Inside Asian Gaming

March 2010 | INSIDE ASIAN GAMING Cover Story Marina Bay Sands The Lion City Tussle Who will be top dog in Singapore? S ingapore’s casino market is likely to serve up small to medium whales compared to Macau’s leviathans. Anil Daswani, global head of gaming research at Citigroup Investment Research, forecasts Singapore’s two IRs will generate US$2.8 billion in casino revenue in 2011, their first full year of operation. Aaron Fischer, an analyst at investment bank CLSA, is more bullish, forecasting US$3.5 billion revenue in 2011. Yet even his more bullish figure is a far cry from any two year forecast for Macau casino revenue, which hit US$14.9 billion in 2009, and started 2010 strong, growing a whopping 63% year-on-year in January. It is acknowledged that China’s recent monetary tightening will limit funds available to Macau’s high rollers, though given the January showing, it may merely temper what would otherwise have been another stratospheric year of revenue growth. Investment bank Merrill Lynch predicts Macau’s 2010 casino revenue will come in at US$16.4 billion. Singapore’s casinos should prove more successful at courting higher-margin direct VIP business than their Macau counterparts, which is just as well given the CRA’s junket regulations. Both Singapore IRs will need all the margin they can get, given the relatively exorbitant sums they have invested despite the much smaller expected gaming volumes than in Macau. With a price tag of US$4.4 billion, RWS currently holds the title of the world’s most extensive and expensive integrated resort. Marina Bay Sands will soon take that crown, with a price tag of about US$5.5 billion. Genting says it will soon open 530 gaming tables, 1,300 slot machines, and a 12-table poker pit at the casino at RWS (initial reports after the Chinese New Year opening suggested it was only operating with 270 tables). RWS also contains Southeast Asia’s only Universal Studios theme park, which is seen as the resort’s key family-friendly attraction. MBS will include a 2,600-room hotel, two 4,000-seat theatres, an exposition and convention centre that can support 45,000 delegates, and a luxury shopping and dining complex. Its casino will contain 1,000 tables and 1,400 slot machines. The consensus view is that Las Vegas Sands Corp (LVS) will emerge victorious in the battle for leading share in the Singapore gaming market, given the downtown location and more chic surroundings of MBS, compared to the more leisurely and family-friendly RWS site. Initial reports from the RWS casino support the thesis that LVS [based on its performance in the US and Macau] has a superior customer service philosophy to Genting. Mass market patrons accustomed to free coat check services at the entrance to all Macau casinos were surprised when asked to pay to deposit belongings in lockers before entering the casino at RWS. Many complaints have also been heard about the lack of free drinks and helpful staff at the new RWS casino. Presumably, Genting will up its game when LVS—a seasoned veteran from the Macau market share battle—finally opens shop in Singapore. The first LVS property in Macau, the US$265 million Sands Macao, famously recouped its initial investment within 10 months of its May 2004 opening. Now, LVS operates three casinos in Macau: Sands Macao, the US$2.4 billion Venetian Macao and US$905 million Four Seasons Macao. That’s a total initial outlay of less than US$3.6 billion, with which LVS has garnered a 22% share of the Macau market. The US$3.6 billion in revenue LVS is expected to earn inMacau this year will likely overshadow the entire gaming market that LVS and Genting have to share in Singapore. Hence, Singapore’s IRs will be banking on their non-gaming draws. Merrill Lynch estimates 90% of revenue at Macau casino resorts is generated by gaming activities, with the remaining 10% from non-gaming. That mix is not much different at Genting’s sprawling Malaysian casino resort, where Merrill estimates 11% of revenue derives from non-gaming sources. Merrill believes the Singapore IRs will do much better on the non-gaming front, however, deriving 30% of their revenues outside their casinos. A desire to drive general tourism numbers and tourism revenues—rather than a wish to find a new source of tax revenue for a mature economy—was the stated policy aim of the Singapore government in allowing gaming resorts in the first place. The opening set of official numbers on RWS—and later MBS—will be a step on the way to seeing whether official aspiration and market reality match.