Oh, What A Circus!

50 years ago, the circus came to Las Vegas, and it stayed.

In 1968 Jay Sarno and Stan Mallin stood as the emperors of Las Vegas, with their Caesars Palace reshaping what a casino could be. But Sarno's Bacchanal fantasies were unsated. He took the Latin for performance area, “Circus” and Circus Circus was born. Never has a casino been so aptly named, as under the duo’s ownership, the early history of the property was just that.

The Rollercoaster

Advancing the concepts from Caesars Palace the couple continued to take customers out of reality and into a fantasy world. There were the Sarno design hallmarks, (which have been removed over decades) such as the fountains and driveway, marking the customer journey. The entrance to the property was on level 2 and from the customer’s perspective there was a huge reveal of the entire floor. The descent to the casino was by slide, truly creating a unique sense of arrival.

What set Circus Circus apart from previous casinos before was the spectacle. Not only was the backdrop illuminated by the midway with the various barkers enticing customers to play their games, but their shouts were punctuated by the 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, there was little that was family-friendly about this property. Topless dancers, flashes of implied nudity and a range of carnival games, including chickens dancing on hot-plates, that would certainly be considered bad taste if not illegal in today’s world, were centerpiece at this adult fantasy. With 14 bars and restaurants, more than any other property in town, it certainly understood the value of food and beverage to an operation, years before others caught on to this. 

Customers were foremost to be entertained in what remains today the most radical casino ever to be opened in Las Vegas.

Where the gods were on the side of Sarno and Mallin in 1966 when Caesars opened, it seems that they had conspired against them by late 1968.

Famously, Circus Circus opened without a hotel, charging customers to enter. Not a good idea. The Teamsters funding that enabled the hotel to be built and ongoing running of the casino came with strings – and that was something that the Gaming Commission did not welcome, putting the partnership’s license under constant scrutiny, ultimately renewing it on a monthly basis.

Moreover, the FBI had started investigating Las Vegas, accusing Jerry Zarowitz, Caesars’ Financial Manager with having links to organized crime, before dismissing charges, but forcing Sarno and Mallin to sell their Roman masterpiece.

The gas crisis and US economic downturn put pressure on visitation, and revenues required to operate Circus Circus profitably did not materialize, indeed Sarno’s own gambling habits put his personal finances under some pressure.

And then, to cap it off, the IRS claimed Sarno and Mallin owed $1m in taxes, which was to lead to an eventual highly publicized court case, and lead to the end of Sarno and Mallin’s partnership that shaped modern Las Vegas.

Any one of the above would challenge any normal casino owner and the pressure on Sarno and Mallin must have been immense, so when another unlikely duo, Bill Bennett and Bill Pennington came up with an exit plan, Sarno and Mallin took that route.

What first iteration Circus Circus brought to the Strip was a sense of fun and excitement. If was radical beyond anything before and after, positioning the casino as only 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 and 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 again for decades.

The Lion Tamers

Bill Bennett and Bill Pennington had been on the hunt for a casino of their own. Pennington had built a slot manufacturing business and Bennett had a successful time running The Mint on Fremont Street for Del Webb. After aborted attempts to buy the Four Queens and Howard Hughes’ Landmark, a lease to operate Circus Circus was acquired, via assistance from E Parry Thomas, the banker and deal-maker that pieced together Las Vegas. Circus Circus Enterprises was born and was to become one of the most successful businesses in the history of Las Vegas.

Bennett, the operator, was the anthesis of the showman Sarno, who under the terms of the lease, retained a suite on property and served as an “advisor” to the new operator. A disciplinarian, Bennett had curated his skills in a very different environment from Sarno and Mallin, who were first and foremost developers. Bennett was a details guy, with an awareness of every square inch of the property and minutiae of the operations. Moreover, he had a clearly defined understanding of who his customer was and what they wanted. Shifting away from the adult carnival, Bennett translated his time Downtown to the Strip, offering good value to low volatility players, even families, in a large, mid-market property. In many ways, he saw this model to be the future of Las Vegas. And he was right.

Almost immediately Bennett cleared house, moving on many of the early employees, removing the alleged mafia influence from the retail, retiring Tanya the elephant and closing the risqué carnival shows. The latter proved pivotal, as 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 below.

However, what defined the future of the gaming industry was his management. Physically, they put a ceiling over the tables so that gamblers were not distracted by the show overhead and whether it was Bennett’s insights from The Mint or Pennington, with his slot manufacturing background, the duo focused on slots and slot customer, reducing the number of tables and associated overhead and imposing lower betting limits, limiting the instability in revenue caused by a small number of high limit players. The slots at Circus paid a reported 97.4%, 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 in weekdays. The $18 room rates were marketed widely 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 3 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 US economic slowdown, the MGM fire and Atlantic City legalizing gaming, which was soon to surpass Las Vegas in casino revenue. But with a low cost, low volatility business model Circus Circus was differentiated from the rest of the industry and 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 $8m, $16m by 1982 and $20 by 1983.

The Trampoline

Any circus performer will tell you it isn’t hard to jump high, it is the landing that is difficult. Circus Circus did not land. It floated.

