Dr. Mattson Table of Contents

Executive Summary

Statement of the Problem

Circus Circus needs to find ways to continue to expand and continue to be a major player in the casino industry.

Background

Circus Circus has been one of the best attractions in Las Vegas for years, with attractions for both children and adults, it is more than just a simple casino. Circus Circus has another big top attraction in Reno, Nevada called Circus Circus-Reno. The company also owns other casinos in Las Vegas, the Luxor and the Excalibur, as well as owning 10 other properties in Nevada. At the time of the case Circus Circus was involved in a new venture, Mandalay Bay, and upscale casino styled as a South Seas adventure.

Discussion

At the time of the case, Circus Circus was involved in many joint and new ventures, the largest being the Mandalay Bay hotel and casino. With the property the company owns in Las Vegas, they can continue to expand by opening new hotels and casinos, as well as renovating current establishments. They also need to attempt to break into the market in places such as Atlantic City, New Jersey.

Recommendation

Circus Circus needs to continue to stay on the course they are on at the time of the case. With the Mandalay Bay project in Las Vegas, the company should continue to do well. Circus Circus needs to expand to other gambling locations, most importantly Atlantic City, which has different types of consumers frequenting the casinos there.

Operations

Circus Circus has been one of the best attractions in Las Vegas. They try to ensure that their customers have fun and are able to relax. In their Las Vegas resort, they have circus acts that perform every 30 minutes for free. There are attractions such as video games for the children, while there are slot machines and dollar tables for the adults. At the time of the case, Circus Circus had around 3,744 hotel rooms, shopping areas, restaurants, buffets, video arcades and a 109,000 square foot casino.

Circus Circus also owns another Las Vegas hotel and casino, Luxor. Luxor is an Egyptian-themed hotel and casino that opened in 1993. It is a 30-story bronze pyramid, and after the first weekend it opened in 1993, 40,000 people had already visited the new hotel. Luxor is at the south-end of the Las Vegas strip, and it connected to the Excalibur by a climate-controlled skyway with moving walkways. Between 1997 and 1998, Luxor underwent $439.8 million in major renovations. After the renovations, it contained 4,425 hotel rooms, a new casino space, seating for 800 at a buffet, five themed restaurants, a variety of specialty shops, and much more.

Connected to the Luxor, is the Excalibur, which is one of the first things travelers see when they enter the Las Vegas strip. It opened in 1990, and took $294 million to build. It is a colorful, medieval castle that makes a lasting impression upon travelers. Guests cross a drawbridge, with a moat, onto a cobblestone walkway that enters the hotel. The castle walls are four 28-story hotels towers (Ross, 181). Inside the unique hotel, there is an exciting medieval world with jugglers, acrobats, peasants, serfs, and much more to make the visitor feel like they have just entered medieval times. Also inside the hotel are twelve restaurants, which can feed more than 20,000 people. In 1997, Excalibur contributed 23 percent of the organizations revenues.

Another one of Circus Circus’s big facilities is Circus Circus-Reno. When the case was written, this hotel offered 1,605 hotel rooms and 60,000 square feet of casino room. With the remodeling at a cost of $25.6 million, Circus Circus thinks the property will increase revenue.

Circus Circus also owns smaller casinos such as The Silver City Casino and Slots-A-Fun. These two casinos are not nearly as big as the Luxor or Excalibur, but they attract the traffic on foot throughout the strip. They also own ten properties in Nevada, one in Mississippi, and have fifty percent ownership in three others which are: Silvery Legacy (located in Reno, Nevada), Monte Carlo (located in Las Vegas) and Grand Victoria Riverboat Casino (located in Illinois). In 1997 the operational earnings were off 38 percent from 1997, but management thinks the reason for this was all of the renovations that had been going on most likely disrupted all of the services, and that profits would go back up. Other properties owned by Circus Circus include The Colorado Belle and The Edgewater Hotel, which are both located in Laughlin, Nevada.

At the time this case was written, in 1998, Circus Circus’ new venture was Mandalay Bay. This hotel will have 3,700 rooms, an 11-acre aquatic environment with beaches, a snorkeling reef, and a swim-up shark exhibit.

Joint Ventures

Circus is currently engages in three joint ventures. Circus joined with Mirage Resorts to build and operate the Monte Carlo. Opened on June 21, 1996, this hotel/casino offers 3,002 rooms designed along the lines of the grand casinos of the Mediterranean. It features a 90,000 square foot casino that contains 2,221 slot machines and 95 gaming tables, high tech arcade rides, a 550 seat bingo parlor, restaurants and buffets, a microbrewery, roughly 15,000 square feet of meeting and convention space, and not to mention, a 1,200 seat theater. For the first seven months of operation, Monte Carlo generated $14.6 million as Circus’s share in operating income.

Also, Circus is in a 50 percent partnership with Hyatt Development Corporation in The Grand Victoria. This floating casino and land based entertainment was built for a total of $112 million and is styled to resemble a Victorian riverboat. It includes around 36,000 square feet of casino space, with 977 slot machines and 56 gaming tables. The land based complex contains two movie theaters, a 240 seat buffet, restaurants and parking for approximately 2,000 vehicles. Circus generated $44 million in operating income in 1996 from the Grand Victoria.

