Inside Asian Gaming

April 2010 | INSIDE ASIAN GAMING Singapore’s main fix for its tourism ‘problem’ is two new casino resorts. There are other, seasonal fixes, including the reintroduction in 2008 of the Singapore Grand Prix to the Formula One season. MICE in Singapore between them spent around US$6 billion on tourism infrastructure in Singapore—all for the sake of two precious casino gaming licences. That cash is equivalent to Brazil’s entire receipts from foreign tourists in the whole of 2008, according to figures given by Luiz Barretto, Brazil’s Minister of Tourism at the Global Travel and Tourism Summit in May 2009. The US$6 billion spent by the casino operators in Singapore is not, strictly speaking, free money for the Singapore government, given that opponents of gaming argue there is a social ‘cost’ connected with the industry. But Asian casino licences nonetheless attract big premiums. Genting and LVS are doing it because they expect to make the money back many times over, given the proven propensity of Asians to gamble hard and often. Singapore offers the potential of not only ethnic Chinese customers from its domestic market, Malaysia, Indonesia and mainland China, but also Indian nationals—a wild but potentially lucrative card in the Asian gaming scene. Analysts’ estimates of the size of the gaming component of the Singapore casino market vary somewhat. Anil Daswani, global head of gaming research for 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, a senior analyst at investment bank CLSA, is more bullish, estimating US$3.5 billion revenue in 2011. But there are key structural differences between the Singapore and Macau gaming markets, as Inside Asian Gaming has reported. On the upside, Singapore is a duopoly (if one excludes the role of Singapore’s slot clubs) within five hours flying time of half the world’s 6.6 billion people. And it’s the half that most likes to gamble. Potentially on thedownside, the Singapore casinos have relatively small footprints in relation to the total project (a maximum of 5% of gross floor area). That suggests producing good returns on the rest of the casino operators’ real estate will be even more important than it is in Macau. Such is the strength of the gaming revenue stream in Macau—a US$14.9 billion market in 2009, shared between six concessions— that LVS at The Venetian Macao managed to produce EBITDAR margin of 30.6% in the fourth quarter of 2009, despite a year-on- Source: Singapore Airlines