Inside Asian Gaming

INSIDE ASIAN GAMING | February 2014 18 problemgambling and local visits in general areworking as intended. Only 7.7% of the local adult population made more than one visit to the casinos in the past three years, the CRA said in its 2012/13 report. Tourism figures, however, are up. According to the Singapore Tourism Board, more than 12.9 million international visitors arrived to October 2013, an 8.4% year-on-year increase similar to the growth in non-gaming revenue at both resorts. Given that revitalizing the flagging tourism industry was the government’s primary stated objective in legalizing casinos, the two resorts appear to be doing their job. And with annual hold-adjusted EBITDA at Resorts World Sentosa looking close to the billion-dollar mark, and Marina Bay Sands well above, there isn’t much cause for too much dissatisfaction. And the duopoly will remain in place for some years, with no license revisions due until at least 2017. Thus, if return on investment is a key consideration in assessing a property’s success, Singapore’s plateau is still quite positive. W hile much of the talk about Singapore has focused on slowing growth, both Resorts World Sentosa and Marina Bay Sands saw healthy year-on-year increases in the third quarter. Revenue and EBITDA at Sentosa increased by 17% and 15%, respectively, to S$776.4 million and $348.3 million, while MBS generated adjusted property EBITDA of US$373.6 million and gaming revenue of $628.1 million, increases of 43.3% and 33.4%, respectively. The trend did not continue for MBS, however, which closed out the year with gaming revenue down 8.2% and adjusted EBITDA down 14.4%. While luck has played a role in the results, the figures continued an overall downward year-on-year growth trend market-wide that began in the second quarter of 2011, leading one analyst to categorize the market as “flattish and boring”. On the plus side, the range of attractions on offer in each resort has led to sound growth in non-gaming revenues, ensuring that both will remain highly profitable enterprises despite the apparent plateau in gaming revenue. The main concern on the gaming side is with the VIP segment. The government remains antipathetic to junkets, and this has kept VIP volumes low relative to other jurisdictions and volatility correspondingly high and forces the casinos to shoulder the credit risks. Given that many of the high rollers come from China, where gambling debts are not legally enforceable, it’s a sizable problem. The government currently has licensed only three junkets, none of them Macau-based, and restricts their services. Junkets active in Macau would certainly work with Singapore’s casinos in order to offer their clientele a greater choice of venue and also potentially to partake in the greater incentives enabled by the city-state’s much lower tax rate on VIP play—12%, which includes 5% on the gross and a 7% goods and services tax—versus 40% on the gross in Macau. Even without junkets, however, mainland Chinese players account for about half the rolling chip volume at both MBS and RWS. Not surprisingly, this has led to the IRs being saddled with relatively high impairment charges and provisions for bad debts. The Singapore government has not given any indication that it will loosen restrictions on junket operators and may impose stricter regulations covering VIP gaming this year, such as requiring players to draw down their entire qualifying deposit of S$100,000 before credit can be extended to them and imposing higher fines on junkets for regulatory violations. Despite these challenges the outlook for the VIP sector appears decidedly more robust than that of the mass market. According to analyst Grant Govertsen at Union Gaming Research Macau, the mass market will remain soft for the foreseeable future. While there is scope for mass margin improvement, he believes the casinos’current efforts to acquire more premium-mass customers will have little near-term impact, with market penetration already high. Indeed, daily visits by locals have dropped, according to the government’s Casino Regulatory Authority, and initiatives to curb COVER STORY SINGAPORE Still Healthy Resorts World Sentosa increased revenue and adjusted EBITDA in 2013. Without junkets to handle the credit risks, Marina Bay Sands has faced relatively high impairment charges and provisions for bad debt.