On December 18, 1993, MGM Grand opened as the largest hotel not just in Las Vegas, but in the world. It wasn’t the first time Kirk Kerkorian’s company had held this honor. Or the second. But by the third time, Kerkorian had learned from past ventures, and as today’s MGM Grand celebrates 25 years, we look at how the property came to be, how it has survived the changing landscape of Las Vegas, and what the impact is of Kirk Kerkorian’s thinking on modern Las Vegas and future developments.
On his passing in 2015 at the age of 98, the Las Vegas lights were not dimmed as they had been six times previously. It is unlikely he would have wanted it, but it is arguable that Kirk Kerkorian deserved this token of remembrance more than any of the past honorees, as it can be strongly argued that he was more responsible for modern Las Vegas than any other person.
Kerkor Kerkorian’s early life was undoubtedly tough. As the proud son of Armenian immigrants who lost whatever they had in the recession of 1920-21 and without any more than a basic education, Kerkorian undertook a series of hard-working but menial jobs, and built a name for himself as a good amateur boxer.
He was a self-trained mechanic, buying older cars and making them good, before trading them for profit. As World War II broke out, Kerkorian trained as a pilot and worked with the Royal Air Force undertaking long, dangerous trans-Atlantic cargo flights—which proved to be his making, as after the war he used his savings and bought a small single-engine airplane.
He later expanded his fleet by buying planes from Europe and bringing them to the U.S. West Coast, where a popular flight route proved to be shuttling wealthy patrons between his home in Los Angeles and the growing but certainly adult-orientated and mob-controlled gambling city of Las Vegas.
Los Angeles Air Service was to be Kerkorian’s first corporate acquisition. He renamed it Trans International Airlines (TIA), with a focus on growing the nascent U.S. charter flights industry. After running the business for several years, Kerkorian sold TIA to Studebaker and plowed the proceeds into acres of the barren desert land in Clark County, just south of the city of Las Vegas around what is now the Las Vegas Strip.
Three years after selling TIA, in a habit which Kerkorian was to repeat later in life in many industries, in 1965 he reacquired the company at a discount. He continued to reinvest in Las Vegas land, but without acting as a casino owner or developer. Instead, he leased his land to Jay Sarno and Stan Mallin, two Missourian hotel developers with a crazy idea of building a Greco-Roman-themed palace of decadence in the Nevada desert.
“Kirk Kerkorian was key to us being able to build Caesars Palace, and he backed us again in building Circus Circus, but he was no pushover,” says Mallin, co-founder of Caesars Palace and Circus Circus. “He was one of the smartest, toughest and shrewdest people in town. For some people, the currency in Las Vegas is dreams, but with Kerkorian it was always dollars.”
As we now know, Caesars Palace was not just to invent the modern casino resort, but was also to inspire Kerkorian to move into development of his own casino resorts.
Birth of the International
Eyeing the profits that Caesars Palace generated, Kerkorian invested in 85 acres of land to the east of the then-center Strip, behind the Riviera and adjacent to the convention center. His company, International Leisure Corporation (ILC), bought the Bonanza and Flamingo hotels, ostensibly to train staff for his next projects, but ILC was also active in renovating and investing in the existing properties. This period coincided with the “corporatization” of Las Vegas, as long-held mob interests were replaced by Howard Hughes and Kerkorian, who gave the old mobsters a legitimate exit as they were coming under renewed federal scrutiny.
Legendary architect Martin Stern Jr. was employed to design Kerkorian’s first property, coming up with the “Y-shaped” design that is now commonplace on the Strip, and which formed the basis of the Mirage, Bellagio and many more properties built over the subsequent decades.
The International was unlike anything in Las Vegas at that time. Not only was it bigger than anything else—over double the size of Caesars Palace—but it featured so much more than the typical Las Vegas hotel. It had a place for children to play as their parents gambled, a range of resort amenities to compete with the best, and the entertainment was revolutionary. The International was the first property to bring in the next generation of iconic entertainers; Elvis Presley and Barbra Streisand played the main showroom and Hair, the counterculture hit from Broadway, was in the smaller showroom.
The hotel made headlines and featured heavily as the Whyte House in the James Bond film Diamonds Are Forever.
However, behind the scenes, Kerkorian and ILC were facing questions from the federal Securities and Exhange Commission, which was investigating all things Las Vegas with an overtly critical eye, relating to the previous ownership of the Flamingo. With pressure coming from previous European loans taken by Kerkorian, he was forced to sell his stock to Hilton, which had made a previous investment in the company. The International became the Las Vegas Hilton. It was to become the best-performing property in the entire Hilton portfolio. Today, it is the Westgate.
