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LOYAL/BELIEVE SHOW ARTICLE

A gravity-defying profit act

KONRAD YAKABUSKI

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December 18, 2008 at 6:00 AM EST

The Las Vegas strip is sullen and Macau is morose. But Cirque du Soleil, which has more than half of its business tied up in the world's gambling capitals, somehow seems able to contort itself out of any tight spot.

Canada's top cultural export will post growth of 15-per-cent this year – with 10.5 million tickets sold and revenue grazing the $1-billion (U.S.) mark – and is so bullish on 2009 it is even braving the ravaged ruble to enter the Russian market for the first time and launching the king of all Vegas shows with an Elvis retrospective.

We already knew the Cirque, which turns 25 next year, was good at high-wire acts. Now we're finding out it can defy gravity, too.

And no, it's not merely an optical illusion, though that is the basis for the Cirque's newest Vegas show with marquee act and Mindfreak star Criss Angel.

Chief executive officer Daniel Lamarre says profits from the Montreal-based Cirque's six permanent Vegas shows are up 3 per cent so far this year, an acrobatic feat in itself considering the rivers of red ink flowing along the strip these days. The Cirque's Vegas partner – hotel and casino operator MGM Mirage – is among the walking wounded. It has, in the Cirque, found its own angel.

“We are running at historic low room rates and historic low occupancy,” concedes MGM Mirage spokesman Alan Feldman.

“But while we're seeing double-digit drops in room rates, food and gaming, we're not seeing it in entertainment. And for us, entertainment is the Cirque.”

The Cirque brand remains a beacon on the strip. Even its weaker shows are propped up by its ability to steer last minute spillover audiences from its sold-out acts to those with available seats. An average Cirque ticket in Vegas goes for $125.

“The fact that I have a dominant position in the market gives me a better handle on the consumer,” Mr. Lamarre explains. “In Vegas, it's a huge competitive advantage for us.”

Even the Criss Angel show – entitled BeLIEve, in keeping with its illusionist theme – has survived almost unanimously vicious reviews to fill the seats as much as any other Cirque show since its Oct. 31 debut.

“The customer base for Criss is made up of renegades. By definition, they react well to bad reviews,” Mr. Lamarre says of the mildly Goth crowd drawn to the show. “It brings a different clientele to Vegas. It's definitely changed the demographic of Cirque du Soleil.”

Macau, on the other hand, is a mess. The Cirque's permanent ZAIA show premiered in August at the Chinese gambling venue's Venetian resort, owned by Las Vegas Sands Corp. But travel restrictions from the mainland and the economic morass has left Macau a ghost town on many days. Cash-strapped Las Vegas Sands has mothballed a half-finished resort that was to house a second Cirque show in Macau, forcing Mr. Lamarre to find a new venue for the production that is already well into development.

So, surely Macau must qualify as a wicked tumble for the Cirque? Nope. Instead of smirching its reputation as a smart operator, the Macau debacle will only enhance it.

“When we did the agreement with Sands, we told them it would take three years to build a show. So we negotiated a profit guarantee for the first three years,” the 55-year-old Mr. Lamarre says. “We're very happy we did that.”

For all the daring of its acrobats, what impresses Cirque watchers most is just how well it manages risk. Cirque founder Guy Laliberté made what now looks like a brilliant business decision when he and about 20 top managers, including Mr. Lamarre, sold 20 per cent of the company in August to two units of Dubai World, the Dubai government's investment arm. If ever there was a time when it helps to have a partner with ocean-deep pockets, it's now.

Dubai World also owns 9.4 per cent of MGM Mirage and has Nevada approval to raise its stake to 20 per cent. It is also a partner with MGM in the, gulp, $9.2-billion CityCenter complex being built in Vegas. Its theatre will house the Cirque's most widely anticipated act ever, the yet unnamed Elvis show, when it makes its debut a year from now.

The deal with Dubai World gets one thinking about the Cirque après Laliberté. And though he's still only 49, the closet-smoking creative genius has not put off deciding what should come after him.

“Even though Guy is very young, he is very responsible,” Mr. Lamarre says. “We spend a lot of time talking about who will take over from us. I already know who would be on the board of directors if anything happened.”

What do you know? An irreplaceable billionaire visionary who actually knows he's not immortal.