Inside Asian Gaming

INSIDE ASIAN GAMING | Oct 2007 20 M odern casinos have evolved from gambling halls into all encompass- ing entertainment centres run by global operators. Developing them is capital intensive and often requires extended pay back periods, as we report in our cover story ‘Capital Ideas’ on page 6. The principle is perfectly illustrated by what’s happening inMacau and Singapore— two jurisdictions now importing what is es- sentially a Las Vegas business model to Asia. Las Vegas Sands Corp (LVS) claims bragging rights as the pioneer of this Vegas format, which stresses the development of non- gaming revenue through integrated resorts (IR) with conference, retail, and entertain- ment facilities. The objective with this mix is to get gam- ing and leisure to support each other. Giving casino customers multiple reasons to visit a venue alters existing patrons’ discretionary spending habits and brings in new visitors, goes the thinking. Existing players, instead of leaving a casino as soon as their allotted gaming money runs out, are more likely to increase their trip budget for spending on meals, shopping and shows. Consumers who might not previously have considered spending time in a casino come for the shows and shopping, then stay for a flutter. It creates a win-win situation for operators and investors, as gaming and non-gaming revenues rise simultaneously. This theory appears to be proven by economic trends in Las Vegas. Research sug- gests that between 1990 and 2000, the de- velopment of IR casinos helped non-gaming revenues post a 13% compound annual growth rate (CAGR), while gaming revenue also went up—though with a shallower curve at 7% CAGR. Multiple models In Asia, the most clearly identifiable IRs are being developed in Macau (The Venetian Macao, City of Dreams, Macao Studio City and GalaxyWorld) and Singapore (The Ma- rina Bay Sands also from LVS and Genting’s Resorts World at Sentosa). The Singapore sites will though have a different mix of ame- nities compared to what’s on offer in Macau because of government restrictions on the size of the gaming areas. Under the terms of their government licences, the Singapore re- sorts are limited to 161,000 sq. ft of gaming space each and 2,500 gamingmachines—by comparison, there is 550,000 sq. ft of gaming space at Venetian Macao, making it the big- gest casino in the world; 420,000 sq. ft at City of Dreams and 320,000 sq. ft at GalaxyWorld. Japan andTaiwan – two countries report- edly considering the legalisation of casinos as a way of keeping their ardent gamblers at home and away from illegal domestic gaming, while simultaneously raising much- needed tax—may also opt for integrated resorts, either with a limit on the amount of gaming space as specified in Singapore, or the more free market Las Vegas model seen in Macau. A safe sell The IRmodel is widely regarded as a safer ‘sell’ than traditional gaming halls, especially in Asia. It is easier to pitch to any domestic opponents of the industry because of its em- phasis on stimulating the local economy by boosting tourism and business travel. Sup- porters of the IR model argue its economic and social benefits outweigh any perceived negative social effects of gambling. Vietnam,an officially communist country that currently has limited legal gaming, has reportedly authorised the construction of a huge multi-phase US$4.5 billion beachside IR project on a 2.1-mile long piece of land to be called the Ho Tram Strip. The site in Vung Tau province, a two-hour drive from Ho Chi Minh City, may also be known as Vietnam Casino City. The plan is to build a total of five casino hotels, but gaming is expected to take up only a modest amount of the total 16.1 mil- lion sq. ft of gross floor area. The rest will be for hotels, restaurants, theatres, a cultural centre, a country club and a massive swim- ‘ I ’ is for Integration Supercasinos are changing the face of Asian gaming Marina Bay Sands interior