Mohegan's new CEO helping engineer domestic, global diversification

Photo & Renderings | Contributed Mario Kontomerkos recently took over as president and CEO of Mohegan Gaming & Entertainment after serving six years as CFO, and is helping diversify the tribe's domestic and global business interests.

(Above) A map outlining Mohegan’s Preston Riverwalk Project. (Below, left to right) Renderings of: Inspire resort in South Korea; convention center in Uncasville; East Windsor casino.

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By John Stearns

Mario Kontomerkos' engineering degree has come in handy since he took over as president and CEO of Mohegan Gaming & Entertainment (MGE) in October.

He has a lot of moving parts to manage as he helps to engineer a diversification strategy for the Mohegan Tribe's business enterprise that spans from Uncasville and neighboring Preston to East Windsor, Pennsylvania, Atlantic City, Washington state and South Korea.

The Trumbull High School and Cornell University graduate, though, portrays the calm and calculus to make it all happen as he juggles a full plate of big-ticket projects for MGE, which reported almost $1.5 billion in gross revenues in fiscal 2017.

While the planned $300 million casino in East Windsor, a joint venture with the Mashantucket Pequot Tribe, operator of Foxwoods Resort Casino, gets most headlines these days, Mohegan Sun is preparing to open a large, $80 million expo center in June.

Longer term, it's planning a significant non-gaming project across the Thames River from Mohegan Sun in Preston, adding a new complexion to the sprawling tribal enterprise and further broadening its business base.

“We're so much more than gaming — we're entertainment, we're retail, we're restaurants,” said Kontomerkos, who previously was MGE's CFO for six years. “It's a very strong position that we're in. I think if gaming goes down, I think non-gaming will just go up. … We'll make it up in other ways and we'll drive more people to the property.”

Moody's Investors Service, in a report on Mohegan's debt last fall, noted Connecticut's gaming market is highly vulnerable to further competition and long-term challenges to the U.S. gaming industry. But Moody's gave MGE a stable outlook, based in part on the 2016 opening of Mohegan Sun's 400-room Earth Hotel — giving the resort about 1,600 total rooms — and its diversification toward non-gaming amenities.

While MGE has substantial debt of about $1.7 billion, its balance sheet strength has reached a level not reached in about 10 years, Kontomerkos said on an earnings call last month. Moody's also noted an improved debt-to-earnings ratio.

Kevin Brown “Red Eagle,” chairman of the Mohegan Tribe and MGE management board, said Kontomerkos has the attributes to guide MGE through its myriad projects while also displaying the ability to have a vision for the organization and where it's going.

“The great thing about Mario is that he's a steady hand,” Brown said, adding that people can portray themselves as visionaries or efficiency experts, but Kontomerkos brings a blend across the spectrum and with a measured approach. “I can't think of a better person to lead the way.”

Kontomerkos also has “incredible teammates” to support him at the corporate and property levels, Brown added, noting MGE has “thickened” its corporate organization to meet MGE's many demands across North America and the world.

“We aren't just the Mohegan Sun Casino in Uncasville, Connecticut anymore,” Brown said, calling MGE's growth exciting and necessary.

Kontomerkos took time out recently to share some thoughts on where he sees MGE headed.

Disney on the Thames?

The tribe is acquiring about 400 acres in Preston, site of the former Norwich State Hospital, to develop non-gaming attractions to complement Mohegan Sun. The tribe expects to get the property in a year or two, after the brownfield site is cleaned up.

The goals of the property: attract a younger customer who currently doesn't visit Mohegan Sun and draw visitors from outside Mohegan's core market.

“We know that the growth will come in areas where we're not currently in today,” Kontomerkos said. “We need to be able to expand into different revenue streams and that's why we're doing it.”

Kontomerkos did not provide specific ideas for the property, but the tribe has said plans for the so-called Preston Riverwalk Project include outdoor and indoor attractions, hotel and retail space, restaurants, housing, a marina and RV Park.

Asked if it could include a Disney-like theme park, Kontomerkos said attractions need to bring in millions of people and integrate with Mohegan Sun, which attracts more than 9 million visitors annually.

“You've got this beautiful river that separates the two sides and if there were easy ways to integrate and connect the two sides, I think that's sort of our vision,” he said. “I don't think you're too far off when you say Disney-like,” he added, noting a theme park could be among options.

