Singapore's casino industry outstrips Las Vegas
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Upstart Singapore outstrips Las Vegas
By Muhammad Cohen
SINGAPORE - The current exhibition at Marina Bay Sands' ArtScience Museum commemorates this year's centennial of theTitanic's fateful voyage. When Singapore began its journey to create the world's two most expensive casino resorts, many experts expected a titanic-scale failure. After all, the conservative nature of the Singapore state could hardly be more different from the well-deserved Sin City reputation of Las Vegas, until recently the world's biggest gambling center.
Yet something titanic has happened with Singapore's casinos - success. In their first full year of operations last year, Singapore's pair of casinos likely registered more gambling revenue than the 39 casinos along the legendary Las Vegas Strip.Singapore's minimum table bets of S$10 (US$7.71), more often S$25, are only part of the answer.
"While most of us understood that Singapore possessed unique attributes that would allow it to achieve prodigious results, no one anticipated how quickly that market would grow into a US$6 billion a year [gaming] industry,” Gaming Market Advisors principal Andrew Klebanow says.
Singapore didn't just get two casinos - it got two integrated resorts (IRs) with a wide range of attractions. Profits for 2011 at the two IRs were on track to surpass US$1.5 billion, ranking them among the most profitable on earth. Exact figures will be made public when the operators - US and Macau giant Las Vegas Sands (LVS) and Malaysia's Genting Group - release financial results in the coming weeks.
In with the in-crowd
Singapore tourism has also benefited grandly. In 2010, the year the IRs opened amid continuing construction, Singapore's visitor arrivals rose 20% and visitor expenditures rose 49%. The latest figures show additional rises of 15% for arrivals and 18% for expenditures. Growing visitor numbers also help explain the double-digit rise in hotel rates and average revenues despite some 4,000 rooms being added to supply.
"Perhaps 25% of tourism growth is from the IRs," HSBC senior gaming and consumer analyst Sean Monaghan estimates. He adds that the IRs have encouraged other investments, for example, a boom in new restaurants.
As the statistics suggest, Singapore didn't just steal a page from Las Vegas; the Lion City has rewritten the book on casino resort development and has done it so well that people now speak about a "Singapore model" for gaming development.
"The Singapore government's approach was to carefully plan the development of its casinos. Las Vegas' growth was driven by entrepreneurs - not by government," Klebanow, a longtime Las Vegas executive who now consults globally, says.
"From [US entrepreneur] Jay Sarno's development of Caesars Palace and Circus Circus, to Steve Wynn's Mirage Resort and Sheldon Adelson's Venetian Casino Resort, each of these individuals recognized what the market needed and created transformational properties. Government merely provided the regulatory environment and infrastructure that allowed the industry to grow and prosper."
Super model
Even though free markets are presumed to be best for business, it's the heavy-handed Singapore model that other Asian destinations and international gaming companies are starting to envy. "Everyone's saying, 'We don't want to be left behind'," former Marina Bay Sands chief executive officer Thomas Arasi observes.
Niall Murray, director of operations development for Macau market leader Sociedade de Jogos de Macau, adds, "New destinations have no excuse for getting it wrong."
Even so, Chee Soon Juan, chairman of the opposition Singapore Democratic Party counters, "There are many economic activities that contribute to societal health and sustainable progress: the gaming industry is not one of them. Being a model for the gaming industry is not something we should aspire to."
There are, in fact, two sides to the Singapore model, one geared toward the public interest and one that keenly interests international gaming companies.
In the public interest, the Singapore model's key feature is tying casino development to a package of non-gambling attractions to boost tourism and the local economy overall. The government set up a competitive bidding process for each of the two designated IR sites with evaluation criteria that drove bidders to maximize investment and create new facilities to boost Singapore's tourism appeal.
