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As the casino resort celebrates its 50 year anniversary as one of the dominant properties on the Las Vegas Strip, we explore the history and importance of Caesars Palace through the prism of the evolution of management theory to understand why this property has stood the test of time, while other similar properties have made their way to the great neon graveyard in the sky.
Having met at college in Missouri, the pair built and operated the Cabana Hotels in Georgia, California and Texas before turning to Nevada with the idea to build the luxurious Caesars Palace, a room, 14 story tower in Las Vegas.
However, Sarno and Mallin had two problems; no land and no money. The land that the Cabana Palace, or the Desert Palace as it was also known in development, needed was plentiful, but they needed a landowner who would take a bet on two Missouri upstarts with no casino experience and an idea to build something more exciting than another desert-style motel.
Mallin, in his eighth decade and still a resident of Las Vegas, recalls the early days fondly. He says that Kirk Kerkorian the landowner and Sarno, both gamblers, hit it off, leading to the deal for the land.
They paid the highest price, initially a rental deal with an option to buy. Between the staff and owners, we identified the biggest players in Las Vegas and gave them markers.
All our energies were spent on raising money, and in one respect that was our failure as the only place we could get staff was from other hotels in town.
If we had spent more time on management we would have avoided the problems we had later. It transpires that on condition to raise some funds, an investor specified that a particular casino manager, with experience from the Sands, should be hired.
Unbeknownst to Sarno and Mallin, that manager was acting for external interests. Levitt observed that companies should stop focusing on just selling their products, and instead on meeting customers' needs, which is the real secret to a successful casino resort.
For the post-war generation, many of whom had served in the military and were discovering consumerism and suburbia, there was a real need for escapism, luxury and excitement.
Caesars Palace transitioned perceptions of Las Vegas from a desert town for the mob and gamblers into a glamourous escape for all Americans, with Caesars Palace at the iconic centre.
A new Las Vegas was born that allowed Kerkorian to go from landlord to casino developer, building the International as the largest hotel in the world, which opened in , and paved the way for casinos to be more than just gambling houses.
After selling Caesars Palace, the duo then built Circus Circus a couple of blocks north, but after subsequent financial difficulties eventually went their separate ways.
In his later years, Sarno planned his great uncompleted project, Grandissimo, as well as offering classes to emerging casino executives, including a young Steve Wynn.
There are touches of Caesars Palace, such as the water features and distinctive landscaping, the use of escapist themes and the long driveways taking the customer physically, as well as metaphorically, away from the humdrum of reality into a new world of escapism.
Caesars Palace sold itself. They established a brand that entered public consciousness that has lasted five decades. Fred Kolman came to Caesars Palace in the s, ending up as a long-standing member of staff.
During this period there was a sense of luxury throughout, from the turquoise lighting outside, to Louis Prima in the lounge and Sinatra in the showroom.
The biggest stars played at Caesars Palace and the management knew that they had to be ahead of the curve as others always wanted to challenge Caesars.
We had the best staff and the best customers. Everyone was classy. In , Las Vegas had 6. By visitation had grown to In addition to increased visitors, gaming revenue grew massively.
Las Vegas really was the global capital of gaming and much of this was down to the Perlmans expanding Caesars Palace to be the dominant player, increasing the market size, and by extension its market share.
It was also in the s that strategic management became a dominant business philosophy, advocated by the likes of Peter Drucker and Igor Ansnoff.
The Perlmans understood that Caesars Palace was a national brand that had meaning and could be rolled out, like their hot dog stalls.
Secondly, Caesars was a cash-cow and provided the base for both expansion and diversification that would suit this management philosophy.
Between , Henry Gluck was the driving force behind Caesars World, shoring up revenues, cutting costs, making efficiencies and maximising profits at a time when the bottom line reality did not meet top line expectations.
As a large corporate entity there were several hostile financial manoeuvres, including one by Donald Trump which Gluck defended.
Caesars World continued to diversify in the gaming sphere as per the PIMS maxim, operating casinos on cruises and other jurisdictions.
The mothership, Caesars Palace, ticked over. Gluck, unlike many of the gaming executives of the time, was an outsider. Already a highly successful businessman when he joined Caesars World, his expertise was not in gaming, hospitality or fulfilling the wishes of customers.
He was a businessman and eschewed the high volatility of Caesars Palace which suffered from several bad creditors at this time and sought to position the property squarely for the middle classes.
With Frank Sinatra now on the books as director of entertainment, Caesars became the home to his band of aging swingers and crooners, signed up for package deals in multiple Caesars properties.
