8/24/2016

TheBigRead:Onceamoneyspinner,canSingaporescasinosbeattheodds?

TheBigRead:Onceamoneyspinner,canSingapores
casinosbeattheodds?

Reutersfilephoto
Published:12:35AM,July2,2016
Updated:12:08PM,July2,2016
SINGAPORELastmonth,George,apitmanageratResortsWorldSentosa(RWS),wasaskedbya
superiortostaybackafterwork.
Hehadabadfeeling.Inthepreviousfewdays,severalcolleagueswhostayedbackhadnotreturned
totheoffice.Turnsouthewasrighttoworry.
Iwassackedonthespot.Iasked,whyme.Theywereunabletoexplain.Theysaidthatmy
performanceforthepreviousyearwasaverageandtheywereexpectingbetterperformance,addedthe
middleagedSingaporean,whoaskedthathisrealnamenotbeused.
Howcouldtheydothistous?Wewerethefoundingmembersoftheteam.Backthen,ourchairmanhad
saidthatthegroupneverletsgoofitspeople,wetrustedhim.
RWS,whichemploys12,000people,cutcloseto400casinojobslastmonth,citingdifficultiesfacingthe
business.Sofar,rivalMarinaBaySands(MBS),whichemploysabout9,500people,hasdismissedtalk
ofpotentiallayoffs.ButlikeRWS,itscasinoprofitsareslipping.
Singaporesglitteringcasinos,toutedasaneconomiclifelineadecadeago,appeartobelosingtheir
lustre.Theirfortunesarewaningtotalgamingrevenuefell16percentlastyearasChinesehigh
rollershavestoppedcomingduetoaslowingeconomyandacrackdownoncorruptionbackhome.
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TheBigRead:Onceamoneyspinner,canSingaporescasinosbeattheodds?

AndrestrictionssuchasleviesonSingaporegamblersmeancasinoscannotturntolocalstohelpmake
uptheshortfall,akeyrevenuestreamincasinoselsewhere.
Astheoddscontinuetobestackedagainstcasinoshere,theirfutureseemstobeabiggamble.Willthey
beabletofindanewrevenuemodeltosustainoperationsorgraduallylosetheirwinningstreak,weighed
downbyregulationsandasregionalrivalscatchup?
Theirfortunesarealsotiedtoapoliticalminefield.Withthecurrentbadnewsoflayoffsandplunging
profits,ithasrevivedquestionsonwhetherSingaporewasrighttoscrapitslongtimebanoncasinosand
embracegamingasaneconomicdriver.
Thepressureonthegovernmentcanbeimmense,particularlywhenitneedstoshowthatthedecision
tolegalisecasinogamingwastherightone,saidSingaporeManagementUniversity(SMU)lawdon
EugeneTanwhotracksthegamingindustryclosely.
Itisatoughcall.Governmentagenciesdealingwithtradeandtourismbelieveinvestmentsinthetwo
integratedresorts(IRs)whichhouseshotels,dining,entertainment,conventionspacesandcasinos
havehelpedthelocaleconomy,buttheyarealsohedgingtheirtourismbets.
TheIRshavegeneratedsignificantbusinessandjobopportunitiesforlocalSMEsandSingaporeans,a
MinistryofTrade&Industry(MTI)spokespersontoldTODAY.Theyhavealsobroughtinworldclass
leisure,entertainmentanddiningoptions,MTIadded.
TheSingaporeTourismBoard(STB),meanwhile,saidtheIRsarejustonepartofitsdiversetourism
strategy,whichincludesnongamingattractionssuchasGardensbytheBay,NationalGalleryand
FormulaOneSingaporeGrandPrix.
SINGAPORESBIGBET
Afteryearsofrebuffingcasinosforfearofcreatinganationofgamblersandtheancillaryviceandcrime
thatcouldfollow,thecitystatehadgrantedlicencesfornotone,buttwo,gamingoutletsin2006.This
changeofheart,amidintensepublicdebate,wasdrivenpurelybyeconomics.TheIRsweresaidtobring
inmoretouristsandcreateasmanyas35,000jobs.
Wecannotstandstill.Thewholeregionisonthemove,PrimeMinisterLeeHsienLoongtold
ParliamentinApril2005.
Losingourappealtotouristsisthelesserproblem.Butifwebecomeabackwater,justoneofmany
ordinarycitiesinAsia,insteadofbeingacosmopolitanhuboftheregion,thenmanygoodjobswillbe
lost,andallSingaporeanswillsuffer.Wecannotaffordthat,headded.
Weneedtodomanythingstobecomeaglobalcity.Acasinobyitselfisnotessentialtothisvision.But
anIRisnotjustacasino.AnIRisonesignificantideawemustconsider,thatwillhelpusreinvent
Singapore.
ButtherewerealsomovestoshieldSingaporeansfromgambling,suchasaS$100levyimposedon
citizensenteringthecasinosontopofsettingupagenciessuchastheCasinoRegulatoryAuthorityand
NationalCouncilonProblemGambling.
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TheBigRead:Onceamoneyspinner,canSingaporescasinosbeattheodds?

