Right now, Singapore is the darling of Asia’s gambling scene.
Two casinos opened in the conservative city-state last year, which are now the thriving centerpieces of a pair of glitzy resorts. Both have delivered bumper profits and will enjoy a protected duopoly until 2017.
The success has been so great, that Singapore is likely to steamroll Las Vegas and become the world’s second-largest gambling hub — after fellow Asian casino center Macau — as early as this year.
But pursuing the casino tourist is a difficult task for a government that once banned casino gambling completely. A complex domestic environment, coupled with rising competition from its neighbors, could see a marked cooling of Singapore’s gaming market.
“In the first year it has proven to be a major success, but the problem is expectations have gone very high, to a level that is scary,” said Nomura Asian gaming analyst Wai Kee Choong.
Singapore vs Las Vegas
Genting Singapore PLC SG:G13 +1.39% GIGNY +2.23% opened its Resorts World Sentosa in January 2010, followed by the Marina Bay Sands — owned by Las Vegas Sands Corp.LVS +0.41% — in April 2010.
Royal Bank of Scotland’s Asian gaming analyst Philip Tulk forecasts Singapore’s gross gaming revenue will grow by up to 25% this year, to total $6.4 billion.
That’s expected to put it ahead of the Las Vegas strip, which last year delivered revenues of $5.8 billion, according to the American Gaming Association.
Both are well out of sight of pack leader Macau, however, with 2011 revenue forecasted at $32.1 billion, according to Royal Bank of Scotland.
Transforming tourism
The foray into gambling is a part of an aggressive push to grow Singapore’s tourism sector.
The government wants to lift tourist arrivals from 8 million to 17 million, and to triple tourism receipts to 30 billion Singapore dollars ($24.7 billion), by 2015.
Historically, tourism was tied to location, as a regional transit hub and gateway to Southeast Asia’s leisure playgrounds, including Phuket and Bali.
“The government wanted to build Singapore’s appeal for tourists, and as a city for business related to travel and tourism,” said Aaron Hung from Singapore Management University’s World Travel & Tourism faculty.
“That’s where it adds value. Money flows through Singapore, it becomes a decision-making center, so people have to go there,” Hung said.
So far the government is on track to hit its targets.
Online travel group Tripadviser, and Starwood HOT +0.43% and IntercontinentalIHG -0.25% UK:IHG +0.16% hotels are among the firms that have established Asian headquarters in Singapore.
Tourism receipts in the first quarter of 2011 jumped by more than 35% from a year earlier. Arrivals rose by nearly 16%. Sightseeing and entertainment — which includes gaming — more than tripled.
Just how many visitors are attending the casinos remains unclear. Resorts World is upfront about other aspects of its operations — more than two million guests visited its Universal Studios Singapore in its first nine months of operation — but remains tight-lipped on casino tourists.
Nor does Singapore’s Casino Regulatory Authority publicize gaming revenue or gaming-tax numbers.
Hung said cultural and legal standards of Singaporean society dictated that in the past, the government “didn’t touch gambling.”
“The requirements are quite stringent. The operators can’t run [the resorts] as gaming facilities, they must have MICE [meeting, incentive, conference, events] facilities, and other attractions,” Hung said.
Despite the add-ons, more than two-thirds of the resorts’ revenues are derived from gaming.
“The government and the tourism board don’t blatantly promote the casinos, but it is attracting the audience. The audience knows [the casinos are there] — they’re gamblers,” he added.
So far those gamblers have pumped billions into the two casinos.
Resorts World’s gaming revenue for the first quarter of 2011 was about $664.5 million, while Marina Bay Sands hit $464.4 million.
The duo are protected from competition for 10 years, with gaming magnate Steve Wynn among those reportedly considering entry to the Singapore market once this exclusivity period expires.
Analysts’ views
Analysts and fund managers are split on the value of Singapore’s gaming stocks.
Nomura’s Choong argues current margins are unsustainable. He expects revenue growth will moderate to 10% for the next two years.
Choong warns that with only a handful of “hardcore gamblers” in Singapore, the casinos will struggle to secure the necessary domestic support.
“The Singapore market is too small for two casinos to sustain the exceptionally high [earnings] margins recorded currently,” Choong said.
The casinos face rising threats from emerging markets such as the Philippines and Laos, as well as competition from established gambling houses in Macau and Malaysia.
“[It’s] unlikely the Malaysian mass-market player will gamble in Singapore dollars, especially on a sustainable basis,” Choong said.
Aberdeen Asset Management Asia’s Christopher Wong is not swayed by the dazzling profits of Singapore’s casinos, put off by what he describes as a “dirty industry.”
“The existing players are enjoying super-normal profits. They are extremely successful, so much so that Sands and Resorts World are asking the government to give them more land, so they can increase capacity,” Wong said.
“They’re pulling overseas visitors, and punters from [mainland China]. From that perspective, the businesses sound fine, but if you dig deep into the nitty-gritty, and reputation of the people running it, it’s probably a bigger worry for us,” he said without elaborating.
Junket uncertainty
Those reputation concerns flow into the lingering tide of anti-gambling sentiment in Singapore.
“The government almost energetically and aggressively is keeping people out of the casinos. It’s quite difficult for the operators,” said Hung from Singapore’s School of Management.
Measures include a S$100 entry fee for local residents, exclusion orders for problem gamblers and continuous anti-gambling campaigns.
Singapore also has yet to license junket operators. These casino tour promoters are a crucial part of Macau’s success, bringing in the lucrative VIP players and providing credit.
“There’s no smoke without fire — the junket operators are dodgy. They are linked to the Triads [Chinese secret criminal societies], so the Singapore regulators are more stringent in terms of letting junkets operate,” Aberdeen’s Chris Wong said.
The Casino Regulatory Authority has received applications from junket operators and is assessing their suitability.
While the house supplies high-roller credit in Singapore, the approval of junkets could bring fresh hordes to its gaming houses.
Royal Bank of Scotland’s Tulk believes junkets will be authorized in Singapore by the second half of this year.
But Nomura analysts are more cautious.
“We take a very conservative view on junket operation. The way the Singapore government regulates is very tight. A case in point is the move to stop the free shuttle-bus services by the Casino Regulatory Authority. A lot of things are still roadblocks for junkets in Singapore,” Nomura’s Choong said.
“In Macau, the government is behind gaming, they want to make Macau a gambling hub. In Singapore, it’s very different,” he said.
But one factor supports the outlook for stocks in both markets, Aberdeen’s Chris Wong said.
“It’s recession-proof — when you need to drown your sorrows, you drink and gamble, and if you have money, you do the same thing too,” he said.
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Consulting, Investment and Management, focusing three main economic sectors: International PR; Healthcare & Wellness;and Tourism & Hospitality. We also propose Higher Education, as a bridge between educational structures and industries, by supporting international programs. Sign up with twitter to get news updates with @SaigonBusinessC. Thanks.
No comments:
Post a Comment