Circus Circus Enterprises, Inc.
Circus Circus Enterprises, Inc.
Sales: $806 million
Stock Exchanges: New York
Circus Circus hotel and casino company operates seven properties in Nevada. A consistent profit leader within the industry, the company has grown constantly since 1974. Relying on a formula of low costs and high volumes of middle-class customers, Circus Circus has pioneered the concept of the casino as an entertainment theme park for the entire family.
Circus Circus began as the brainchild of Jay Sarno, a Las Vegas businessman with reputed ties to organized crime. Sarno had made his name as the operator of a chain of motels and had also developed Caesars Palace, a casino and hotel with a Greco-Roman theme. In 1968 Sarno opened a casino with a circus theme on Las Vegas Boulevard, more commonly known as the Las Vegas Strip. Never one to think small, the promoter installed a circus arena, a carnival midway, a casino, restaurants, and shops under an enormous pink and white-striped tent-like roof. A baby elephant roamed the premises pulling the handles of slot machines and aerialists whirled through the air, their nets hovering just above the gaming tables. On the midway customers threw baseballs at targets and were rewarded for a bull’s-eye by a topless woman springing out of a bed to dance for them. Stunned by the excess of the display, rivals on the Las Vegas Strip declared Circus Circus a combination of Sodom and Disneyland.
Sarno had hoped that the extravagant displays of Circus Circus would attract high rollers to his baccarat tables, but the circus theme—with clowns and animals and the children they attracted—was at war with the ambiance of a posh gambling hall. Trapeze artists whizzing overhead were a constant distraction to gamblers and the casino was not the big money-maker that Sarno had envisioned.
Although a 400-room, 15-story hotel tower was completed in 1972, Circus Circus continued losing money; within two years Sarno was broke. In February of 1974, the casino and hotel operation were formally incorporated; three months later, in May, the setup was purchased for $50,000 by two new investors, William N. Pennington and William G. Bennett, a former furniture store executive who became chairman and chief executive officer of the company.
Bennett and Pennington set out to revamp Circus Circus. After briefly attempting to cater to big spenders with perks and free services, the new managers soon became convinced that a circus theme would never attract high rollers. “Circus acts and kids and high rollers—it doesn’t mix,” Bennett later theorized in Fortune magazine. Bucking the industry trend, Bennett and Pennington decided to try to make their greatest weakness a strength by seeking out family business. In place of the traditionally coveted high-stakes customer, they would try to attract the masses, going after the middle-class tourist.
Implementing a shift in marketing emphasis and strict financial controls, the new owners remade their casino. The circus was moved to the second floor to cut down on interference with the gambling, the slot-playing elephant was retired, and the company banished the topless dancers. Bennett removed the high-stakes baccarat tables, ended complimentary services for big spenders, and stopped issuing credit to gamblers. Instead Circus Circus installed nickel slot machines, black jack games, and $1 tables on the gaming floor. In addition to the circus acts, the company provided video games for kids and additional children’s games on the mezzanine-level carnival midway; adult gaming activities were, therefore, separated from children’s activities in compliance with state gaming regulations.
Most importantly, Circus Circus began to provide low-cost rooms and food to attract vacationers looking for a bargain. The company offered $28 rooms and inexpensive all-you-can-eat buffet meals. The buffet’s purpose was to pull people in, not to make money on the food; indeed, the company lost about 50 cents on each meal served. Circus Circus also lost money on the hotel operations, but was subsidized by the casino. Patronized by hordes of people attracted to inexpensive food and lodging, the Circus Circus casino became one of the busiest and most profitable gaming arenas on the Strip. Bennett and his cohorts had refined their vision of what Circus Circus ought to be, becoming the first of a new generation of casino operators who saw their business not as an off-shoot of a slightly shady underworld practice, but as an entertainment franchise designed to attract people of all income levels and all ages.
By June of 1974 Circus Circus was turning a large profit. In the following year, the opening of a second 15-story hotel tower provided an additional 395 rooms.
Four years later, the company duplicated the Las Vegas operations in Reno, Nevada, opening a second Circus Circus casino in a space that had formerly been a department store. The new casino was accompanied by a 104-room hotel. In addition, the company opened a five-story garage in Las Vegas to serve the original casino.
This facility was expanded in the next year with the opening of the Circusland RV Park, part of the company’s strategy to attract vacationers looking for a bargain. The park had slots for 421 recreational vehicles, complete with electric hook-ups to power utilities, a 24-hour convenience store, a laundromat, a children’s playground, a pet-walking area, a community room, pools, saunas, a Jacuzzi, and a game arcade. Vacationers paid just $10 a night to use the park’s facilities.
