Inside Asian Gaming

September 2015 inside asian gaming 25 Like nothing else, Marina Bay Sands declares this is not your father’s Singapore, or in the case of Prime Minister Lee Hsien Loong, son of Singapore patriarch Lee Kuan Yew, not his father’s Singapore. Marina Bay Sands’ trio of 57-story towers have become instantly recognized icons of 21st century Singapore. The rooftop infinity pool is this decade’s must-have feature for integrated resorts the world over, though few can match MBS’s commanding riverfront site, putting selfie clickers eye to eye with a dramatic skyline surrounding colonial architectural gems. Despite Chinese high rollers laying low, MBS has continued to deliver world-beating EBITDA margins and widened its advantage over Genting’s Resorts World Sentosa, thanks in part to its more central location with MRT mass transit trains stopping in its basement, plus a more comprehensive and sophisticated non-gaming menu. The success ofMBS is in large part a tribute toGeorge Tanasijevich, who led parent company Las Vegas Sands’ bid for a Singapore license. An American with a law degree and MBA, Mr Tanasijevich worked for a leading US shopping mall developer and operator then came to Singapore to join government-linked CapitaLand, Southeast Asia’s largest property company (and one of the bidders LVS beat to win the Marina Bay IR site). LVS hired the sartorially splendid Mr Tanasijevich in 2004 as its director of development in Macau, and a year later sent him to Singapore to spearhead its efforts to win a gaming license there. In retrospect, it seems LVS was destined to create MBS. But back in 2005, virtually every gaming company that could find Singapore on a map expressed an interest in at least one of its two IR licenses, in part George Tanasijevich President and CEO Marina Bay Sands inspired by the breathtaking success of LVS’s first Asian venture, Sands Macao, that opened in May 2004. Bidders like MGM and Harrah’s were far more experienced and better capitalized than LVS, which at that time had built exactly one of the properties that Singapore would term integrated resorts (and Singapore’s specifications categorically prohibited replica designs such as The Venetian). Mr Tanasijevich, with his track record in property development and history with CapitaLand, lent the outlandish LVS plans—“Now let me get this straight, the three towers are going to be curved, and on top you’re connecting them with suspended concrete as long as the Eiffel Tower for a park and swimming pool?”—desperately needed credibility. Mr Tanasijevich, named MBS president and CEO in 2011 as well as LVS global development director, has delivered numbers befitting a property with 2,561 rooms, an 800,000-square-foot (74,400 square meter) shopping mall, 1.3 million square feet of MICE space, a museum providing state of the curatorial art lodging for temporary exhibitions, two theaters, appropriately huge-scale public artworks, plus sampans on indoor canals and an ice skating rink, surrounding the casino limited to 161,000 square feet by government mandate. In a challenging environment, with Singapore tourism numbers declining, especiallyChinese, andgaming revenue showing its customary quarterly volatility (owing to a relatively small pool of VIP players), MBS delivered $1.7 billion in EBITDA last year on a 53.6% margin, up seven percentage points from the previous year. In the first half of this year, revenue fell 8.7% to $1.5 billion and adjusted EBITDA was off 8.8% at $778.6 million on margins of 52%, the same as a year earlier. The headline numbers may be somewhat misleading. Reporting as part of LVS, rather than a separate entity, MBS states results in US dollars, and the Singapore dollar has lost value against the US for the past year, 6% since the start of this year alone. On a constant currency, hold-adjusted basis, LVS says EBITDA was up for the first half. Rolling chip volume decreased 15.8%and overall gaming revenue fell 9.8%, but in local currency terms—the Singapore dollars players bet—average daily mass revenue reached a record in the second quarter. Over the past year, MBS is believed to have overtaken Genting’s Resorts World Sentosa for the lead in VIP play while widening its lead in mass revenue. Outstanding player debt for MBS dipped under $1 billion at the end of the second quarter with a reserve balance of $383 million. Non-gaming elements accounted for 20% of first half revenue at $300 million, providing a solid base along with mass gaming. The Shoppes at Marina Bay Sands mall was the sole MBS segment to record revenue gains in the first half, featuring operating margins of 85.4%. MBS profits through the first half, on a trailing 12-month basis, show good balance, with 37% from mass tables, 20% from slots, 16% from hotel operations, 8% from mall leasing, 4% from MICE and other items, and 15% from volatile VIP gaming. MBS would like to expand its non-gaming footprint with additional hotel and convention space on a vacant plot just to its west, but the government has refused to let it have the land. Where LVS would like to expand most of all remains Japan, and Mr Tanasijevich, in his corporate role, leads that effort. LVS has reportedly focused almost exclusively on the Tokyo area, Japan’s largest market and international gateway. As a good real estate man like Mr Tanasijevich knows and the experience of the two Singapore IRs shows, it’s all about location.