Inside Asian Gaming

April 2010 | INSIDE ASIAN GAMING 39 some analysts, possibly half or more is going to go in operating costs. That will give a pot of about US$1.2 billion to US$1.4 billion to split between the two. “I predict one [resort] will get 60% and the other will get 40%. If MBS gets the 60%, they’re going to be in great shape. “Resorts World has a problem in my view. Theme parks in Asia don’t have a track record of being highly successful after the initial rush at the time of launch—especially Western-themed ones. The cost of the theme park puts a lot of extra pressure on the operator’s business model. RWS is also further away from town than MBS. Sentosa is like another world. To the locals, it’s like going somewhere else. You’ve got to make a positive decision to be there. Marina Bay, on the other hand, has 250 restaurants, and the biggest shopping complex in Singapore within a few minutes’ walk of Marina Bay Sands. Many people would have to pass MBS to get to RWS,” says the source. “If the market breaks 60% toMBS, they’re going to be running an annual ROI [return on investment] of 15%. If it breaks 40% to RWS, the extra burden of costs from the Universal Studios theme park will mean Genting could be in a situation where they’ll be lucky to show 8% ROI.” Pivotal The key battleground between the rival resorts, stresses the source, will be the battle for the hearts, minds and most of all, wallets of the locals, suggests the insider. By ‘locals,’ the source includes the significant cohort of tourists to Singapore who actually come to stay with friends and relatives, and those Malaysians who live within a few hours’drive of Singapore. “Regarding cannibalisation of Genting Highlands’ market, I think the 20% figure quoted by some sources is on the low side. I think it could be up to 30%. One market in Malaysia that is potentially massive for Singapore is Malaysian Muslims—who want to gamble but legally can’t in their own country. Indonesia will be next largest market, but it won’t be that big a market in my view. The rest of Asia you could put down to opportunity. “To me, the Singapore casinos are what we used to call in the industry ‘city centre’ type casinos. You can promote overseas business and bring in specialised tourism, but if you don’t capture your local market, you’re going to go broke,” states the source. “Why would anyone from mainland China want to bypass Macau? Macau has got better facilities for Chinese visitors than Singapore will ever have. No one from China is going to over fly Macau and spend another three or four hours on an aeroplane just to go to Singapore,” adds the insider. “I think 85% to 90% of the business could be ‘Singaporeans’. I include in that figure tourists staying with friends and family. They make up a lot of the visitors to Singapore. Pipe dream “The fact that government and the operators are saying this is going to generate foreign tourism is possibly a bit of a pipe dream. Singapore is an expensive destination. It’s more expensive than Hong Kong, and more than twice the price of Macau, when costs such as accommodation, meals and transport are factored in. For many overseas tourists it’s not going to be attractive, though I imagine there will be some opportunity business.” In 2008, Singapore’s average daily room rate (ADR) hit S$245—that’s US$175 at current exchange rates. In January this year, the ADR in Singapore stood at S$187 (US$137). Macau’s ADR for January 2010 was 1,044 patacas (US$130). The Las Vegas ADR for that month was US$99.75. And as Inside Asian Gaming reported in recent issues, it’s highly unlikely any junket operators with mainland China customers will be able to set up business in the Lion City. “Not one of the major junkets in Macau—no disrespect to any of them— would pass muster in terms of Singapore’s reporting requirements for junkets,” states the source. “Singapore has made itself the most difficult jurisdiction to go through in the world. The process is just horrendous, and most people will not pass. “It’s all about knowing everything about your financial background. People are not going to just give that information up for fun.” “In my view, MBS has got to be the favourite for domination of the Singapore market. Genting have done themselves a lot of damage with a half-baked launch. They’ve invested so much money, you can understand why they wanted to open the doors quickly. The problem is they’ve done so with not enough staff and without enough thought about what they were doing. It’s not, in my view, a well-planned casino. I really hope they get things right soon. They will need to, or LVS could leave them trailing.” Resorts World Sentosa Shops at Resorts World Sentosa