Robbie Knievel succeed where his father failed and finally cleared those fountains. Caesars World also instituted a number of innovative attractions at this time to lure customers, including the OmniMax Movie Theatre, The Atari Adventure centre and a live ice skating tournament, but none of these lasted the test of time.
As a brand, Caesars in the s was a symbol of Las Vegas — a kitschy pastiche of American excess, a something for everyone. That is, getting a mix of everyone, from the extremely high roller to the low-end player.
To great fanfare, The Mirage immediately broke all occupation and gaming revenue records. Caesar was no longer the emperor of Las Vegas, Wynn was.
After Excalibur, Circus Circus enterprises raised their game with the iconic Luxor, initially an attempt to move into the lucrative VIP segment.
It is the most basic of economic principles that competition leads to innovation but not all could keep up, and the old boys began to slip away.
Some made it, others did not. Yet it was Caesars Palace that had the most to lose, and like the former boxer and Caesars host Joe Louis, fight it did, throwing punches left and right, with some hitting and others missing badly.
What Caesars Palace had as a competitive advantage to those other properties was a globally recognisable brand, but behind the columns and statues the experience was unrecognisable from the glory days.
The corporate decades had eroded the extravagance, eyes were now firmly focused on managing both volatility and the bottom line.
From a management perspective, under Gluck there was no overarching strategy other than to run an efficient business to maximise profits.
The view was to give the customer more, rather than better; quantity was valued above quality. This was initially much derided, but proved to be a lasting legacy for Caesars Palace.
Having been expanded several times, it is still one of the most successful malls in the world today and has turned Las Vegas into one of the retail capitals of the USA.
The Forum also led to the introduction of the celebrity chef to Las Vegas, with Wolfgang Puck to be the first of dozens of chefs to launch offerings in the town.
With many older stars moving into retirement, the entertainment offering was bland, with the nadir being the hosting of WWF Wrestlemania; seeing toga-wearing wrestlers simulate fighting moves where Sinatra once strode was a new low.
In the early s Caesars held its own, just. It was around this time that a group of Harvard academics wrote a paper called Putting The Service Profit Chain To Work, which formed the basis of what we know today as relationship marketing.
The authors, including a young professor called Gary Loveman, hypothesised that only customer loyalty drives profitability and growth, and customer satisfaction drives loyalty.
In other words, quality beats quantity. Halfway through the decade, the corporate hospitality world re-engaged with Las Vegas once again, seeing the profitability of gaming, as Mirage Resorts, MGM and Circus Circus demonstrated to the market.
Gluck retired again shortly after. With customers defecting to newer hotels, those managing Caesars in the first half of the s sought to build the business by offering more to the customers in order to capture their loyalty.
Vegas was undergoing a generational expansion. As a strategy to compete, Caesars sought to challenge with size, scale and range of offering.
Internally, Park Place Caesars' new parent company built Paris in Las Vegas, which was positioned as a higher end property in the portfolio but with little discernible differentiation other than theme, which shows a valuable insight into the thinking of this era.
Drivers for competitive advantage, as we now can assess, are very few. In the period when it seemed that each quarter brought a new Strip opening or two, the prevailing thinking was that there was an under-supply to the market and differentiation strategies such as theme and architecture were sufficient to capture market share.
The dynamic that played out was that theme alone proved to be not enough; it allowed for successful differentiation in marketing, but not much else.
What became more evident in this period was that the theme became a brand, but it was the experience that determined customer loyalty and retention.
As experiences, such as restaurants, gaming and entertainment became more generic, the competitive drivers diminished. Upstairs in the corporate boardroom, all was not roses either.
Terry Lanni had left the company in the wake of ITTs takeover. In the quest for ever increasing profits, once manageable businesses had led to highly diversified sprawling conglomerates which were becoming increasingly difficult to manage.
ITT held diverse interests ranging from insurance companies to hotels and casinos, which made it attractive to suitors that wanted to acquire specific industries, with the new thinking, opposite to PIMS, that refined business processes management theories dedicated to specific sector growth could lead to greater efficiencies and profits.
One of those was to become hospitality giant, Starwood, which acquired ITT in Shortly after this takeover Starwood, which focused on hotels rather than casinos, exited the volatile and regulated Caesars World gaming assets and interests to Park Place, ironically a gaming spin-off from the over-expanded Hilton, which had faced similar boardroom pressure to separate.
By the mids Las Vegas was looking at another type of customer. No longer an adult Disneyland, it was a place for entire families to spend their vacation.
This was intended to complement the other family attractions on offer which made Caesars Palace a must-see for the new class of visitor.