THE CURSE OF THE SULTAN

Gaming America regular contributor Oliver Lovat is back! Here, he discusses The Dunes, the Las Vegas Strip’s 10th ever resort to be built...

The Dunes opened in 1955, in the heat of the first phase of the Las Vegas Strip’s growth, and marked the end of that cycle as the first full resort to be imploded. It’s 38-year run was short, even by Las Vegas standards, but certainly not without event. On the 30th anniversary of its demise, we assess the impact of The Dunes and its legacy to casino management.

Early Years

The late May opening of The Dunes deliciously coincided with Life Magazine's infamous cover story, “Las Vegas – Is Boom Overextended.” The $4m, 200-room hotel was easily identified by designer Kermit Hobson Hawkins' 38-foot Sultan (officially titled “The Sheik”) that cast a knowing eye on all who entered the casino. The Sultan’s presence was not a lucky one and the resort almost immediately failed, with the casino making a particular loss. The owners of The Sands assumed the running of the property, but within short order, they threw in the towel at the loss-making joint and the bankrupt property was sold at auction. Numerous investors came in and out over the following period, but the constant was the property President Major Riddle, a noted businessman and gambler, allegedly highly connected to gangsters in Chicago. Alongside Riddle came a team of operators including Charlie Rich, George Duckworth and St Louis’ illegal betting king, Sid Wyman, who ran the casino. It was in 1961 that The Sultan’s Table opened as the finest restaurant in town, with two grand pianos and violins providing a unique ambiance.

The property also added a convention center, a 24-story Diamonds of The Dunes guestroom tower, health club, café, more restaurants and a nursery, where patrons’ kids could hang out. It was in this expansion that the famed Dome Under the Sea opened. Incomparable among the gourmet rooms of the period, diners ate Sole Belle Meuniere and Lobster Thermidor (both $7.50) in a specially built dome, entertained by a golden-haired harpist, Kippy Lou Brinkman.

The Sultan statue was moved from the entrance to the newly built Emerald Green golf course and was replaced by Lee Klay’s Dunes Pylon which, at 180 feet, was the largest electric sign in the world. Property leadership was making all the right moves in turning The Dunes into one of the most desirable locations in town, attracting gamblers from across the nation, but the Sultan’s curse was about to strike.

Not a decade into the apparent success, the property was acquired by Continental Connector Corporation. The new owner, a listed entity enabled by the Corporate Gaming Acts of 1969 to own casinos, was immediately investigated by the US Securities and Exchange Commission. Allegations of misreporting and unpaid taxes were made; indictments were to follow. Many of the owners, including Sid Wyman, had to sell up but were later acquitted of all charges, owing their freedom to one man: their lawyer, Morris Shenker.

Changing Times

Shenker wasn’t new to Las Vegas, straddling both sides of the city. On one hand, he parlayed with the well-healed business leaders and casino owners; but he was also, no doubt, familiar with the less salubrious operators, having represented many of those with connections to the city’s casinos, including at the Kefauver hearings into organized crime. Moreover, he was a close friend and lawyer to Jimmy Hoffa, leader of the Teamsters Union (and the central character in The Irishman), the pension fund which had financed many of Las Vegas’ early resorts, including The Dunes.

Despite one of the most rigorous of investigations in its history, The Nevada Gaming Control Board found nothing untoward and issued Shenker with a license in 1975, after his acquisition of controlling interest of The Dunes in 1973.

With Riddle still involved, “Uncle Sid” Wyman was hired again as a consultant and with Shenker’s decades’ long connections with gamblers and junket operators from the East Coast, The Dunes sought to reclaim its glory. However, the times were changing in Las Vegas. By the mid-1970s, the corporatization of Las Vegas had pushed out many of the first generation of owners, but the Dunes remained as a favorite haunt of many of the old guys, even some those that featured in The Black Book.

The steady flow from Teamsters' loans was also coming to an end, as management of the unions, including the Culinary Union, which had committed to and then withdrew a loan offer to The Dunes, fell under increasing scrutiny. The Teamsters' loans had enabled much of Las Vegas’ early development – and every casino loan was paid back in full – but since corporatization, whereas Kerkorian (Flamingo, International and MGM), Bennett (Circus Circus) and Riklis (Riviera) had the ability to tap capital markets for development finance, with The Dunes’ complicated ownership history, this was more difficult. Indeed, the property struggled with cash throughout Shenker’s time, and the old gamblers who were part of the glory days began to falter and pass.

In 1979, The Dunes borrowed to add the South Tower, giving the property another 700 rooms in addition to the existing 600. The property was perfectly poised for the 1980s.

However, at The MGM Grand across the road, killing 85 people in a horrific inferno. The Dunes suffered the blowback, as visitation fell in the desert, partly due to safety concerns, but also due to the wider economic malaise in the US. Furthermore, the new casino offering that arrived in Atlantic City was geographically closer to The Dunes’ staple of East Coast junket players. It was the perfect storm for The Dunes.

