Aug. 21, 2003 - MOHEGAN, Conn. -- A year after the Mohegan Indians opened their 1,176-room hotel tower, the average daily rate and occupancy rate are lower than casino executives had expected.

The average daily rate at the hotel has fallen from about $174 to $146 over the past year, and the occupancy rate is about 79 percent, rather than the anticipated 85 percent. Terrorism, the soft economy and SARS are partially to blame, and industry analysts say it often takes time for new hotels to "ramp up." As a result, some local customers have received fliers advertising room rates as low as $79 a night.

Executives say they are filling the rooms with casino patrons who pay less to stay overnight than other guests but make up for it on the gaming floor.

"Since we're not as successful with group business, we've been redirecting, using our (players' club) database to market to the hotel," said Mitchell Etess, executive vice president of marketing. Players can be counted on to spend an average of $300 per room on the gaming floor, he said. Executives think the players probably spend even more on food and beverage and shopping, and the casino is looking at a system to track the "gross revenue per occupied room."

"We will be getting a 'smart card,' where everything they do can be tracked," said Jon Arnesen, senior vice president of hotel operations. Only a few casino hotels track those figures, but Arnesen thinks they will some day be an industry standard.

Hotel operators adjust their room rates based on demand, and in the casino industry they assess daily how many rooms will be "comped" to customers, and how many will be available to the public. Mohegan Sun always makes 300 to 400 rooms available for the public, according to Arnesen.

The hotel has 175 luxury suites, and the casino is still working to entice high rollers. The focus has remained on domestic players who might drop a lot of money on the gaming floor rather than the international high-rollers, referred to as "whales," that other casinos covet.

"We're gradually getting the premiere players," said Etess.

Mohegan Sun is working with HelmsBRiscoe, a Scottsdale, Ariz.-based convention booking company, to develop group business. They are building a foundation of customers over time, Arnesen said. Businesses sometimes book their conferences as much as five years ahead of time.

"The booking pace was significant over the last year and momentum is up over the last five months in terms of definite and tentative bookings," he said.

Local tourist officials said they do not yet have figures that speak to the impact of the Mohegan Sun on the region's hotel market, but that southeastern Connecticut appears to be having a good summer.

Mohegan Sun's occupancy rate falls short of Foxwoods Resort Casino, which opened its first casino hotel, Two Trees Inn, 10 years ago and has since added the Great Cedar and Grand Pequot properties. Foxwoods had a 92.8 percent occupancy rate for the 2002 fiscal year.

"Foxwoods feels it has been successful in developing an excellent business conference customer, tour customer and transient business over a number of years," said Arthur Henick, director of public relations for the Mashantucket Pequots. "There's been good consistent demand for our hotel, conference and banquet services over that time. We've been at it for a long time."

John Kempf, a gaming analyst with Goldman Sachs, said a "ramp-up" period often follows a hotel opening.

"I think they're getting closer to doing what they have to do to fill up that hotel," Kempf said of the Mohegans. "For any casino, the key is to maximize your occupancy. ... If you get people into the room, they're going to spend money in the casino."

The Mohegan hotel has had good reviews from the hospitality industry. After just six months, it was rated four-diamond by AAA and in the first year has won three industry awards, including the Gold Key and Pinnacle awards and a national insurance company award for meeting accommodations.

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(c) 2003, The Day, New London, Conn. Distributed by Knight Ridder/Tribune Business News. GS,