What A Circus!

Fifty years ago, the circus came to Las Vegas—and it stayed

In 1968, Jay Sarno and Stan Mallin were the emperors of Las Vegas, with their Caesars Palace reshaping what a casino could be.

But Sarno’s Bacchanalian fantasies were unsated. He took the Latin word for performance arena, “circus,” and Circus

Circus was born.

Never has a casino been so aptly named. Under the duo’s ownership, the early history of the property was just that—a circus.

 

The Roller Coaster

Advancing the concepts from Caesars Palace, Sarno wanted to take customers out of reality and into his fantasy world. Design hallmarks such as the fountains and driveway marked the customer journey. The entrance to the property was on the second level, and from the customer’s perspective there was a huge reveal of the entire floor.

The descent to the casino was by slide, creating a truly unique sense of arrival.

Before he created Circus Circus, Jay Sarno imagined a Roman empire with Caesars Palace

What set Circus Circus apart from previous casinos was the spectacle. Not only was the backdrop illuminated by a midway complete with barkers, but their shouts were punctuated by 700 slot machines—some 500 more than Caesars Palace, all with bells ringing, lights flashing and coins dropping. Trapeze artists swung from above and Tanya the Elephant roamed the floor.

For those of us familiar with today’s iteration, little was family-friendly about this property. Topless dancers, flashes of implied nudity and a range of carnival games—including chickens dancing on hot plates—would be considered in bad taste if not illegal in today’s world, but were the centerpiece of this adult fantasy.

With 14 bars and restaurants, more than any other property in town, Circus Circus certainly understood the value of food and beverage to an operation, years before others caught on. Customers were foremost in what remains the most radical casino ever to open in Las Vegas.

The gods were on the side of Sarno and Mallin in 1966 when Caesars opened, but it seems they were conspiring against them by late 1968.

Famously, Circus Circus opened without a hotel and charged customers to enter. Not a good idea. The Teamsters funding that enabled the hotel to be built and the casino to run came with strings—something the Gaming Commission did not welcome. The partnership’s license was under constant scrutiny, and ultimately was renewed on a monthly basis.

Moreover, the FBI accused Caesars financial manager Jerry Zarowitz of having links to organized crime. The charges were dismissed, but Sarno and Mallin were forced to sell their Roman masterpiece. The gas crisis and the U.S. economic downturn put pressure on visitation and revenues. Sarno’s own gambling habits put pressure on his personal finances.

To cap it off, the IRS claimed Sarno and Mallin owed $1 million in taxes, which led to a highly publicized court case and the end of a partnership that shaped modern Las Vegas. When another unlikely duo, Bill Bennett and Bill Pennington, came up with an exit plan, Sarno and Mallin took it.The original Circus Circus brought a sense of fun and excitement to the Strip. It was radical beyond anything before or after, and positioned the casino as a small part of the entertainment offering. It set out to offer “an experience” decades before that description entered the lexicon of modern casino managers. It advanced the casino resort template.

Sarno and Mallin were ahead of their time in customer psychology, programming and vision, but Las Vegas wasn’t ready for them. Neither man was to open another casino, and Las Vegas was not to see anything as pioneering and bold as Circus Circus for decades.

 

The Lion Tamers

When they began their hunt for a casino of their own, Bill Pennington ran a slot manufacturing business and Bill Bennett had run the Mint on Fremont Street for Del Webb. After aborted attempts to buy the Four Queens and Howard Hughes’ Landmark, they signed a lease to operate Circus Circus with assistance from E. Parry Thomas, the banker and dealmaker who pieced together Las Vegas. Circus Circus Enterprises was to become one of the most successful businesses in the history of Las Vegas.

Operator Bennett was the anthesis of showman Sarno, who retained a suite on-property and served as an “advisor” to the new team. Sarno and Mallin were first and foremost developers. Bennett was a details guy, aware of every square inch of the property and the minutiae of the operations. Moreover, he had a clearly defined understanding of his customers and what they wanted.

Shifting away from the adult carnival, Bennett brought his Downtown experience to the Strip, offering good value to low-volatility players and even families in a large, mid-market property. In many ways, he saw this model as the future of Las Vegas. And he was right.

Almost immediately Bennett cleaned house, letting go many early employees, removing the alleged mafia influence from retail, retiring Tanya the Elephant and closing the risqué carnival shows (the latter proved pivotal; by bringing in more conventional carnival games, Circus Circus became the first property in Las Vegas that gave the kids something to do while their parents gambled).

