Can We Bet on Singapore Integrated Gambling Resorts
Mon 21 August 2017
Today we have a exclusive report about the soon to be opened Singapore Integrated Resorts by our popular Expert IR, who is one of the key panelists invited at the Gaming Executive Summit to be held on 2nd & 3rd December in Singapore.
With the opening dates of Singapore Integrated Resorts approaching, interest level has been increasing among not only the investment analysts but, also for casino operators in Macau (other than Sands) to closely watch over their shoulders, whether this City State could once again pull it off to a great success with their latest creation – mega casino resorts to woo tourism and, Asian’s high-rollers.
In essence, we are looking at the following factors that would most likely shape Singapore (IR) Integrated Resort’s future scenarios.
Here are the focal issues to be closely examined, IR’s VIP Segments
Important question: What’s the desired market share for VIP gaming of the total casino revenue?
- Singapore: Encourages higher proportion VIP (high-roller) gaming with lower tax regime, instead of too reliance on mass gaming especially to avoid negative local impact.
- Most analysts: Estimated that VIP gaming revenue would be at 55% of total casino revenue generated.
- Likely scenario: Between 30 – 35% of total casino revenue for the first few years.
Desirable Pre-conditions for Singapore IRs
To secure the future for Singapore Integrated Resorts the operators and authorities would need to establish the following pre-wining conditions first,
- Casinos that manage rolling play volume and credit risk well.
- Casinos that tap on new growth pipelines instead of scrapping the bottom of barrel on traditional direct play markets.
- Well formulated casino regulatory regime that meets Singapore’s requirement for high standard of compliance yet it is business friendly.
- Teamwork between the IR operators & authorities to create impactful launch, promotions & raise service standards to the next level.
- Grow industry service-support clusters that provide good connectivity in and around the Integrated Resorts (transport, ticketing, dining, transfer services, lifestyle, affordable entertainment, etc.)
- Casinos are well positioned to manage and achieve highly efficient promotional distribution channels (Mass & VIP).
In conclusion, there are four (4) plausible scenarios that can be derived from the discussion of the above mentioned conditions.
As for the first 3 to 5 years of operations, the IR is likely to rely on casino revenue (up to 75% of total revenue) in order to deliver its EBITDA and margins.
The best scenario that all should aim for will be the “star Performer” at the top right-hand corner. However, for the IRs to achieve Star Performer outcome it requires all the above pre-conditions to be met with great efficiency.
It is still quite a heart-warming outcome if the IR were to achieve an “Alternative Scenario”, in its first few years of operations, allowing time for the non-gaming elements within the resorts that can be developed in full-wing to balance up otherwise a state of overly reliance on casino generated revenue. This is represented by a smaller Star as in the top left-hand corner in the following scenarios chart.
The not so welcomed scenario of the four would be the “What If” that happens when the IR opens. That scenario in the lower right-hand corner indicates a weak or inconsistent mass market (gaming) volume that persists for the initial period of IR operations. Should this scenario happens, both the tourism authority and IR operators need to re-examine the fundamental concept of heavily relying on the current 5 major sources of tourism traffic supplies with higher expectation, and why there isn’t significant growth in any of potential new growth pipelines?
Operating margins may be greatly affected simply due to lack of critical mass to sustain the IR’s gaming revenue contribution which is the critical sustainability factor in the first 3 – 5 years window of Singapore IR’s competitive landscape. When this happens, will the authority allows the casino operators to adopt more aggressive casino marketing to the locals? Notably at a higher social cost.
The worse scenario of the four is rather unlikely to happen. It is at the lower left-hand corner indicated by a red no-through road sign. If it does happen, then it is really a “Surprise, surprise”.
All said and done, we foresee that the competitive landscape for Singapore Integrated Resorts will be much challenging and it can be another watershed in Asian casino resorts arena, just like Macau.