The First MGM Grand
In 1969, now firmly based in Los Angeles, Kerkorian acquired a substantial stake in MGM Studios, attracted by the significant land holdings in Los Angeles and the brand name that conjured the glamor and legacy of Hollywood. This brand was subsequently attached to his next project, the MGM Grand, again designed by Martin Stern Jr.
The Grand opened in December 1973, with a movie theater, retail and multiple showrooms, including the largest showroom in Las Vegas with both residencies and nightly performances from America’s leading entertainers, including Dean Martin singing on opening night.
The hotel cost $106 million and was the largest hotel in the world, again. The MGM Grand was a solid and successful operation, but sadly, the hotel is now mostly remembered for the fire in 1980, the darkest day in the history of Las Vegas and one that cost the lives of 85 people. Kerkorian settled all claims and personally oversaw that this tragedy would not be repeated in any of his properties.
The property was sold at a profit in 1986 to the former Bally Manufacturing, the slot manufacturer, but Kerkorian smartly kept the MGM brand out of the sale. Today, as Bally’s, the resort is part of the Caesars Entertainment portfolio.
The Second MGM Grand
Undeterred by the tragedy, Kerkorian was to acquire the Desert Inn, and briefly, the Sands hotel. In 1989, he bought the Marina hotel at the southern end of the Strip and several parcels of land in the surrounding area which were to form the footprint for what is today’s MGM Grand. The context of the acquisition was the unexpected success of Steve Wynn’s Mirage and the expansion of Circus Circus Enterprises’ offerings with Excalibur and the Luxor on the southern Strip.
At $1 billion, with 5,005 rooms and on 112 acres, the Veldon Simpson-designed MGM Grand opened in late 1993. The MGM Grand was conceived and built as a full-scale theme park, rather than an integrated casino resort, with Disneyesque characters, including a Mickey Mouse-inspired “Looey The Lion” greeting guests.
In the age of themed hotels,the MGM Grand fit in. Kind of. The 30-story green building was reminiscent of MGM’s Emerald City from The Wizard of Oz, and references to the iconic movie were peppered throughout the property, from the Flying Monkey Barn to the Wizard’s Magic show and a full animatronic Wizard of Oz show.
There was a clear strategy to advance on Kerkorian’s past ventures by targeting families, with investments in a midway and arcade, successfully employed in Circus Circus, and a theme park with rides, movie theaters and separate restaurants away from the casino.
But the theme was not all-pervasive, as it had been in Sarno’s imaginariums. Although a couple of restaurants were Oz-themed, the resort featured traditional offerings, such as Chinese food in Dragon Court and Santa Fe-style offerings, among the wider range. Notably, MGM Grand was one of the earlier adopters of bringing in celebrity chefs such as Mark Miller and Charlie Trotter to run their own restaurants; although Puck’s Spago was open in the Forum Shops, his restaurant at MGM was his first within the walls of a casino.
Kerkorian had obviously experienced the magic of The Wizard of Oz in his own life, and related that to the escapism of Las Vegas—when we leave our home or our routine and go to Las Vegas, with the aim of beating the odds and hopefully returning as conquerors after winning that life-changing jackpot. For many customers, this alignment is subconscious, born out of the collective narratives and dream of the brand of Las Vegas. We buy into the fantasy that is being offered and alter our behaviors accordingly, most notably in spending and consumption behaviors and in an increased attitude to risk.
On opening, the MGM Grand was an iterative product of Kerkorian’s past work combining everything that he and his team had learned from 25 years in building Las Vegas, yet was remarkably innovative and forward-thinking. The now-ubiquitous ticket-in/ticket-out for slots was first employed at the property, which featured the first coinless slots in Las Vegas. Former MGM Grand Chairman and CEO Larry J. Woolf proudly reflects on the hiring practices, bringing in and training staff from non-traditional backgrounds, seeking to build a diversified workforce, and opening drug-free after mass screening, via hair testing.
“All along the journey, he had a details man, Fred Benninger, who made sure every detail was taken care of and not one penny was spent that was not an absolute necessity,” recalls Woolf. “We fought many times over the smallest things. He made Kirk’s vision come to life. Kirk was a modest, honest man who was always thinking and had great vision. It was like he could see or feel the future. However, he was a private man who tried to stay out of the limelight.”
But unlike Wynn’s much-feted Mirage, which became the textbook case study for the integrated resort, the MGM Grand’s story was more complex.