Wish list
One longstanding government hope was to get a world class convention center. Marina Bay Sands (MBS) includes 111,500 square meters of convention space. Built at a record cost of US$5.7 billion, MBS also has two theaters, a museum, a mall with 300 predominantly luxury shops headlined by a Louis Vuitton flagship outlet that appears to float in Marina Bay, and six celebrity chef restaurants. Its 2,541 hotel rooms in three towers are connected across the top with the world's largest elevated infinity pool and an observation deck 57 stories above downtown, a new signature for the Singapore skyline.
Singapore's government also coveted a world-class theme park for its designated leisure zone on Sentosa island off Singapore island's southeastern coast. Resorts World Sentosa (RWS) brought in Universal Studios as part of a S$6.59 billion IR that also includes, six hotels, a post-modern circus stage spectacular, and a maritime museum that later this year will link with what will be the world's largest aquarium.
The Singapore model also includes strict regulation designed to discourage local residents from gambling and keep criminal activities out of the casinos. The tax rate of 15% for mass market play and 5% for high rollers (plus 7% goods and services tax [GST] on each) encourages casinos to chase high rollers rather than small fries.
However, Singapore's Casino Regulatory Authority has strict licensing criteria for junket operators, the agents that bring VIP players to casinos and act as money lenders (and collectors). Those roles have made them crucial cogs in Asia, and led to suspicions of ties to organized crime.
Keep it clean
Singapore's requirements include probity checks on junket agency owners and employees plus full scrutiny of financial records. So far, no junkets have been licensed. Reports of unlicensed junket activity persist, but for the most part casinos have to find their own VIP players and engage them directly, including by lending them money.
"The challenge for Singapore gaming operators is collecting on the credit that they extend to players," Klebanow says. "Since gambling debts are unenforceable in China, there is always the risk that players will not pay back their obligations. Uncollectable debts are a cost of doing business in the casino industry and are factored into operators' financial statements."
To discourage local players, Singapore citizens and permanents residents have to pay a casino entry tax of S$100 for 24 hours or S$2,000 for a year. No forms of casino advertising are permitted in Singapore, and the government keeps restricting their marketing activities. In 2010, it stopped casino shuttle buses and last year it barred loyalty card promotions outside the IRs.
"The government is determined to cap casinos' impact on the domestic market," Platform Asia senior consultant Felix Ling says. "Singapore casinos' future scenario: Limited mass gaming market growth with a direct VIP market. Junkets will not be allowed to play a major role here as they do in Macau."
Outstanding qualities
It may seem the Singapore model forces casinos to do business with one hand tied behind their backs. But in less apparent ways, the Singapore model provides an ideal business environment, at least for companies that can afford the multi-billion dollar price of admission.
For example, Singapore allows 100% foreign ownership of casinos and long-term leases on land. Its tax rates are also low compared with Macau's 39%. Gambling debts are enforceable in local courts. More basically, there's rule of law. Those attributes are not common elsewhere in Asia.
Even measures that seem to run counter to casinos' interests may actually benefit them. The tax on domestic players to enter the casino appears to be an extreme hindrance, until you consider the alternative of barring local players. The entry tax presents markets with a middle ground between open-to-all-approach of Macau and the Philippines, and the foreigner-only approach of South Korea and Indochina's mostly tiny casinos.
Arasi, now president and chief executive officer of Harbinger Advisors, says South Korea and Japan could attract the same level of casino-related investment and revenue as Singapore, but only with domestic player participation. In Thailand, international gaming companies consider the wagering-mad local market vital to building what experts say would be fabulously successful casino resorts in what's already a prime global tourist destination.
The biggest roadblock to increased gambling revenue in Singapore remains the lack of licensed junkets, and many observers believe the government never will grant junket licenses. Platform Asia's Ling believes that is the way the casinos prefer it: In Macau, he notes, junkets provide more than two-thirds of revenue but take more than half of profits.
"Profit margins in Macau for most casinos are real bad," Ling, a former Macau casino executive, says. "Those operators basically invest and build casinos for junkets and the government to make money."
The Singapore model has the best interests of investors and the government at heart. That's what's put the sin in Singapore, and makes it more successful than Sin City itself.
