Inside Asian Gaming

March 2009 | INSIDE ASIAN GAMING 27 with taking a three-and-a-quarter hour flight to Singapore, when Macau is a short trip by car or bus. Singapore’s IRs will cater more to players from Southeast Asia— particularly high net worth ethnic Chinese from Indonesia, Thailand, Vietnam and even Malaysia. Well-heeled Malaysians will probably welcome an alternative to the ageing Genting Highlands Resort. Exorbitant entry fee Although Singapore will boast a relatively low gaming tax rate, its citizens and permanent residents will be charged a fee—S$100 (US$65) per day or S$2,000 per year—to enter the IRs, while admission for tourists will be free. A senior government official described the entry fee as“exorbitant” when discussing how it would prevent an increase in the incidence of problem gambling among locals. The fee is one of several measures intended to minimise the potential negative social impacts of the IRs. At mid-2008, Singapore’s population reached 4.84 million, while Macau’s stood at 551,900. Macau’s population could certainly not generate sufficient demand for the city’s gaming capacity, which included 4,017 gaming tables and 11,856 slot machines at the end of 2008. According to Macau government data, non-residents contributed around 98% of all gaming revenue in the city, though considering local casinos are not required to identify patrons, this could be a rough estimate. Marina Bay Sands is permitted to have up to 1,000 gaming tables and 1,400 slot machines. To get an idea of how much gaming capacity Singapore’s population could support, consider Melbourne with a population of 3.8 million served by Crown Casino, with 350 tables and 2,500 slots. Crown Casino notably became the most expensive casino property in the world when it opened in 1997 at a cost of over US$1.7 billion. LVS is spending over three times as much (not adjusting for inflation) to earn Marina Bay Sands the title of priciest casino resort at opening. Crown is Melbourne’s only casino, and apart from its monopoly on table games also contains half the city’s total slot machine capacity. Locals have unfettered access to CrownMelbourne, and they drive a largepart of its business, alongwith contributions from visiting Chinese VIP players. Demonstrating the robustness of locals-only gaming demand during economic downturns, Crown’s non-VIP revenue rose 6% year-on- year in the first seven weeks of 2009. If Melbourne’s local population is able to just about sustain Crown’s gaming business, Singapore’s could possibly sustain the casino at Marina Bay Sands, but only in the absence of entry fees and other deterrents. Genting plans to open the sprawling Resorts World Sentosa in the first quarter of 2010, and local demand will probably not be able sustain both IRs. The IR operators hope demand from non-locals will more than make up for any shortfall, even though straight-laced Singapore’s ability to attract junkets is untested. Even without having to worry about an “exorbitant” entry fee holding back local demand, the exorbitant cost of Singapore’s IRs makes generating a healthy return on investment a daunting task. In Macau, LVS managed to build the world’s largest casino resort, Venetian Macao, at a cost of US$2.4 billion—less than half the latest budget for Marina Bay Sands. Still, Venetian Macao struggled to turn a profit even before the economy headed south. Big budget mega resorts are risky ventures, especially now that their developers—including LVS, the most bullish of the bunch in Asia—are facing bankruptcy risk. The IRs will need to tap every revenue source available to them, and allowing locals unrestricted access to their slots could make a material contribution to their financial survival. Singapore’s current slot market consists of over 2,000 machines at low-key slot clubs. A market player told Inside Asian Gaming that even though the clubs are relegated to non-prime locations, Singapore’s average slot win per machine per day is [probably] higher than that of any other market in the world, suggesting pent- up demand and insufficient capacity. The casino entry fee not only jeopardises the viability of the IRs by limiting local visitation, but also prevents the release of pent-up demand for slots. Imposing the fee will also prove an administrative nightmare because of the need to identify citizens and permanent residents—the latter generally carry foreign passports, so a separate check needs to bemade to verify whether they also have a Singapore resident permit within. Opposite ends of the spectrum Whereas the Singapore government has a reputation for sometimes going too farwith its attempts at social engineering, the Macau government is renowned for its general neglect, beyond populist quick-fixes such as last year’s 5,000 pataca cash-giveaway to all residents and reservinghigh-paiddealer jobs for locals. Such measures generally come at the expense of the diversification and long- term development of Macau’s economy. Singapore’sS$100entryfeewillobviously dissuade low-income players from playing too often, and could thereby make them less prone to develop an addiction. However, it is a regressive tax that could be seen as disproportionately punishing the poor, especially if they are capable of gambling responsibly. If anything, the entry fee will reduce the proportion of low-income players who gamble within their means at the IRs, while raising the proportion of low-income compulsive gamblers, for whom attempting to win back the entry fee is part and parcel of gambling beyond their means. There has been a perceived increase in the prevalence of problem gambling among Macau locals following the liberalisation of the casino industry, though the last comprehensive survey on the subject was conducted in 2003, before the arrival of any of the glitzy new foreign-operated casinos. Ironically, that increase is seen as resulting from the improved perception of Macau’s gaming industry following the Melbourne’s Crown Casino In Focus