The successes of Meshulam Riklis at the Riviera, and Michael Milken and SteveWynn in 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 over $300m and changed the face of the casino industry forever. Firstly, casinos could be an investible asset class for the many and not the few, and secondly, 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 and further in Laughlin. Las Vegas was perceived to be moribund in 1987 when almost simultaneously Bennett and Steve Wynn announced their plans to build new resorts. They had very different visions.

Sarno, who was a personal friend and mentor to the Mirage developer, shared his ideas to his protégé for his never realized third project, Grandissimo, a 6,000 mega-resort. 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. It’s 3,000 rooms were for the highest to lowest rollers, 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, opening as the largest hotel in the world. It’s 4,000 rooms were squarely aimed at families. It had nearly half the gaming tables as The Mirage, but over 500 more slots with over 2,700 in the floor, more than any other property in town. The casino cost $300m to build and produced $80m profit in the first year. This was a remarkable achievement.

Circus Circus was not forgotten, as the 5-acre Adventure Dome a climate controlled indoor theme park with rollercoasters and rides, was opened costing $90m. Children rejoiced.

The Final Act

Circus Circus Enterprises was one of the best performing stocks in America, but by the early 1990s management differences had emerged, and many of the young executives initially hired by Bennett departed. The Luxor, Bennett’s next project was beset with problems – there is a reason why they stopped building Pyramids 3,000 years ago. Although iconic, the project proved costly in design, operations and maintenance, and the company was not comfortable in managing the volatility caused by the high rollers that 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, as the new flagship mega-resort Mandalay Bay seemed a far more appropriate name for a modern hospitality company than the grind-joint Circus Circus, albeit one that was firmly enshrined in Americana. In 2005, the company founded by Bill Bennett and Bill Pennington on a gamble on a struggling property, was sold to Kirk Kerkorian’s MGM for $7.9b.

As MGM has rebranded as a global entertainment company, Circus stands as an island on the north of “The Strip” almost untouched from Bennett’s days. With the modernized SLS, Genting’s $4b Resorts World, the $4b Drew and $1b LVCVA Convention Center as neighbors, it looks somewhat out of place in new Las Vegas and the MGM portfolio. That is because it is.

 The Double Trapeze

The skill of the trapeze artist is in the hand over. The story of Circus Circus is the unique double-double acts of Sarno and Mallin and Bennett and Pennington; nobody in the history of Las Vegas has been so intuitively visionary as the former pair, and there has been no better operator than the latter. Yet there are valuable lessons that can be applied in modern casino development, strategy and management.

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, the same food, all found at the same place. the only differentiator is the customer, and both owners recognized this, but acted in different ways.

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

Innately, Sarno understood this, believing the current Las Vegas casino offering boring and set about 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 iteration 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 picture, along with a Jay Sarno cameo in full carny schtick. Watch it.

Circus Circus in 1971 was unique then and now. 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 their 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 for Las Vegas and with a guaranteed hold, some customers may win big, but the house will always win.  

It was the holistic principles of customer value and cost management paired with the culture that empowered his management to make decisions to that end, that was born in operating Circus, that allowed the growth of the company. Ironically, it was also this that limited the flexibility of the company to meet the needs of a different type of customer, as the company grew and sought to develop a more premium product. Portfolio owning companies still face this conflict today with inherent discomfort, managing a property like Circus Circus needs an entirely different skill-set to that of managing the Bellagio. Management style needs to be aligned with the product and customer needs.

With his discipline, detail and determination, Bill Bennett shaped casino management. It is undoubted he would have been successful if he had acquired any other property, but the red and white canvass he inherited was perfect for his style of painting.

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

The last principal alive, Stan Mallin, commented, “It is gratifying to see Sarno and my vision in the mid 20th century be the inspiration for the many megaresorts in Las Vegas in the 21st century.”

Walking round Circus Circus is a tour of living history. Like the forerunners, the Ford Model T, the Apple II and Picasso’s Blue Period, Circus Circus is essential in understanding the evolution of Las Vegas, casino design and management of the gaming and casino industries.

It is worth revisiting and appreciating, as there will be nothing like it ever again.

The Players

Jay Sarno (TL) never built his third casino resort. He died in 1984 aged 62. He was inducted into the inaugural AGA Gaming Hall of Fame in 1989 and lends his name to the casino design awards.

Stan Mallin (TR) retired from the gaming industry after the sale of Circus Circus, focusing on his community and other business interests. He lives in Las Vegas aged 96. The AGA Gaming Hall of Fame will honor him in 2019.

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

Bill Pennington (BR) remained in Reno. He spent his later years as a philanthropist in his home city. He died aged 88 in 2011. He was inducted in the AGA Gaming Hall of Fame in 1991.

Oliver Lovat leads the Denstone Group, which offers strategic advice and consultancy on customer-facing, asset-backed investment and development, with a focus on casino resorts. He is a Fellow of the Royal Institution of Chartered Surveyors and visiting faculty at Cass Business School in London. He lives in Las Vegas.

A version of this essay first appeared in Global Gaming Business Magazin