Bill Harrah once commented that there would always be a newer, shinier casino, and being the newest wouldn’t guarantee success. Harrah was correct. Indeed, my own study of competitive strategy only shows two sure drivers of strategic competitive advantage—location and customer loyalty—and there are different customers and different drivers of loyalty.
Casino design and architecture plays an important role in enhancing customer loyalty, either in creating the functional elements that enable operational success, or in creating a place where customers feel enhanced by visiting. These elements of customer centrality define the resort and are critical in sustainable success.
Thus, when conceiving the resort, customer needs, both practical and psychological, must be at the forefront. New resorts can either meet the needs of existing customers and compete against the market or find unmet demand within a particular demographic or psychographic segment.
Within the history of Las Vegas, there are successful examples of both. The Stardust, Caesars Palace, The Mirage, Hard Rock, The Venetian and Cosmopolitan all arrived to market and brought a different customer that was not exclusively catered for. Arguably, The International, both MGMs, Bellagio and Wynn created an enhanced offering for an existing segment of the market. There is room for both strategies.
Successful owners and operators need the vision to enable success, however it is the role of the architect to structure these thoughts to allow for delivery. In the case of both Circa and Resorts World, the owners were both genuine visionaries, both understood Las Vegas’ wide range of customers, but both had to find a way to realize their ambitions.
The Circa Challenge
Michigander brothers, Derek and Greg Stevens, didn’t follow the traditional path to casino ownership; the pair led their family business manufacturing motor parts. However, beginning in 2008, they chose to diversify their business interests and Las Vegas seemed an attractive proposition. With Derek the public face, they focused on Downtown Las Vegas, initially with The Golden Gate, then acquiring and rebranding Fitzgerald’s as The D, and latterly assembling a full block on western Fremont St, once home of the Las Vegas Club, Mermaids and Glitter Gulch casinos. This project was to become Circa.
The early challenges facing Derek were strategic. With the Golden Gate, the positioning was obvious; it was a legacy property with significant brand equity. With skill and focus, he was able to modernize the property, driving incremental gaming and dwelling revenue, plus monetizing the huge footfall to the Fremont Street pedestrian area by offering street-side purchasing opportunities. Fitzgerald’s had no such brand equity and in assessing the competition, The Golden Nugget aside, there little to excite customers. The D became a literal personification of the owners; smart, creative, exciting, social, engaging and very much Detroit. Like Derek, it became a very attractive proposition to be around. The entertainment paradigm was resolved, as with a smaller footprint, the Fremont Street hotels couldn’t hold the capacity needed for larger events. The brothers acquired the old courthouse and demolished it for an open-air events center.
Stevens borrowed liberally from Fremont icons Steve Wynn and Benny Binion, offering the style, hospitality ethos and operational nous of the former, and the personality of the latter. Binion was supposed to have said, “People want good whiskey, cheap, good food, cheap, and a square gamble… Make the little man feel like a big man.”
Having immersed himself Downtown for a decade, Stevens has an unparalleled understanding of his customers. The puzzle that he needed to solve for Circa was whether the market could support his model to the extent needed for business success.
Stevens’ customers were not the growth drivers of recent Las Vegas. They don’t do nightclubs, aren’t the corporate convention crowd, nor are they the Asian high rollers. In fact, the Downtown market was much like the U.S. regional market, which had grown exponentially since Fremont’s previous heyday. Stevens also observed that there was a demographic shift in Downtown’s visitation. Of the 20m tourists that visited Fremont Street, plus locals that came Downtown, many skewed younger than average, taking full advantage of the outdoor offering that Stevens himself had innovated at the Golden Gate and The D.
He had seen the impact of his past investment on the macro-trends; since 2009, gaming revenues had grown by 21 percent to over $660 million, but all the other metrics had grown also, notably alcohol sales by 118 percent, almost to as much as food sales, with a much higher margin.
Would a new resort increase revenues or cannibalize the market? Would his existing customers pay a premium for a new resort? Would the Las Vegas leisure customer make Fremont Street their new home? Could the “new” Downtown support a property without all the expensive entertainment that was on the Strip?
Stevens rolled the dice.
The Genting Gambit
Eyebrows were raised when, on March 4, 2013, Malaysian group, Genting, announced that they had acquired the 87 acre site of Boyd Gaming’s stalled Echelon project.
Genting is a true international multi-billion conglomerate, with interests ranging from pharmaceuticals, real estate, cruise ships and theme parks. No stranger to hotels and gaming, Genting is the largest, most diversified gaming company in the world. The group was an initial supporter of Foxwoods and tribal gaming in the U.S., the largest casino operator in the UK and operator of the Resorts World brand, which includes Genting Highlands, the largest hotel in the world, one of the two highly lucrative casino licenses in Singapore. The obvious absence within the portfolio was in the entertainment capital of the world.
Unlike U.S. corporations (and like several Asian groups), many of the various businesses fall under the direction of ihe Lim family. Lim Goh Tong, who passed in 2007, was the founder and patriarch of the group. He was succeeded by Lim Kok Thay, (known colloquially as KT) who alongside his other family members, manage the family’s diverse interests. Like the Stevens brothers, with a background in engineering, Lim’s professional and business interests are deep and highly strategic, with a global perspective in understanding customer behavior and shaping an offering to meet their needs.
Lim had long watched the trends on the Las Vegas Strip grow, validating his multi-aspect entertainment thesis.
With a balance between adventure and caution, the group collected interests in gaming and hospitality across the world with the objective of eventually entering the Las Vegas market and challenging the established order. This was no easy ambition. MGM and Caesars have 100 years of proven market operations between them and lead the entertainment offering with a full range of amenities and global talent on offer. Wynn and Encore, and Venetian and Palazzo have over 11,000 rooms combined and cater for high end gaming customers, many of them international.
For Lim, the global entertainment visionary, was Las Vegas a step too far? Would he be able to build a resort that could compete – even surpass – the icons that inspired his global entertainment platform? Could an Asian-centric group be able to challenge the US hegemony in the market? Was Las Vegas able to support another new mega-resort for the 2020s?
It was time for Lim to play his cards.