Despite suffering a heart attack in 1980, Shenker held on (just), bringing in The Perlmans, who owned the hugely successful Caesars Palace next door. Riddle did not, passing in 1980. The final throw of the dice was led by Arthur Shenker, Morris’ son, who foresaw the trends coming to Las Vegas. He sought to move away from the volatile high-end play and declining pool of old gamblers, in what was now a highly competitive casino market. Instead, the plan was to cater to mid-market tourists on modest budgets, taking a leaf from Downtown, introducing fun-books and cheap food. At sidewalk level, the neon entrance of The Oasis Casino invited pedestrians to come inside. The offering became cash generative to the resort, eliminating volatility and quadrupling play at the slots and video poker machines. It looked like The Dunes was finally turning a corner.

Despite the success of The Oasis, the Sultan struck again. The plan for cash customers at the front and junkets at the rear was blown apart in 1982, when Mexico devalued the Peso, leaving casinos with unpaid markers; the Peso to Dollar was now worth about 20 cents. The Dunes was particularly exposed with 60% of the Mexican junket play.

By 1984, The Perlmans were done. Californian farmer and casino operator, John Anderson, acquired both their stock and that from the estate of Riddle. Anderson’s optimism that he could overcome the curse was unfounded.

Despite the positive performance of The Oasis, the wider business was not in sync and the company faced default on its debt obligations. The Dunes was out of luck, time and money. By December 1985, both

Morris and Arthur Shenker had succumbed to the curse and were out of the Dunes after Anderson led the company into bankruptcy.

An Unhappy Ending

Just days later, on January 1 1986, the once-prominent Sultan, now at the rear of the property adjacent to the I-15, caught fire and was destroyed from the torso upwards. His curse continued. Hilton, Steve Wynn, Sheldon Adelson, Bill Bennett and Kerkorian had all looked at acquiring the property, but ultimately the bankruptcy court sold The Dunes in 1989 to Japanese company Minami Shoji for $157.7m. The Gaming Control Board had concerns over CEO, Maseo Nangaku, only awarding him a temporary license. His full license was not approved until 1991, by which time The Dunes was in financial trouble, again.

This time, buoyed by the success of The Mirage, Wynn could see the potential that The Dunes’ 163 acres presented and bought the asset for an undisclosed amount. The Dunes was closed and finally imploded in October 1993. The curse was finally vanquished and today, on the site of the Dunes and the golf course, stands The Bellagio, Aria, Vdara, Park MGM, New York-New York and The T-Mobile Arena, with a present land value of billions of dollars.

THE SULTAN’S LEGACY

For those of us who study the evolution of the casino resort and the history of Las Vegas, there is much we can learn from The Dunes’ story. On one level, the purported purpose of The Dunes’ original operations was not merely to offer a structured return on investment to the shareholders, but allegedly to maintain financial support to undeclared beneficiaries.

For decades, this put successive management teams in an invidious position: to operate the asset commercially and take action to end the alleged illicit activities, or to tacitly acknowledge the status quo, thus denying the management the required capital to reinvest and maximize the full potential of the wider landholdings. This was the real curse of The Dunes.

Nonetheless, The Dunes faced the same challenges that existed in other properties of that era and were not an impediment to their success. Rather, with the benefit of hindsight, the failure of The Dunes was down to a single fundamental problem – for a long period of its life, the property was operated with the absence of a coherent strategy. The golden age of The Dunes was undoubtedly the period of the 1960s, when Riddle and Wyman oversaw the property; their customer was them, first and second-generation Italians, Jews and Greeks in their middle age, who had a penchant for gambling and the finer aspects of post-war American life. As owner-operators, they shaped the programing of the property to meet their needs, which were also the needs of their customers.

was the sole advocate in the boardroom to the possibilities of what Las Vegas could become.

Yet operating in this field requires both operational and financial discipline, a point understood by Bill Bennett at Circus Circus, who led in this market, but not one that proved evident at The Dunes. Its aging leadership had eyes on a period and a customer, that had long passed. The Dunes was born in a period of market over-expansion and operated despite ongoing challenges; when it looked like it was shaping up for a new generation, it fell under the burden of its legacy. Finally, it was imploded and buried under a dancing fountain on a lake. All before it turned 40.

There is little doubt of the curse of The Sultan.

The further challenge facing The Dunes their eyes on the same customers, but When those properties reinvested, the arrivals of Kerkorian (who was a

The further challenge facing The Dunes was that The Desert Inn, Sands, Riviera, Flamingo and Caesars Palace also had their eyes on the same customers, but provided greater opulence and amenity. When those properties reinvested, elevated and expanded, along with the arrivals of Kerkorian (who was a part-owner of the Dunes in the early days), The International (which became the Hilton) and MGM Grand, The Dunes did not have a response until it was too late.

Without a clear customer strategy or competitor strategy, and without the internal capabilities to obtain competitive advantage in the market where it was positioned, the shift to a discounted offering was perhaps the only possible strategic response. This was fully understood by Arthur Shenker, who became the Hilton) and MGM response until it was too late. strategy or competitor strategy, to obtain competitive advantage once positioned, the shift to a discounted understood by Arthur Shenker, who

Oliver Lovat