Circus Circus’s steady construction of parking facilities resulted from heavy reliance on patrons who drove from areas around the Southwest, primarily Southern California, to Las Vegas. This dependence left the company vulnerable to fluctuations in the oil industry. A gasoline shortage, resulting in long lines at service stations, lessened Circus Circus’s profits for several months in 1979.
Slot machines remained a staple of Circus Circus’s strategy to keep costs down and returns high. Unlike table games, the machines did not need casino attendants and were extremely inexpensive to operate. Furthermore, visitors found them unintimidating, so the machines typically had a high rate of use despite the fact that the house paid out a smaller percentage of winnings on slot machines than on other games. In 1979 Circus Circus purchased Slots-A-Fun, located next door to the first casino on the Las Vegas Strip, and a dramatic renovation of this once-ailing facility soon followed.
Circus Circus added more hotel rooms in 1980. Circus Manor consisted of five three-story buildings; this project included 810 hotel rooms and a mini-casino. To link the different areas of the company’s extensive Las Vegas operation, Circus Circus constructed a $5 million amusement-park-like elevated car system named the Circus Sky Shuttle. Pink and white air-conditioned cars glided along a monorail 18 feet above Circus Circus Drive carrying casino patrons between the big top and their hotels starting in 1981.
Circus Circus’s rapid expansion continued in 1981 with the purchase of the Silver City Casino, a failing casino located one-quarter mile south of the company’s headquarters on the Las Vegas Strip. The new owners revamped the property’s exterior and expanded and updated the interior. In Reno, Circus Circus had an additional 725 hotel rooms in a new 22-story building.
In an effort to keep the flagship property fresh, the company spent $7 million in 1982 remodeling Circus Circus-Las Vegas. The casino, restaurant, and parking facilities were enlarged and a new front entrance marquee was built. By 1983, 20,000 people utilized the facilities each day and Circus Circus reported $240 million in revenues, making the venture the most profitable public gaming company.
In order to finance more expansion, Circus Circus went public in October of 1983, offering 4 million shares on the New York Stock Exchange. The stock was introduced at $15 a share and quickly rose to $16.25 in trading, the start of a process that would lead to rich rewards for the shareholders, notably chairman William G. Bennett and president William N. Pennington. “We changed this business when we went public,” Bennett later acknowledged in the New York Times. “People knew we were doing well, but until then nobody knew how well. Once they found out, everyone went after the so-called family business.”
With the influx of funds that resulted from the stock offering, Circus Circus extended the operations to a third city in Nevada, purchasing the Edgewater Hotel and Casino on the Colorado River in Laughlin, Nevada. Shortly thereafter the company announced plans for a $12 million expansion and renovation of the property, which had fallen on hard financial times. This expansion, based on a Southwestern theme, included the construction of an additional 450 hotel rooms, quadrupling the Edgewater’s existing 150 rooms to 600, and the enlargement and total overhaul of the casino. Other facilities appealing to middle-class vacationers, such as a Keno lounge, a sports betting center, a swimming pool, and a bowling alley were also added.
As part of these plans Circus Circus purchased the Colorado Belle Casino—located next to the Edgewater—in 1984, for $4 million. The company wanted to move the original Colorado Belle building out of the way of the Edgewater’s view of the Colorado River to make space for the expansion of adjacent property. The following year the company announced that the Colorado Belle would be reincarnated as a new resort in the shape of a $70 million replica of a three-deck Mississippi paddlewheel riverboat.
Circus Circus expanded the Reno facilities in 1985 as well: a 27-story hotel, the Skyway Tower, boasted more than 1,625 rooms and suites. The company’s revenues in Reno, however, failed to match capacity. Harsh winter weather, in particular, resulted in an extremely poor showing for the Reno properties during 1986.
Construction in Laughlin and Reno did not stop the pace of expansion in Las Vegas, though, as Circus Circus added a new casino, which provided 17,000 more square feet to the gaming area, and also opened a large garage. Since occupancy rates for the existing hotels remained high, the company began constructing a 29-story hotel tower in 1985, called Circus Skyrise. The new accommodation provided an additional 1,188 hotel rooms. When inaugurated early the following year, Circus Skyrise and West Casino gave the company the largest gaming capacity in the industry. However, the property was not immediately profitable and revenues remained sluggish for the next six months.
On July 1, 1987, Circus Circus opened its first casino developed from the ground up, the Colorado Belle, in the booming Laughlin, Nevada, market. Designed to attract a slightly more affluent customer than the company’s staple blue-collar gamblers, the Belle was decked out in authentic riverboat decor. With a 210-foot “smokestack,” elaborate lighting to give the effect of a turning paddle wheel, and a length three times that of the actual river boats, the casino site dominated the banks of the Colorado River and was accompanied by a hotel building with more than 1,200 rooms. The Colorado Belle and the Edgewater quickly became the top two money-makers in the Laughlin market and Circus Circus ended 1987 with earnings of nearly $56 million.
