Singapore Surpasses All Expectations
The two new integrated reports in Singapore have surpassed all predictions and expectations since they opened their doors in 2010. Very few market observers accurately forecast the initial revenues that would be generated by the Marina Bay Sands and Resorts World Sentosa in the first year.
One reason that Singapore’ casino market was underestimated has been the readiness of the local population to take to gaming. Within the domestic market there was little existing gaming activity from which to draw conclusions. Prior to the creation of Singapore’ two integrated resorts, the law did already permit a number of private member slot clubs. Typically, Singapore’ slot clubs are quite luxurious and incorporate good quality restaurants and live entertainment. The numbers of machines per club will vary according to the size of their membership but most will have ‘jackpot rooms’ that include between 20 and 30 machines, though some of the smaller clubs have as few as five machines.
There are approximately 75 of these clubs operating in Singapore with a total estate of around 1,700 machines.
With the Marina Bay Sands offering 1,600 machines, and Resorts World Sentosa holding a similar number, meaningful conclusions about the nature of the performance of the new market could not really be drawn from the existing domestic machines market. And this is to say nothing of the more than 1,000 gaming tables (including VIP rooms) that the two integrated resorts added to the Singapore market as well.
The two resorts seem to have settled on different operational strategies. They are targeting different customers to generate their revenues and, on the face of it, there seems to be little overlap in their respective target markets. The Resorts World Sentosa is basing its strategy in the tourism and family market. A result of this positioning is that the ratio of foreign visitors to the resort compared to local Singaporeans is 65:35.
The Marina Bay Sands has geared itself towards business travellers and the resort includes 120,000 square meters of exhibition floor space. Marina Bay can host up to 45,000 delegates and boasts the largest ballroom in South East Asia. Marina Bay’s location in downtown Singapore also means that it is conveniently sited to attract local visitors.
The Resorts World Sentosa’ casino had the advantage of opening its doors first, on 14 February 2010 – the first day of the Year of the Tiger in the Chinese calendar. But the suggestion from local analysts is that Marina Bay Sands has been eroding that advantage over the course of 2010. In the fourth quarter of 2010 it was thought that the casino split between Marina Bay Sands and Resorts World Sentosa was 50:50.
Genting Singapore Plc reported that the Sentosa resort contributed revenues of S$775.2 million (US$ 608 million) in the final quarter of 2010 and EBITDA of S$ 389.8 million (US$ 305 million). This represents an EBITDA margin of 50%. Las Vegas Sands showed that its Singapore resort had revenues of US$ 560.4 million in the fourth quarter of 2010, and EBITDA of US$ 305.8 million at a margin of 55%. These early results from the two resorts have resulted in projections for the Singapore casino market being increased to US$ 6.5 billion in 2011, increasing from an estimated US$ 5.5 billion in 2010.
By 2012 it is being forecast that Singapore will overtake Las Vegas.
One of the aims of allowing the integrated resorts to be built was to help Singapore boost its tourist numbers. In 2009 there were 9.7 million tourism-related arrivals to Singapore down by 4% on the 10.1 million arrivals in 2008. Eventually it is hoped that the new resorts will increase this annual figure to around 15 million arrivals. Visitor arrivals to Singapore rose by 24% to 857,000 in February 2010 compared to the same month in 2009, as Sentosa opened its casino to coincide with the Chinese New Year holiday.
In the first six months of 2009 there were 4.51 million visitor arrivals to Singapore. For 2010, with the new resorts open, this number had grown by 23% to 5.53 million. July 2010 marked a new high when visitor arrivals for a single month passed the one million mark – 1.095 million visitors. In August and September 2010 this figure fell back below the one million mark, standing at 997,000 and 947,000 respectively.
As a source of visitors to Singapore, Indonesia and Malaysia have been consistently at the top of the monthly rankings. In September 2010 visitor arrivals from Indonesia and Malaysia accounted for 339,000 of the 947,000 total arrivals, which represent 36% of the total. The September visitor figures for Malaysia were up 40% year on year. These figures do not record the purpose of an individual’ visit or whether they enter either of the casinos but it is interesting to note that both Indonesia and Malaysia have limited gaming facilities within their borders.
In figures revealed by Community Development, Youth and Sports Minister Dr. Balakrishnan in September 2010 local residents made one million visits to the casinos in the first seven months of opening. Marina Bay estimates that one-third of visitors to its casino are local residents. These visits are despite the government’ attempt to lessen the appeal of the casinos to local citizens through the imposition of a casino entry levy. Singaporeans and permanent residents must pay this entry levy, which amount to S$ 100 for 24-hour access to the casino or S$ 2,000 for an annual entry. There is a S$ 1,000 fine for entering the casino without having paid the levy.
Indeed, in the apparent early success of Singapore’ two resorts, it is the government that seems to be least happy with the success. The government continues to take measures to limit the interest of the casinos to Singaporeans and ensure there are no wider social problems caused by gambling.
In September 2010 both the resorts were required to stop operating the free shuttle bus services they were providing to bring visitors to the resorts. Politicians complained that the buses were making it too easy for local residents to get to the casinos and that the buses were also acting as advertising for the casinos.
The self-exclusion programme and family exclusion programme have also recently been extended to allow foreigners in Singapore to apply for the programmes. In March 2010, just after the Sentosa had opened, the National Council on Problem Gambling (NCPG) issued 218 self-exclusion orders, compared to 158 for the period between November 2009 and January 2010.
It is still the very early stages of the Singaporean gaming market and its full potential is obviously still to be realised.
The two resorts still have about 20% of capacity to be completed and 2011 will be the first full calendar year of operations. In addition, Singapore’ economy appears relatively strong compared to Europe and the United States. This should also aid the resorts’ performance in the coming years. The main threat to continued success could come from the government’ policies on local citizens’ entry to the casinos.