Inside Asian Gaming

inside asian gaming February 2015 26 Cover Story “Many [foreign] government officials visit the IRs in Singapore and think, we want this in our country,” Spectrum Asia chief Executive Paul Bromberg says. “They go home and find it’s not that easy. It takes a lot of government will and years of behind-the-scenes planning. Four years before the IRs opened, Singapore was working hard on their development and regulation.” Despite those years of preparation, the IR experiment didn’t start smoothly. When the S$7 billion ($5.25 million) Resorts World Sentosa opened its doors on 14th February, 2010, it was a Sunday, Valentine’s Day and the first day of Chinese New Year. “There was nowhere else to go,” Mr Tay recalls. “They expected it to be successful, but not that successful.” With thousands queuing in the tropical sun with little shade or water, Genting Executive Chairman Lim and RWS Chief Executive Tan Hee Teck helped with crowd control. Early hiccups included frequent shutdowns of Universal Studio’s much-heralded Battlestar Galactica dueling rollercoaster, finally closed for reconstruction last July. Ironically, Genting paid Universal Studios US$1 billion, a source says, to secure the theme park rights that many believe clinched the Sentosa license. Occasional glitches haven’t prevented RWS—also featuring the world’s second-biggest aquarium, a water park, six hotels, museums and a destination spa—from becoming one of the world’s most profitable casino resorts, reporting S$968 million in EBITDA on net revenue of S$2.2 billion, a 43.5% margin, for the first nine months of last year. The world’s most profitable casino resort is likely crosstown rival Marina Bay Sands, also the world’s most expensive at US$5.7 billion. For the first nine months of 2014, MBS reported EBITDA of $1.2 billion on $2.38 billion revenue, a 50.7% margin, believed to be the highest in the industry. MBS non-gaming revenue, which Singapore had hoped would comprise 50% of total revenue, was $633.7 million, or 26.7% of the total. Jointly the IRs’ non-gaming revenue, $991.5 million, was 24.5% of their $4 billion combined total revenue. PROFITABLE PLATEAU The key fact for both resorts is that revenue is flattening, albeit at a level generating substantial profit. Singapore’s gaming revenue hasn’t moved much since reaching an estimated $6 billion in 2011, the IRs’ first full year of operation, though it fluctuates substantially each quarter owing to volatility in hold, a result of the relatively small pool of VIP players coming to the city. Third quarter gaming revenue fell 21% at RWS and 9% at MBS year on year, and EBITDA declined at both, reflecting the same economic and political headwinds from China hitting Macau, plus Singapore’s declining Chinese visitor arrivals, a weaker Indonesian rupiah and less frothy regional economic growth. Those factors also contributed to non-gaming revenue at RWS declining for the first time ever in 2014’s second quarter, and then again in the third. On the gaming side, marketing constraints prevent the IRs from fully exploiting the home market’s wealthy residents—an estimated 15% of Singapore’s population are US dollar millionaires— and junket curbs restrict their reach overseas. “For the foreseeable future, there will be immense challenges in growing revenue,” Mr Tay says. Located on Sentosa, Singapore’s designated leisure island, RWS has a reputation as a family destination, and owing to its Malaysian roots, many say it draws customers mainly from “across the causeway” linking Singapore to Malaysia. In reality, RWS consistently beats MBS in share of VIP roll with a 61-39% edge, and analysts estimate about half of it comes from mainland Chinese players. Genting’s longstanding regional network built through its flagship Resorts World Genting, outside Kuala Lumpur, aid its VIP edge. In mass-market revenue share, MBS leads 55-45%, posting a category record $291 million in the third quarter. The resort sits in Singapore’s designated New Downtown area, within walking distance of the financial district and, since June 2012, connected to the MRT mass transit rail system, making access easy. Last year, MBS welcomed 40 million visitors, about 110,000 daily. RWS stopped Five years after Genting’s Resorts World Sentosa kicked off Singapore’s IR experiment, the city-state’s model of open license bidding, strict development guidelines aligned with government policy initiatives and stringent gaming regulation has been deemed a success.