Despite persistent rumors that Circus Circus would follow other Las Vegas casino companies to New Jersey’s Atlantic City, chairperson Bennett insisted that the cost of doing business in the East Coast city, where land prices were far higher than in Nevada, made such a decision unlikely. Instead Circus Circus looked to develop another massive resort in Las Vegas. In April of 1988 the company purchased a large parcel of land once owned by Howard Hughes on the Las Vegas Strip and designated a sizeable chunk as the site for a new mega-resort bearing a castle theme. The castle was intended to be the first thing motorists saw as they left the highway. Slightly more upscale than Circus Circus’s other properties, the company planned to raise room rates and meal costs. The project—a large casino, a shopping arcade, a “dungeon” with miniature golf and other amusements, and more than 4,000 hotel rooms—was slated to cost $290 million. After a contest the castle was dubbed “Excaliber” and groundbreaking ceremonies were held in October of 1988.
In February of 1989 Circus Circus relinquished its only non-gaming unit, Circus Hobbies, Inc., a money-losing enterprise that marketed radio-controlled toy planes. The company sold the unit to chairperson Bennett, who put up approximately $11.5 million in stock for the purchase.
When Circus Circus opened Excaliber in June of 1990, the enterprise became the world’s largest resort. With multicolored towers and crenelated battlements, the castle established new standards of flashiness for Las Vegas properties. In keeping with Bennett’s belief that “the non-casino areas have to be winners for the casino to succeed,” as reported in the Wall Street Transcript, the hotel featured jousting tournaments in the main dining hall, strolling minstrels, fire-eaters in medieval garb, and periodic sword fights between knights in armor in the hallways. In an appeal to the prearranged tour market, the company promised fairs, festivals, rides, and shows. The hotel was almost always full.
Circus Circus continued growing steadily. Early the next year, the company unveiled a new high-rise hotel tower with nearly one thousand rooms, attached to the Edgewater Casino in Laughlin. Only the Reno property remained largely unchanged. By the end of the first nine months of 1991, the company had earned $84.3 million on sales of nearly $620 million, despite a general recession in the gaming industry.
Circus Circus announced plans for the other half of its parcel of the Las Vegas Strip in November of 1991, unveiling “Project X,” a $300 million development shaped like a pyramid with a glass facade. Slated to have 2,500 rooms, the pyramid was to showcase the theme of past, present, and future exploration of exotic places and would include amusement-park-like rides, including a water journey and futuristic elevators to carry hotel guests among 30 stories. President William Bennett, who was nearing retirement age, announced that he would change his plans and stay on at the helm of the company in order to supervise the new project.
Four months later Circus Circus made a serious stab at opening a casino outside of Nevada. The company joined with two competitors to propose a $2 billion joint gambling and entertainment project to be built in the Chicago metropolitan area. Although Illinois had legalized gambling on Mississippi riverboats, land-based casinos were still forbidden; the realization of the plan depended on a large number of significant factors. Nevertheless, this hypothetical plan represented the company’s first serious bid to expand beyond Nevada.
In April of 1992, Circus Circus broke ground on the Las Vegas pyramid project and announced that Project X would henceforth be known as “Luxor” and would incorporate Egyptian artifacts and hieroglyphics; the building was scheduled to open late in 1993.
Circus Circus had not incurred any large debts in financing its expansion, nor had it expanded into geographical areas or industries with which it was unfamiliar. As a result of disciplined adherence to growth within a gaming-industry niche—middle-class low-stakes gambling in elaborate settings in Nevada—the company’s revenues remained high, and Circus Circus looked to the late 1990s confident of continued success.
Circus Circus Hotel/Casino—Las Vegas; Circus Circus Hotel/Casino—Reno; Colorado Belle Hotel/Casino; Edgewater Hotel/Casino; Excaliber Hotel/Casino; Silver City Casino; Slots-A-Fun Casino.
Harris, Jr., Roy J., “Circus Circus Succeeds in Pitching Las Vegas to People on Budgets,” Wall Street Journal, July 31, 1984; Seligman, Daniel, “Turmoil Time in the Casino Business,” Fortune, March 2, 1987; Gro-ver, Ronald, “Circus Circus Rakes in the Bread Bread,” Business Week, February 27, 1989; Stevenson, Richard W., “Cloning Casinos With Appeal for the Masses,” New York Times, December 8, 1991; Yoshihashi, Pauline, “Casino Companies Say Chicago Is Their Kind of Town,” Wall Street Journal, March 25, 1992.