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BusinessWeek: January 11, 1993 |
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Industry Outlook: Introduction
CAN THESE THREE TOP THEMSELVES IN '93? TURNING UP ACES With seven casinos in Nevada, the $806 million gaming company caters to the bluejeans and-Wimebago crowd. And the strategy is paying off. Circus Circus has the gaming industry's highest profit margin and its best return on equity. In 1991, when gambling in Vegas was off by 2%, its revenues grew 16%. and profits rose 35%. Even in '92, as it started to pay the bills on a $350 million, pyramid-shaped casino called Luxor, its earnings ran 20% ahead of 1991's. Circus Circus is the brainchild of William G. Bennett, 68, a former furniture retailer who brought his mass-marketing philosophy to the Vegas Strip in 1974. By charging an average $35 a room, Bennett fills most of the 11,000 at his Vegas, Reno, and Laughlin hotels most nights. To keep customers in the casinos, he has circus acts and even a jousting tournament. Unlike his Vegas competitors, he offers few free rooms or complimentary drinks to players, and he keeps advertising costs low. Over the past year, the company's cash flow was strong enough to cut debt to a third of its total capital-among the industry's lowest ratios. It isn't even borrowing for the 30-story Luxor, due for completion in October, which will dominate the Vegas skyline with its Egyptian motif. Circus Circus' success in tapping the mass gaming market is drawing imitators, says company President Glenn W. Schaeffer. Billionaire Kirk Kerkorian is one, with his $1 billion MGM casino and theme park. So is master marketer Steve Wynn, whose Treasure Island casino, when finished, will offer a stunt-show battle to complement the mechanical volcano of his Mirage casino next door. Bennett and Schaeffer think they can top even this. Luxor, with its simulated spaceship rides and other tooth-rattling entertainment, will keep clients from straying too far from its doors, they claim. So will a $50 million theme park, with a flume ride that drops 52 feet over a waterfall and a four-loop roller coaster. So why worry about the rest of the industry? Does Kmart worry about I. Magnin? | |
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