OncethegovernmentagreedtobuildingIRs,anelaboratebiddingandprojectevaluationprocess
followed.MrSheldonAdelsonsLasVegasSandsandMalaysiangaminggiantGentingclinchedthe
contractstobuildanIReach.
Theworldsbiggestcasinooperator,LasVegasSands,pumpedinclosetoS$8billiontodevelopthe
iconicMBS.Ithousesa2,563roomhotel,arooftoppoolandrestaurants,a1.3millionsqfconvention
centre,anexpansiveshoppingmall,onemuseum,twotheatres,multiplecelebrityrestaurantsto
accompanythelargestatriumcasinointheworldwith500tablesand1,600slotmachines.
GentingSingaporesS$6.59billionRWSprojectincludessixhotelswithover1,500rooms,Universal
Studiosthemepark,AdventureCoveWaterpark,S.E.A.Aquariumoneoftheworldslargest
Oceanariums,conventionfacilities,foodandretailoutlets,andthecasinospanning161,500sqf.
In2010,SingaporesIRsdebutedasbellesoftheeconomicball.Theyaddedvibrancyandvervetothe
economy.Visitorsfromthecurioustothecompulsiveflockedin,quicklytransformingSingaporeinto
theworldsthirdlargestgamblingdestinationintermsofrevenueafterMacauandLasVegas.
TheIRscontributesomewherebetween1.5percentand2percentofSingaporesGDP.
UNLUCKYGAMBLE
ButLadyLuckhasnotbeenfavouringthegamingduopolyrecently.Revenuesdippedasthebiggest
whales,Chinesehighrollers,stayedaway.Theyavoidedcasinosamidacorruptioncrackdownledby
PresidentXiJinpingandaslowingChineseeconomy.
AsChinesehighrollersmakeupasignificantportionofSingaporecasinosrevenue,theirabsencehitthe
bottomlinehard.Singaporesgrossgamingrevenue(GGR)fell16.5percent,fromUS$5.59billion
(S$7.52billion)in2014toUS$4.8billionin2015.
Analystsexpectrevenuetodipevenmorethisyear.Thenumbersfromthefirstquarteralreadyshowa
downwardslideof15percentwithGGRdecliningtoUS$1.1billionfromUS$1.3billioninthesame
quarterlastyear.
ThefiguresareevenbleakerforGGRfromVIPgamblersorhighrollersthosewhodepositover
S$100,000withcasinos.Itsawasteepercontractionofnearly34percentin2015,acrossthetwoIRs.
Thedip,however,wasdeeperatRWS.ItsVIPGGRfell49percent,leadingtoitsmarketsharedeclining
frommid50sin2014toalow40percentin2015,saidMrMervinSong,ananalystatDBSVickers
Securities.
MBS,withitscitycentrelocationpreferredbymostinternationaltravellers,hasfaredbetter.
WhilethetwoIRsarestillprofitable,growthhasbeenstagnantsincetheinitialburstofsuccessdueto
rigidregulationshamperingexpansionplans.
InadditiontobeinghurtbytheantigraftmovementinChina,whichisaimedatstoppingofficialsfrom
siphoningcashoffthemainland,stringentSingaporegovernmentregulationsonjunketoperatorsare
alsoaffectingIRs.

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TheBigRead:Onceamoneyspinner,canSingaporescasinosbeattheodds?