South Korea

Mohegan is partnering on a massive casino-entertainment resort on which Kontomerkos hopes to see ground broken this year, with the $1.6 billion first phase opening about 2021. With additional phases over 20 years, the Inspire project totals about $5 billion.

The site, adjacent to Incheon International Airport outside Seoul, is fantastic, Kontomerkos said.

“Imagine having a plot of land that's approximately the size of Central Park next to JFK with that type of inbound visitation in a city with similar demographics to New York City, because that's essentially what Seoul is,” he said.

“I think it could be a transformational opportunity for this company.”

South Korea is underpenetrated in gambling and entertainment and presents decades of development opportunity for MGE, he said.

“That said, Connecticut will be our flagship for as long as we're around,” Kontomerkos said. “Connecticut is really the blueprint for a lot of the development that we're looking to do overseas.”

Mohegan Sun's integrated entertainment-resort model, which includes a 10,000-seat arena vital to driving business to the Uncasville property, has proved successful, Kontomerkos said.

“We're sort of two major global hubs in two of the most attractive markets in the world that we are going to be focusing on developing further for the foreseeable future,” Kontomerkos said of the Korean and Connecticut properties.

Mohegan Sun

Aside from Preston, Mohegan Sun is further diversifying with the opening of a roughly 125,000-square-foot expo center connected to the hotel-casino and Winter parking garage.

The expansion, which also includes 32,000 square feet of additional meeting and ballroom space and 88,000 square feet of general and entertainment space, will allow MGE to attract larger conventions and trade shows, bolstering midweek meetings and convention business. Mohegan Sun says the expansion will give it more than 275,000 square feet of total function space.

Kontomerkos expects the expo center to open in June for the huge Barrett-Jackson collector car auction.

More conventions will improve midweek hotel occupancy and yield for rooms already exceeding 95 percent capacity year-round, he said. It's too soon to say whether more rooms will be needed to satisfy the additional convention business.

Asked if the convention growth threatened to take business from Hartford, which some say it will, he said MGE has talked with several state authorities and some view it “as a big positive because what we want to do is create more mass to the state in terms of convention business,” similar to Las Vegas with casinos.

He expects the area where the expo center connects to the resort will spawn new development along a corridor to the casino, possibly new retail shops.

East Windsor

The former Showcase Cinemas site is being cleared for the $300 million project, which Kontomerkos believes will happen, despite a legislative proposal to allow other casino bids — opening the door for MGM's proposed Bridgeport casino — while allowing East Windsor to advance. The latter, though, still lacks formal federal approval, which the tribes have sued to get. It aims to stem projected revenue and job losses from the planned opening of the $960 million MGM Springfield hotel casino later this year.

“There's a lot of noise out in the marketplace to try to confuse people that the project's not moving forward, so the questions are completely understandable, but that's not the case, the project's moving forward,” he said, declining to provide a target opening date.

Mohegan is doing everything it can to keep revenue and jobs in Connecticut, which could include incentivizing some employees to remain, he said. Asked if MGM was seeking to hire away Mohegan's experienced employees, he said, “There's always that factor when there's a competitive opening.”

Kontomerkos also believes sports betting should be exclusive to the tribes if the U.S. Supreme Court this session allows the betting nationwide.

“The state and the tribes have a very, very long exclusive partnership on almost all forms of gaming and we would think that falls into the same category,” he said.

In exchange for exclusive gaming rights in Connecticut, Mohegan Sun and Foxwoods pay the state 25 percent of their annual slots revenues.

Kontomerkos envisions the tribes operating sports books similar to those seen in Nevada.

Working with a rival

The East Windsor joint venture with Foxwoods' operator has been a “wonderful partnership,” Kontomerkos said when asked how the competitors will work together running the casino.

Kontomerkos credited the tribes with carefully planning ahead, including a five-person managing board with an independent director to break ties among the two directors from each tribe.

“I don't think there's been any situation to this point where a tie's needed to be broken,” Kontomerkos said.

Many operational decisions remain under discussion, but guests will be able to earn points in East Windsor and use them at either property, including possibly trading points, he said.

Sidebar: Kontomerkos' mind for numbers