Inside Asian Gaming

INSIDE ASIAN GAMING | March 2010 Resorts World Sentosa’s gaming floor The US$4.4 billion Resorts World Sentosa currently holds the title of the world’s most extensive and expensive integrated resort. Marina Bay Sands will soon take that crown. reflect the dominance of Malaysia as a source market. Approximately 9 million people cross the land border between Singapore and Malaysia each year, though a large proportion of them are likely to be day-labourers crossing over for work. In order for Singapore to get an accurate picture of the influence of casino resorts on its total tourism numbers it may need to start breaking down and reclassifying the land border arrivals The top five source markets for tourist visitors at Singapore’s air and sea borders in 2009 were: Indonesia (1,745,000 visitors), China (937,000), Australia (830,000), Malaysia (764,000) and India (726,000).Together, these 5 markets made up over 50% of arrivals to the city-state last year. The bulk of Singapore’s casino patrons will consist of Malaysians and local Singaporeans. With a population approaching 5 million, Singapore is expected to generate considerable homegrown gaming demand, in contrast to Macau, where the half million strong population hardly makes a tangible contribution to casinos’ coffers. The third largest source of players at Singapore’s casinos is expected to be Indonesia. Singapore’s casinos in particular will covet wealthy Indonesians. A report by consulting firm Capgemini shows there were an estimated 23,000 high-net- worth individuals (HNWI) in Indonesia in 2008, with total assets of US$80 billion. The report estimates that one-third of Singapore’s HNWIs are Indonesians with permanent-resident status, holding another US$80 billion. Among the VIP players arriving directly (i.e. not via gambling agents) at Macau’s casinos are Hong Kong residents, Taiwanese and Southeast Asians, who are unrestricted by currency controls, as well as wealthy mainland Chinese with offshore companies and/or overseas bank accounts and assets. These direct VIPs probably collectively account for at most 6% of Macau’s casino revenue. Still, this does suggest that there is potential for more than 1% of Macau’s revenue to be cannibalised by Singapore, especially since Singapore is a regional business hub, and some of these players may find themselves already going regularly to Singapore. Direct players will also be incentivised to take their business to Singapore. RWS is offering direct players a rebate of 1.1%, while direct players in Macau only get about 0.8%. Despite the higher rebate, RWS is still likely to achieve better margins on its direct players because of Singapore’s lower gaming tax rate. Whereas junkets rule in Macau, the direct player is king in Malaysia. Merrill Lynch estimates 80% of rolling chip turnover in Malaysia comes from direct VIP players. Even if the CRA had not in essence regulated away the junkets from Singapore, RWS and MBS would likely have followed the Malaysian model of courting VIP players directly. In fact, if it weren’t for the irksome credit issue, even Macau’s casinos would junk the junkets, who are, after all, essentially middlemen taking a cut. LVS revealed in a June 2009 note to investors that its margin on direct high roller play in Macau was 1.0 to 1.2 times higher than the margin on players fed to it by junkets. Cover Story