UnlikeinMacauandothergamingdestination,themiddlemenwhobringinVIPsarenotallowedtolend
moneytogamblersinSingapore,whichleavesthecasinosheredirectlyexposedtotheriskoflendingto
itscustomers.
MoneythatGentingSingaporeisowedbuthasntcollectedtotalledUS$787.5millionin2014,morethan
doubletheUS$369millionin2010.ThatsaboutfourtimestheaverageatMacaussixbiggestcasino
operators,accordingtoaBloombergreport.
Asasideeffect,Singaporecasinosmissoutonthemainlandconnectionsthatthesejunketoperatorsare
knownforinthegamingindustry.Singaporehasonlythreelicensedjunketoperatorswhilethereare
about200inMacauaspecialadministrativeregionlikeHongKongandtheonlyplaceinChinawhere
casinosarelegal.
ThismeansasmallerandshrinkingpoolofgamblersforSingaporecasinos.
SingaporedrawsuponitsowndomesticmarketaswellasthatofneighbouringIndonesiaandMalaysia.
WithouttheinvolvementofjunketoperatorstohelpdrawthebusinessfromChina,itisessentiallyfacing
afullymaturedgamingmarket,saidMrBenLee,managingpartneratIGamiXManagement&
Consulting.
This,togetherwiththestumblingVIPgamingbusinessandballooningnetexchangelosseson
investments,ledGentingSingaporetorecordits
smallestannualprofitinfiveyearsin2015.Profitsplunged70percentlastyeartoS$193million.Itsnet
profitcrashedevenmoreinthefirstquarterthisyear,an83percentyearonyearslidetoS$10.8million.
MBSperformedbetter.Firstquarterprofitfell33.8percenttoUS$274.9million(S$368million)whilenet
revenuewasdown23.1percentatUS$603.7million.
Thingscouldgeteventougher,asregionalrivalsarefastnippingattheheelsofSingaporesgaming
industry.
Withgovernmentsintheregioneasingtheirstanceongamingoverthepastdecade,neighbouring
countrieslikeCambodia,SouthKorea,VietnamandthePhilippineshavebeendrawingininvestmentsfor
megasizedIRs.MorecasinosarealsoopeninginmaturemarketslikeMacauandAustralia.
By2020,about17morecasinoswillopenintheAsiaPacificregionwithMacautheworldsbiggest
gamblingdestinationsettobehometosixofthesenewcasinos.Threeofthenewcasinoswillbein
SouthKorea(includingonebyGentingSingaporeatJeju),withRussia,NewZealand,Australiaandthe
Philippinesopeningtwonewcasinoseachinthenextfiveyears.
JapanismovingclosertolegalisingcasinogamblingwithitsbilltoallowforcasinobasedIRs,similarto
Singapore.
Still,someanalystssaySingaporehasanedge.
Thereisincreasedcompetitionfromregionalplayersbuttheeconomicslowdownhasleftsomeofthese
plansonhold.ThereisnoimmediatethreatascasinosinSingaporearesufficientlyestablished,saidMs

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TheBigRead:Onceamoneyspinner,canSingaporescasinosbeattheodds?

CharlotteHsu,EntertainmentandMediaLeaderatPwCSingapore.
Asaregionalbusinessandtouristdestinationwithitsgeographicallocation,safety,availabilityofgood
restaurantsaswellastheeaseofcommutingtothecasinos,itislesslikelyforSingaporespositiontobe
eroded.
Singaporesbiggestchallenge,perhaps,ishowtoremainanattractivegamingdestinationwithout
loweringsocialandotherregulatorysafeguards.
WHATSNEXT?
ThetwoIRshere,infact,havelimitedoptionstoboostgrowthandprofits.
CasinosaccountfornearlythreequartersofthetotalrevenueofbothIRs.But,giventheregulatory
restrictionsimposedonthemandtheGovernmentshesitationonlettingthemexpand,muchofany
potentialrevivalstrategyforthecasinosremainoutofthecontroloftheIRs.
ThedropinChinesegamblersisalsopartofalargerglobaltrend.SurveysofoutboundChinese
travellers,analystssaid,haveshownthattheshareofwalletforgaminghasdeclined.
TheChinesemassmarketischanging,andthatmeanstheIRswillneedtoveryquicklyadapttheir
businessmodel,saidMrLeeofIGamiX.
WhatisrequiredfortheIRs,isasustainablestrategybeyondhighrollersandjunketoperators.Thelong
heldmantraofbuildandtheywillcomecannolongerbereliedupononcethenoveltyvaluehasworn
off,headded.
Indeed,bothRWSandMBShaveshiftedfocustothemassmarket.Thoughnotenoughtooffsetlosses
fromtheretreatofhighrollers,ithasprovidedsomecushion.
WiththerecentriseintouristarrivalsintoSingapore,MrSongofDBSVickerssaidthemassbusinessfor
theIRsseemtobestabilising.
Yet,goingmassmarketisalsonotalongtermgrowthstrategyatleastforSingapore.
Atvirtuallyeverycasinointheworld,themassmarkettendstobepredominantlylocaloriented,saidMr
GrantGovertsen,MDatUnionGamingSecuritiesAsia.Giventherestrictionsthatthegovernmentputs
onlocalsitwillbechallengingforthetwocasinostogrowtheirmassmarketbusinessinasignificant
way.
ThatleavestheIRstoconcentrateongrowingtheremainingonequarterofthebusinesspie,including
hotels,highendretailandentertainment,eventhoughitmaynotbeenoughtolifttheiroverallfortunes.
Yet,thatclearlyistheonlyoptiontheyhaveandtheyarebacktothedrawingboardwithanobvious
focusonboostingnongamingbusinesses.
LasVegasSandshasaskedtheSingaporeauthoritiesformorelandtoincreaseroomsatitsMBShotel
byabout60percent.Itnowplanstoadd1,500roomstoMBSbesidesadditionalmeetingrooms,
ballroomsandexhibitionspaces.
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TheBigRead:Onceamoneyspinner,canSingaporescasinosbeattheodds?