The third joint venture in the Silver Legacy is also a 50 percent partnership with Eldorado Limited. This casino opened in 1995, and is located between Circus Circus-Reno and the Eldorado Hotel and Casino on two city blocks in downtown Reno, Nevada. With 1,711 hotel rooms, 85,000 square feet of casino, 2,275 slot machines and 89 gambling tables, management seems to believe that the Silver Legacy holds promise even though the Reno market is suffering, and the Circus Circus-Reno market is enduring tough times due to the opening of the Silver Legacy.

Circus engaged in a fourth joint venture to try to penetrate the Canadian market. However, they were bought out by one of the three partners in the venture, Hilton Hotels Corporation, in 1997.

Gambling of all kinds has spread across the country. The average individual no longer has to travel all the way to Las Vegas or New Jersey. Gambling can be found nearly anywhere these days, at the local market or grocery store as well as many others. There are now almost 300 casinos in Las Vegas alone, 60 in Colorado, and 160 in California. In order to maintain its competitive edge, Circus Circus has relied mainly on the renovation and upkeep of its existing facilities and continues to develop new projects.

Circus Circus has three new projects planned for the development in the near future. As mentioned before, their new venture Mandalay Bay, their largest project, is scheduled for completion in the first quarter of 1999. This hotel will be placed next to the Luxor, on Circus Circus’s southern end of the Las Vegas strip, which they call their “Master plan Mile”. This hotel/casino is targeted at the more upscale traveler and player and is estimated to cost around $950 million to construct.

Circus Circus has also planned three other casino projects, one in Detroit, Michigan, one along the Mississippi Gulf, and one in Atlantic City. Most of these projects are being tailored to attract mainstream tourists and family vacationers. However, Circus anticipates that the remainder of the Master plan Mile will eventually be comprised of at least one additional casino resort and a number of stand alone hotels and amusement centers to attract the more upscale customer.

Major Industry Players

At the end of 1996 the gaming industry was made up mostly of a combination of corporations who where either involved in the gaming industry or a multi-national corporation. in 1996 Hilton acquired a the ITT corporation, once the corporation was under the control of Hilton they then merged with Starwood Lodging Corporation and Starwood Lodging trust. The outcome of these mergers created the world’s largest hotel and gaming corporations. The company owns such powerhouses such as the Sheraton, The Luxury Collection, The Four points and the Caesar Hotel. ITT had a net income of 249 million on revenues of 6.579 billion. At the time of the case ITT had planned to join with Planet Hollywood in an attempt to develop casino/hotels with a Planet Hollywood theme.

Hilton Hotels owns leases or operate 25 hotels; manages 34 hotels partially or wholly owned by others as well as 180 franchised hotels. 11 of these hotels are also casinos located in Nevada, Atlantic City, Australia and Uruguay. By 1997 Hilton had a net income 250 million on revenues of 5.31 billion. Hilton receives 38% of its revenues from the gaming operations and continues to grow into this market. Expansion for the Hilton include the Wild Wild west theme hotel/casino located in Atlantic City along with construction on a 2,900-room Paris casino resort located next to Bally’s Las Vegas. Mirage Resorts Inc is located in Nevada; it operates some of the larger casinos The Golden Nugget, the Mirage Treasure Island and the Golden Nugget-Laughlin. Along with these casinos Mirage Resorts, Inc. is a 50 percent owner of The Monte Carlo Casino along with Circus Circus. In 1997 Mirage’s net income was over 200 million on revenues of 1.546 billion. Mirage is considering two other options, the company plans on developing the The Belagio in Las Vegas and the Beau Rivage in Biloxi, Mississippi. The two buildings will add 265,900 square ft, 252 gambling tables and 4,746 slot machines to Mirage’s inventory.

Another major player in the industry is the MGM Grand Hotel and casino. The casino is approximately 171,500 square ft and is one of the largest casinos in the world. The MGM Grand has 3,669 slot machines and 157 table games. The plans to renovate this casino are going to cost nearly $700 million. Through Wholly-owned subsidiaries MGM owns and operates MGM grand Diamond beach/hotel and a hotel/casino in Australia. Prrimadonna Resorts and MGM also share 50 percent of New York-New York hotel and casino which was opened on Jan 3, 1997.

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  Financial power
  
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  Established and well known name
  
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  Wide range of entertainment choices
  
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  Established outside of Las Vegas as well as within
  
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  Coupled with other hotels and casinos
  
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  Strong partnerships
  

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  Positioned in saturated markets
  
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  Possible legal issues
  
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  Revenues were down 35% in 1997 at the Luxor and Circus Circus
  

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  Expansion into other areas of the country
  
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  Growing gambling market
  
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  Family appeal
  
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  Other partnerships and joint ventures
  
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  Constant Renovation
  

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  Large Competitors
  
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  Hostile acquisition
  
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  Compliance with all extensive and intensive gaming regulations
  
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  Possible failure in other endeavors (Detroit, Atlantic City, and along the Mississippi Gulf)
  

Keefe, Michael J., Middlebrook, Bill J., Ross III, John K. “Circus Circus Enterprises”

printed in Mattson, Melvin R. Marketing Management: Case Analysis by

Team 6. N.Y. McGraw-Hill, 2004, pp 179-191.