Inside Asian Gaming

The Asian Gaming 50 – 2013 not always serve it well in Singapore. The most notable rookie mistake the company committed on arriving in the Lion City was transposing its Macau games mix to MBS. Unlike in Macau, where baccarat reigns supreme, roulette is dominant in Malaysia and Singapore, and the MBS main floor initially devoted too much precious space to card tables and too little to ones with wheels. But MBS soon spotted its mistake and moved quickly to reconfigure. The market responded in kind, revenue spiked, and LVS started getting better acquainted with local tastes. MBS overtook its rival by Q2 2011 and hasn’t looked back. That’s able management, and the team at Marina Bay Sands, led by George Tanasijevich, is one of the best in the region. Mr Tanasijevich arrived in Singapore in 2005 as LVS employee No. 1 and spearheaded the company’s winning bid for the first integrated resort. An accomplished business executive and attorney with extensive international experience, he was the perfect choice for the job. He’d been based in Macau up to that point, responsible for the coordination of various commercial activities related to LVS’ Cotai Strip projects. But having at one time held a senior position at Singapore’s CapitaLand, Southeast Asia’s largest real estate and hospitality conglomerate, he had an insider’s knowledge of the market. Sands President and COO Michael Leven credits him with being “instrumental” in securing the tender. “Throughout Marina Bay Sands’ construction and opening phases, George continued to impress us with his sharp business and legal mind, familiarity with the operating framework in Singapore, and reassuring presence,” Mr Leven has said. “He has been a steady and strong force for the company since Day 1, and we are proud to have him lead Marina Bay Sands to even greater heights.” Mr Tanasijevich also serves as managing director of Global Development for LVS, working to secure opportunities to keep the company expanding at the heady rates it has experienced over the past decade through its forays into Macau and Singapore. Resorts World Sentosa appears to have found itself firmly in the doldrums. Its revenue in the first half of 2013 contracted 7.5% year on year to S$1.38 billion (US$1.07 billion), while adjusted EBITDA slid 18.7% to $560.5 million. Underlying the poor performance is the confluence of a market that has already reached relative penetration and an unfavorable regulatory environment imposed by the Singapore government, from the casino entry levy on residents and injunctions on marketing to locals, to the effective ban on junkets and restriction on gaming capacity expansion. RWS was also hit by bad luck in the VIP segment. Although rolling chip volume had grown 34% in the first half, the VIP win rate fell to 2.3%, having stood above 3% in the same period last year. This highlights the danger of the reliance of both Singapore integrated resorts on a relatively small number of high rollers, which leads to greater volatility. The reason for the limited supply, of course, is that Macau-style junkets are barred from plying their trade in the Lion City. The junkets currently active in Macau would gladly work with Singapore’s casinos in order to offer their clientele a greater choice of venue and also to partake in the potentially greater incentives enabled by the city-state’s much lower tax rate on VIP play—12% (which 12 Tan Hee Teck President and COO Resorts World Sentosa includes 5% on the gross and 7% goods and services tax) versus 40%on the gross inMacau. But the government, understandably wary of junkets and their reputed links to Chinese organized crime groups, has chosen to keep them out. Singapore’s fastidious Casino Regulatory Authority has so far licensed only three junkets, none of them active in Macau or apparently involved in any of the traditional junket activities beyond marketing to players. Known locally as “international marketing agents,” the three approved groups all work exclusively with RWS, and by most accounts do not bring inmuch business. Even without junkets, however, mainland Chinese players account for about half the rolling chip volume in the city-state. Not surprisingly, this has led as well to the IRs being saddled with relatively high impairment charges and provisions for bad debts. RWS saw a 13.7% year-on-year increase in its impairment loss on receivables to S$77.1 million in the first half. The government has not given any indication that it will loosen restrictions on junket operators, and if anything is scheduled to impose stricter regulations. It is also expanding its limits on mass-market advertising. That does not bode well for RWS, which registered a mere 1% year-on- year growth in mass revenue in the first half. Last month, Singapore extended restrictions on casino advertising to include promotional activities surrounding membership campaigns and loyalty club programs. The rules, which previously applied only to advertisements, now require RWS and MBS to obtain prior approval from the Ministry of Community Development, Youth and Sports before launching such promotional campaigns and any media- related activities and sponsorships associated with them. “The casinos are meant to be tourist products and should remain so,” said CDYS acting Minister Chan Chun Sing. “We are prepared to strengthen social safeguards as and when necessary to ensure that there is no targeting of our domestic market.” Despite the bleak growth outlook, Tan Hee Teck stands at the helm of one of the most profitable casinos in the world, the jewel in the crown of Genting’s global operations. Mr Tan was instrumental in helping RWS score its duopoly Singapore license in 2006, and from the property’s February 2010 opening, has worked to shore up its position in the market. He has more than 20 years’ experience in the leisure and gaming industries, having held various senior positions within the Genting group. 24 INSIDE ASIAN GAMING | September 2013