Macau Business magazine special correspondent and former broadcast news producer Muhammad Cohen told America's story to the world as a US diplomat and is author of Hong Kong On Air, a novel set during the 1997 handover about television news, love, betrayal, financial crisis, and cheap lingerie. Followwww.MuhammadCohen.com for his blog, online archive and more.
(Copyright 2011 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.) -
Huat ah.
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Gambling shouldn't even be allowed...
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Originally posted by Summer hill:
Gambling shouldn't even be allowed...
It's called IR.
Not casino.
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hahah, later those casinos from Las Vegas move here for competition. Singapore turns to City of Gamble.
Lion City becomes Gamble City. hahahahhahahah!
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Sin City.
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Originally posted by charlize:
It's called IR.
Not casino.
...
Casino lah.
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Originally posted by Clivebenss:
Sin City.
Sin City
Money City
Greed City
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Originally posted by Summer hill:
...
Casino lah.
whatever me not going...
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If the casino fail, there will be lots of "ah ha ah ha, see stupid move."
When it even beat Las Vegas at its own game, people are saying its foul.
When one embark on a project, there is only one goal, and that is to do one's damness to succeed. No one starts something in order to fail.
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I wouldn't know what to do on weekends in this tiny island without IR, gambling is only bad when one doesn't know how to control and restrict their finances.
How many countries in the world can make companies bidding to invest billions on an area barely that of a few hdb blocks, filled with unheard of regulations and for a lease of only 30year :p
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the casinoes only benefits the businesses and the coffers.
what good does it bring us?
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Originally posted by mancha:
If the casino fail, there will be lots of "ah ha ah ha, see stupid move."
When it even beat Las Vegas at its own game, people are saying its foul.
When one embark on a project, there is only one goal, and that is to do one's damness to succeed. No one starts something in order to fail.
Being the best is not everything. Sometimes there are things we can have without.
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Originally posted by Summer hill:
...
Casino lah.
IR lah.
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Originally posted by dragg:
the casinoes only benefits the businesses and the coffers.
what good does it bring us?
You can destress there and try your luck.
You can pass time after collecting your cpf.
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Originally posted by Clivebenss:
Being the best is not everything. Sometimes there are things we can have without.
The casino is not about being the best. Being the best was incidental.
It is about making it work, against all odds. And the biggest hiderance to the operators is the government.
Yet they made it. Hats off to them.
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Originally posted by mancha:
The casino is not about being the best. Being the best was incidental.
It is about making it work, against all odds. And the biggest hiderance to the operators is the government.
Yet they made it. Hats off to them.
The govt opens the door for them and promotes them.
Hats off?
My my....
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Think more people will be gambling at the casinoes during the cny period.
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Originally posted by Clivebenss:
The govt opens the door for them and promotes them.
Hats off?
My my....
The government opens the doors? and promote them?
The government just make the decision. The operators, several of them, rush in, the selected two runs it with tons of rules and regulations against them. Local levy, no shuttle bus, no advertising, no canvassing, small percentage of floor space, and what not. Strict regulations. Yet they can make profit better than where the laws are more liberal.
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Casinos should be banned.
like chewing gum.
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Chewing gum is not banned what.
You only can't do four things with them, buy, sell, import, and stick them here and there.
You can chew them. Its not illegal to chew the gum.
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Originally posted by mancha:
The government opens the doors? and promote them?
The government just make the decision. The operators, several of them, rush in, the selected two runs it with tons of rules and regulations against them. Local levy, no shuttle bus, no advertising, no canvassing, small percentage of floor space, and what not. Strict regulations. Yet they can make profit better than where the laws are more liberal.
"The government opens the doors? and promote them?
The government just make the decision."
Wow, really sound like the men in white!
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*Merlion waves to tourists with one hand and holds a dice in its mouth
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Thought it should be merlion waves to tourists with one hand , smoking a cigratte in the mouth and holding a dice in another hand ?
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Originally posted by Tingbom:
Thought it should be merlion waves to tourists with one hand , smoking a cigratte in the mouth and holding a dice in another hand ?
merlion has no hand.