However, what defined the future of the gaming industry was the new team’s management. Physically, they put a ceiling over the tables so gamblers were not distracted by the show overhead. The duo focused on slots and slot customers, reducing the number of tables and associated overhead and imposing lower betting limits, reducing the instability in revenue caused by a small number of high-limit players.

The slots at Circus paid a reported 97.4 percent, significantly higher than other Strip properties and eye-opening by today’s standards. Circus was also the first Strip casino to offer linked jackpots, one of the benefits of owning the supply chain vertically.

Taking away the volatility from the casino meant that Circus needed volume, especially on weekdays. The $18 room rates were widely marketed as the cheapest on the Strip, but more people meant more breakfasts, lunches and dinners, and the hotel ran at some of the highest occupancy levels on the Strip.

After three years of ownership, Circus Circus Reno was announced, a property closer to Pennington.

It seemed like a golden time for the Las Vegas casino industry, but dark clouds were around the corner in the shape of a U.S. economic slowdown, the MGM fire and the legalization of gaming in Atlantic City, which was soon to surpass Las Vegas in casino revenue. But with a low-cost, low-volatility business model, Circus Circus was relatively unaffected.

Indeed, the casino prospered, expanding in Las Vegas by acquiring neighboring Slots-A-Fun, Edgewater in nearby Laughlin and 50 acres of land for a highly profitable RV park. Profits in 1980 were $8 million, $16 million by 1982 and $20 million by 1983.

 

The Trampoline

Jay Sarno rides an elephant outside of Circus Circus casino in Las Vegas, Nevada, as two performers on stilts stand by. The elephant is probably Tanya The Elephant, who performed at Circus Circus. (Photo credit UNLV)

Any circus performer will tell you it isn’t hard to jump high. It’s the landing that’s difficult. Circus Circus didn’t land. It floated.

The successes of Meshulam Riklis at the Riviera and Mike Milken and Steve Wynn at the Golden Nugget proved that bringing casino finance from the shadows into the corporate world could be lucrative. With Bennett now firmly driving the business, Circus Circus Enterprises became the first major Las Vegas casino operator to undertake an IPO.

By the close of day-one trading, the company was valued at more than $300 million, and changed the face of the casino industry forever. First, casinos could be an investible asset class for the many, not the few. Second, casino owners could get really rich, legally! In 1986, Pennington retired. Both he and Bennett, who assumed sole control and leadership, were among the wealthiest Americans in the country.

Being a listed company had benefits, such as a lower cost of capital, which allowed the company to expand Circus Circus in Laughlin. Las Vegas was perceived to be moribund in 1987, when Bennett and Steve Wynn announced their plans to build new resorts. The men had very different visions.

Sarno, a personal friend and mentor of the Mirage developer, shared with his protégé his plan for a never-realized third project, a mega-resort he called Grandissimo. Wynn’s Mirage is rightly hailed as the resort that changed Las Vegas, but there are evident nods to Sarno’s past work in the design. Its 3,000 rooms were for the highest to lowest rollers, with Siegfried and Roy in the showroom, tigers in the hallway and dolphins by the pool. This was an entertainment spectacle.

Bennett’s Excalibur was Circus Circus in a castle. Its 4,000-room hotel—the largest in the world—was squarely aimed at families. The property had nearly half the gaming tables of the Mirage, but 500 more slots—a total of 2,700, more than any other property in town. The casino cost $300 million to build and produced $80 million in profits the first year. This was a remarkable achievement.

Circus Circus was not forgotten, as the five-acre Adventure Dome—a climate-controlled indoor theme park with rollercoasters and rides—opened, at a cost of $90 million. Children rejoiced.

 

The Final Act

Circus Circus Enterprises stock was among the best-performing in the U.S., but in the early 1990s management differences emerged, and many of the young executives hired by Bennett departed. The Luxor, Bennett’s next project, was beset by problems (there’s a reason they stopped building pyramids 3,000 years ago). Although iconic, the project proved costly in design, operations and maintenance, and the company wasn’t comfortable managing the volatility of the high rollers the property sought to attract. In 1994, Bill Bennett retired as chairman and sold his remaining stock in the company.

By 1999, the company was renamed Mandalay Group. The new flagship mega-resort was called Mandalay Bay, a far more appropriate name for a modern hospitality company than the grind-joint Circus Circus. In 2005, the company founded on a gamble by Bennett and Pennington was sold to Kirk Kerkorian’s MGM for $7.9 billion.

