vegas, Mohegan Gaming & Entertainment announced that it will be relinquishing its management rights at Virgin Hotels Las Vegas. Following a transitional handover period, Virgin will take over the reins, subject to regulatory approval. After getting the green light from regulators, the tribe (Mohegan) will cease to manage or lease the casino.
While this announcement has sent some shockwaves in the industry dynamics considering the sheer size of the Virgin Hotel Las Vegas establishment, there is no concrete information on how long the transition period would be. Additionally, there’s no indication of any financial implications this decision may have.
A statement released by the president of the property, Cliff Atkinson, read in part:
Quote“We are grateful for the collaboration with Mohegan, and we will continue to work together to ensure a well-ordered transition of casino operations. The transition is a natural progression in our journey to provide guests of Virgin Hotels Las Vegas with a seamless resort experience.”
Given that the establishment currently utilizes Mohegan’s loyalty program for its patrons, the transition also means the casino will switch to Virgin’s reward system. Launched in 2021, the 1,504-room property that covers 60,000 square feet made history as the first commercial casino in Las Vegas to be managed by an Indian tribe.
Tough Times for Virgin Las Vegas Hotels
While Mohegan has operated the casino since launch, its time managing the establishment has been a murky one, to say the least. In the roughly 5 years Mohegan has run the show, it has struggled to establish a regular customer base, which has seen the gaming house struggle immensely with numbers. This can be attributed to the fact that it isn’t part of the Vegas Strip, though it is close to it. So, owing to the unfavorable location, many Sin City don’t view it as a Vegas Strip gaming house, making it an atypical tourist destination.
In December last year, Mohegan reported a slide in the cash flow of Virgin Las Vegas, a massive dip for that matter of a stunning 434.2% from the previous year. The colossal downturn was pegged on decreasing gaming revenue, the most significant being reduced table-game hold compared to what is typically experienced.
Another reason for the facility’s woes is the sheer number of companies that managed different facets of its operations, which is an unprecedented method of running a Las Vegas casino establishment. For example, Mohegan currently handles management duties, the gaming and leisure facet of Connecticut Mohegan Tribe, and AEG Live runs its theater. Meanwhile, the hotel section of the establishment is part of the Hilton Curio Collection, and its sportsbook is under the reins of Betfred. Could it have been the case of too many cooks spoiling the broth? Well, Mohegan’s departure seems to indicate that this may be the case.
Certainly, the removal of Mohegan from the picture will likely smoothen out some of the rough edges. Nonetheless, the establishment will still need to decisively eliminate the discussed stumbling blocks and any others to allow it to work as a harmonized unit. In the meantime, the statement released to announce Mohegan’s departure from its operational duties indicates that all parties are committed to ensuring a smooth transitional process. The official press release noted:
Quote“With both Virgin Hotels Las Vegas and Mohegan committed to a smooth handover, the transition period is planned to be completed by the current year-end with no significant disruptions anticipated for resort guests and team members.”
Ray Pineault, the president and CEO of Mohegan, briefed the media on his entity’s impending departure from Virgin, saying:
Quote“Mohegan’s partnership with Virgin Hotels Las Vegas was, upon inception, and is today, in the very best interest of the guests and hardworking team members whose patronage and contributions to the business are deeply appreciated. While Mohegan’s role will come to an end, we are confident that the resort’s unwavering focus on guest and team member satisfaction will continue.”
Those privy to the operations at Virgin Hotels Las Vegas speak of a tenuous time at the helm for Mohegan. The entity’s lack of marketing experience has particularly shown in its struggle to attract numbers to the casino. This, coupled with its impetuous entry into the Vegas market, are some of the reasons this union was bound to fail from its inception.
These operational headaches reverberated throughout the casino from the employees to the customers. Thus, Mohegan’s exit represents a chance for President Atkinson to steer the ship to a more familiar and prosperous path.
Trouble in Paradise for Mohegan?
The Mohegan Tribal Gaming Authority (MTGA) has been operating seamlessly with a seemingly smooth structure. That said, in January last year, the tribal gaming giant raised some eyebrows when it announced its departure from the Securities and Exchange Commission (SEC). This move caught many market observers by surprise since the tribal gaming giant didn’t specify a reason for its withdrawal from SEC filing. Upon further introspection, market observers didn’t tie the withdrawal down to a specific reason since the casino operator was still functioning in line with SEC guidelines.
In the debt segment of the operations of the MTGA, industry observers have consistently rated the agency as a stable entity suitable for bondholders. Even then, the organization’s checkered history with servicing its debt has previously been a cause for concern. However, it is worth pointing out that many tribal gaming organizations have struggled in this facet of operations. MTGA’s most famous failure to service its loan obligations came in 2011 when the casino operator tried and failed to refinance more than $800 million. In 2020, amid the pandemic, MTGA also defaulted on a $19.7 million interest payment, just like other gaming entities in the industry.
So, while the operator’s reasons for exiting the SEC filing scene might not be known, it may be due to various reasons. SEC filings are known to be particularly expensive, so that may be a reason for the exit, as the entity may have wanted to save on costs. With that in mind, it’s all speculation talk at this point as we try to make sense of Mohegan’s exit from the SEC and, more recently, from running things at Virgin.
Mohegan is currently in charge of eight casino properties around the world. These include the entity’s critical project, Mohegan Sun, in Uncasville, Connecticut. It also has other properties spread out in Pennsylvania, Washington, Ridgefield, Atlantic City, and Wilkes-Barre. Outside of the boundaries of the U.S., Mohegan also owns properties in Ontario, Niagara Falls, and, finally, the popular Mohegan Incheon located in South Korea.
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