Goodbye Yellow Brick Road
Within three years, much of the Wizard of Oz theme had started to disappear, including the much-loved and equally reviled animatronic experience, with criticism that a child-focused attraction (not to mention the child-focused theme and characters walking around the property) was ill-fitting with a casino resort squarely intended to drive revenues from adults. The Grand Adventures theme park was closed in 2002, and today is the home of the Signature apartments and hotel.
In 1998, Elton John opened Studio 54, one of the first mega-nightclubs in a Strip property.
Where the Mirage had Siegfried and Roy’s white tigers, in 1999 the MGM opened the Lion Habitat housing Goldie Metro, a descendent of the iconic roaring lion that appeared in MGM’s movie openings. And in the same year, the lion’s-mouth entrance—which offended the superstitious Asian guests, who felt that entering the casino through a lion was a bad omen—was replaced. The lions stayed on in MGM until 2012, and were quietly retired to a less public pasture.
As the decade closed, the MGM Grand built an exclusive annex, the Mansion, the very existence of which was denied by many in the company. This unique “hotel within a hotel” remains one of the most exclusive products in Las Vegas, and is highly relevant in maintaining the MGM Grand’s allure.
Many of the remaining original features had been removed by 2000, when MGM acquired Wynn’s Mirage Resorts—which by now included the Mirage, Treasure Island, Golden Nugget and Bellagio. In 2005, MGM Mirage, the new corporate entity, acquired Mandalay Resorts, which operated properties including Circus Circus, Excalibur, Luxor and Mandalay Bay. CityCenter, featuring Aria and Vdara, was completed in 2009, and today, MGM Resorts International operates 14 resorts on the Las Vegas Strip and has a global footprint from Macau to Maryland.
MGM’s lion roared loudest, but the MGM Grand was no longer at the top of the food chain.
MGM Grand’s Renaissance
Within the MGM portfolio, MGM Grand was the largest resort, but lacked the clear identity of other assets. Whereas the Bellagio, Mirage and even Circus Circus and Excalibur held significant brand equity and clear market segmentation, MGM Grand was relying on a brand aligned with a legacy movie studio which had sold many of the movie-related assets, and had little evidence of a movie theme remaining.
The property stood as an enigma. It was an emerald-green monument to a once-themed legacy, with the broadest range of amenities on the Strip which had been curated over decades, from the top-level convention center to the Garden Arena (which saw some of Las Vegas’ most iconic fights, including the infamous Tyson-Holyfield epic of 1997), Joel Robuchen’s three-star Michelin restaurant (the only restaurant in the city with that accolade) the VIP-focused Mansion, KA by Cirque du Soleil and David Copperfield providing entertainment—but also with room rates at the budget level, a food court which sold hot dogs and burgers by the score, a Rainforest Café and the original rooms that were built for the Marina Hotel, now named “The West Wing,” that were built in 1975.
Nightclubs are among the most visible and lucrative elements of Las Vegas’ renaissance, attracting the next generation of customer. After a long run, Studio 54 closed its doors in 2012 and was replaced by the Hakkasan nightclub. It was to change the fortunes of Las Vegas and the MGM Grand. Hakkasan, which regularly produces gross revenues of over $100 million per annum, is home to leading DJs Tiesto and Calvin Harris, who challenge Copperfield for prominence on the building’s exterior.
As Kerkorian moved into his final years, the Great Recession hit his Las Vegas legacy, but under the management of his disciples, the company re-emerged stronger than before, and the MGM Grand is experimenting in attracting the next generation of customer. Level Up is a concept space to try and bring gaming product into relevance for millennial customers, and the food and beverage offering is remarkably contemporary, with offerings by acclaimed chefs and concepts including Morimoto, Emeril Lagasse, Robuchon and Hakkasan. Wet Republic, one of the most enduring pool parties, remains a staple for young clubbers, and despite newer venues coming to market, five years later the Hakkasan nightclub remains one of the hottest spaces in town.
With millennials seeking experiences, MGM Grand is home to Top Golf, which has proved a highly popular attraction. As the next generation of customers to Las Vegas seeks an increasing number of non-gaming attractions, it allows us to reassess the vision of Kerkorian, who in many ways was ahead of his time.
Kerkorian as a casino owner was unlike many other casino owners, who were known to micro-manage elements of operations. Rather, he was significantly less hands-on, employing the best people to undertake individual roles. Long-serving executives including Terry Lanni, Bill Hornbuckle and current CEO Jim Murren implemented the strategy, as aviator Kerkorian viewed from above.
Once his properties were built, there was constant refinement and demonstration of tight management discipline, as Kerkorian, who had involvements in other businesses, was very aware of good management practice. His legacy to MGM is not just the buildings, but the strategic approach that drives the company and its properties.