As MGM rebrands as a global entertainment company, Circus is almost untouched from Bennett’s days. With its neighbors—the modernized SLS, Genting’s $4 billion Resorts World, the $4 billion Drew and the $1 billion Las Vegas Convention Center—it looks somewhat out of place in the new Las Vegas and the MGM portfolio. That’s because it is.

 

The Double Trapeze

The skill of the trapeze artist is in the handover. The story of Circus Circus is the story of two unique double-double acts: Sarno and Mallin, Bennett and Pennington. In the annals of Las Vegas history, there has never been as intuitively visionary a pair as the former, and no better operating team than the latter.

Both duos understood the principle that casino resorts are non-differentiated businesses: they sell the same games at the same price, have the same beds and the same food at the same price. The only differentiator is the customer. Both sets of owners recognized this, but they responded in different ways.

In his work Travels in Hyperreality, semiologist Umberto Eco cites his experiences at Disney and in Las Vegas to form his central question: How do we create environments that enhance reality?

Innately, Sarno understood this, citing casinos as boring places, creating a physical experience rooted in emotion, asking the question: How do we create environments that allow our customer to escape their reality?

The concept of visiting the circus is rooted in childhood, invoking something out of the ordinary, a spectacle of otherworldliness. The first version of Circus Circus was exactly this, as patrons came and marveled at Sarno’s imaginarium.

For those of us too young to remember the early years, James Bond’s Diamonds Are Forever immortalized the property, along with a Jay Sarno cameo in full carny schtick. Watch it.

Circus Circus in 1971 was unique. The noise, the atmosphere, the focus on entertainment and the range of amenities were all innovative to the extreme. This was an “experience” that no operator today would have the courage to repeat. Sarno dealt in fantasy, giving psychological fulfillment via escapism. This has been much emulated by Wynn and others.

Bennett was deeply rooted in operating, meeting the physical needs and desires of customers, with a managerial and strategic skill set suitable for volume business. What Bennett did was reposition Circus squarely for the mass market and families, eschewing the conventional wisdom of volatility within the industry and developing a segmented strategy that was evident throughout his organization.

He was the first operator to see that high-jackpot slots were the future of Las Vegas, and with a guaranteed hold, some customers would win big, but the house would always be the ultimate winner. The holistic principles of customer value and cost management, paired with culture, empowered his management to make decisions to that end and allowed the growth of the company.

Ironically, it also limited the company’s ability to meet the needs of a different type of customer as it sought to develop a more premium product. Portfolio-owning companies still face this conflict with inherent discomfort; a Circus Circus requires different management skills than a Bellagio, and management style must be aligned with the product and customer needs.

With discipline, detail and determination, Bennett shaped casino management. Undoubtedly, he would have been successful with any other property, but the red-and-white canvas he inherited was perfect for his style of painting.

There are many in the industry commentariat who lament the loss of the Sarnos and the rise of the Bennetts, but both were true visionaries. More than 50 years later, Circus Circus is still standing, successfully producing profits for MGM, a place for those priced out of the mega-resorts built in recent years.

The last principal living, Mallin, has commented, “It is gratifying to see Sarno’s and my vision in the mid 20th century be the inspiration for the many mega-resorts in Las Vegas in the 21st century.”

Walking around Circus Circus is like a tour of living history. Like the Ford Model T, the Apple II and Picasso’s Blue Period, Circus Circus is essential to understanding the evolution of Las Vegas, casino design, and the management of the gaming and casino industries. It’s worth revisiting and appreciating.

There will be nothing like it ever again.

 

The Showmen

Jay Sarno never built a third casino resort. He was inducted into the American Gaming Association’s inaugural Gaming Hall of Fame in 1989 and lent his name to the casino design awards. He died in 1984 at the age of 62.

 

Bill Bennett bought the Sahara after retiring from Circus Circus Enterprises, and remained active in the industry and community until his death in 2002. He was inducted into the Gaming Hall of Fame in 1990.

 

Stan Mallin retired from the gaming industry after the sale of Circus Circus to focus on his community and other business interests. He is 96 years of age and lives in Las Vegas. His omission from the Gaming Hall of Fame is a notable oversight.

 

Bill Pennington remained in Reno and spent his later years as a philanthropist in his home city. He was inducted into the Gaming Hall of Fame in 1991, and died at 88 in 2011.

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Oliver Lovat FRICS is visiting faculty at Cass Business School in London. As CEO of Denstone, he advises customer-facing, asset-backed businesses on strategic competitive advantage and maximizing value. For a full version of this research, contact him at oliver@denstone-re.com.