GentingSingaporesaid,initsfirstquarterearningsstatement,thatitwillcontinuetoenhanceRWSs
brandidentitytotargetAsiasaffluenttravellers.
RWShasannouncedastrategicpartnershipwithMichelinGuidebookandthewineauthority,Robert
Parker,creatingAsiasfirstMichelinChefshowcaserestaurant.RWSalsorecentlylaunchedanewItalian
restaurant,Fratelli,helmedby3MichelinstarredchefsEnricoandRobertoCerea.
WhenaskedifthereareanyspecificplansbythegovernmenttohelpthetwoIRsturntheirfortunes,MTI
andSTBdidnotdivulgeanyspecificplans.
TheIntegratedResortsarepartofouroveralltourismstrategy,whichincludesastrongportfolioof
worldclassattractionsandeventstoenhanceourtourismappealasavibrantglobalcity,saidaMTI
spokesman.WecontinuetoworkwiththetwoIRstoensurethattheirattractionsandservicesremain
internationallycompetitiveandcontributetoSingaporestourismappeal.
MsCarrieKwik,STBsExecutiveDirector(Arts,EntertainmentandIntegratedResorts)toldTODAYthatit
isworkingwiththetourismindustrytoattractmorevisitors.Forinstance,itisengagingconsumers
researchingtravelproductsonlinethroughsitessuchasChinasBaiduandSouthKoreasKakao.
Wewillalsodiversifyourmarketinginvestmentstoincludesecondarycitiesinourtopmarkets,andthe
keylonghaulmarketsofEuropeandUS,saidMsKwik,addingthatSTBwillalsodevelopmore
experiencesthatshowcaseSingaporesauthenticityandhiddengems.Theseeffortswillhelpmaintain
Singaporesdestinationappealanddrivetourismgrowthinthelongrun.
Meanwhile,theexclusivityperiodforRWSandMBSwillexpirenextyear.Inthisenvironmentthough,
analystsdonotexpectthegovernmenttoallowmoreplayers.Nordotheyforeseeanyeasingofgaming
regulations,exceptonjunkets.
Itwillbeinterestingtoseehowthegovernmentresponds...Anyproposedrelaxationoftheregulatory
regimecannotbedoneexpedientlyaswhatisgivenawayinbadtimesmaynotbesoeasilytakenback
ingoodtimes.Moreover,itwouldshowregulatoryinconsistencyandthatregulationsandsafeguardsare
secondarytoprofits,SMUslawdonEugeneTannoted.
Weblazedatrailwithourapproachtothegamingindustry.Ifwegoforeasysolutionsthatdonotgear
uptheindustryforsustainableadaptationtothefastchanginglandscapeloweringoursafeguardsisthe
surestwaytoundercuttingpublicsupportforandthelegitimacyofthegamingindustry.
Perhapsonequestiontoaskis:DoesSingaporereallyneedtoencouragemoregamingaconceptthat
wasintroducedtohelpdrivetheeconomy?
AsMrLeeofIGamiXputit:Singaporesvision(fortheIRs)hasbeenexecutedperfectlyandthatitis
nowtimetolookatsomethingelseforthatnewboost.
Asforwhatisthatsomethingelse,thatistheburningquestionconsumingthegovernmentcommittee
lookingathowtogrowthefutureSingaporeeconomy.

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