On his passing, Kerkorian was hailed as a great entrepreneur, but strategist Igor Ansoff would define the Kerkorian strategic approach as competitive, rather than entrepreneurial.
As we can see in the adaptation of Ansoff’s “Approaches to Strategic Challenges Table” (below), Kerkorian’s legacy is apparent in MGM’s strategy today, which is far less entrepreneurial than the top-down approach of Wynn Resorts and Sheldon Adelson’s Las Vegas Sands, and less bottom-up than the data-driven approach of Caesars Entertainment, but instead concentrates on long-term incremental evolution with a focus on efficiency and trust in management.
Occurrence in shift of objectives
Direction of changeSize of change in relation to asset
Relevance of management capabilityProblem solving
Cost of information
Appetite for variability
Serial and continual development
Continuation of history and evolution of productSmall and incremental
High trust in managementExperience driven, internal capability
Low, information must be accessible
Formal and well structured
The Kerkorian Legacy
For all his impact in building Las Vegas, Los Angeles was Kirk Kerkorian’s home.
A psychologist could assess the personal circumstances of Kerkorian in his formative years, seeing his family lose everything, but working hard and building businesses from small acorns.
One could look at his appetite for and attitude to risk, gaining confidence by succeeding where others faltered. He was adept in understanding the strengths and weaknesses of competition, perhaps from his time as a boxer or by flying high, seeing the bigger landscape from above while others could only see ground level. Perhaps it is all of these, but where obituaries to Kerkorian note his career as a serial investor, developer and corporate raider, what underlines his success was his confidence and vision in understanding the need for people to be entertained.
Where many others would not have backed Sarno and Mallin to build Caesars Palace, Kerkorian did, perhaps as he shared their vision in the future of the city as a place of fun. He took significant risks on multiple occasions in building his resorts, yet each seemed a natural progression from past successes.
Unlike Wynn (Bellagio), Bennett (Excalibur) and Sarno (Circus Circus), Kerkorian was much more inclusive in his approach to casino development. Where other resorts looked at segmenting their customers, either by demographic or psychographic analysis, focusing on pivoting the offering towards customer segments, Kerkorian’s mission was different. He sought to entertain everyone. Again, Kerkorian saw entertainment as a universal driver of happiness, to make people feel good and to have a great time.
He borrowed from his own memories from the MGM movies, which engendered an emotional response, and sought to bring this happiness and escape to the masses. Whether this was the intention or not, by building properties that were broad in terms of their target, fueled with entertainment and amenities for the widest customer base, Kerkorian built iconic casinos in the vision of understanding not what Las Vegas was, but what it could be. In 1970, the year after the International opened its doors, Las Vegas visitation was 6.7 million people; in 2016, it was almost 43 million. In many ways, his offering was 25 years ahead of its time.
Steve Wynn repeats the mantra that gaming revenues are a consequence of a strong non-gaming offering. Kerkorian was the first casino resort developer to fully implement this, decades before Wynn—building resorts that attracted potential customers, even those that had never considered Las Vegas as a vacation destination or gambling a pastime.
Looking back, each of Kerkorian’s properties focused on American entertainment for that age, with experiences for all, from the highest rollers to the American everyman.
Is it by accident or design that his MGM Grand, Bally’s and today’s Westgate have had the architectural flexibility to adapt and evolve over time, whereas the more defined resorts (such as the Luxor, Paris, Excalibur and even the Mirage) are constrained in adapting to change?
Is it significant that no casino resort built by Kerkorian has been imploded, whereas there is nothing left of the portfolio of his peer and fellow airline mogul, turned Las Vegas developer, Howard Hughes?
There is no doubt Kirk Kerkorian was a genius, years ahead of his contemporaries in understanding what Las Vegas could be. He may have felt that his proudest achievement were in the field of philanthropy, which are notable. However, all that recall him highlight his extreme modesty in everything that he achieved.
Russian dissident Alexander Herzen wrote of Venice, “To build a city where it is impossible to build a city is madness in itself, but to build there one of the most elegant and grandest of cities is the madness of genius.”
With hindsight, Kerkorian was a man who built a city where others thought it was impossible to do so. He invested in and believed in the promise of Las Vegas and built, literally, the “Grandest” of properties, which a quarter of a century later remains as relevant as ever.
On reflection, the collective happiness of millions of customers would make even the most modest of lions rightly proud.
Oliver Lovat leads the Denstone Group, which offers strategic advice on customer-facing, asset-backed investments. He lives in Las Vegas.