Singapore Business Review

Page 27

ANALYSIS: Integrated Resorts to 44% by end-2015 after having climbed to 29% in 2010 from 14% in 2006, it’s a battle Singapore cannot afford to lose. Deeper concerns One broking analyst told Singapore Business Review that Singapore’s VIP segment is even more cyclical than others as there are no junkets to provide credit/financing to VIPs. Most VIPs derive their wealth from manufacturing and property and neither segment is doing well in Singapore or China, where the casinos derive half of their VIP volumes from. “We need to see a sustained recovery in both segments in China and ASEAN before VIP volumes turn around.” But deeper concerns are held for the mass market. The casinos cannot market to locals and therefore depend on tourists for business. “Singapore is not the cheapest holiday destination with an average room rate of S$260 ($210). More should be done to increase the number of hotel rooms and bring down the average room rate so that more visitors can visit Singapore economically. For now, the casinos will likely experience mass market gaming revenue growth that will be anemic,” he adds. Barclays senior regional economist Wai Ho Leong reckons this is a short-term blip, reflecting the wearing off of the initial novelty. “Like the experience of other properties elsewhere, visits should moderate to a more sustainable longterm trend. This has been largely anticipated and is not an ominous structural signal,” he adds. Union Gaming Group principal analyst Grant Govertsen says that with the benefit of hindsight, the plateauing of gaming revenue in Singapore is not overly surprising. Singapore witnessed incredibly fast gaming revenue growth over the first two years of operations, which can be attributed to significant levels of pentup demand among local and regional customers. However, he said, given the government’s desire to minimise any potential social ills associated with gambling, restrictions on the locals’ market were expected. ”As a result, and when combined with the fact that the locals market is well-penetrated, the mass market segment is unlikely

to continue to see explosive growth. The VIP segment, on the other hand, has more recently been impaired by economic issues, and to a lesser extent by regulatory issues (e.g. restrictions on IMAs).” But not everyone thinks this is the end of the growth story for Singapore’s gaming business. The hidden jewel Standard and Poor’s associate director of corporate ratings Joe Poon said although net gaming revenue is likely to post a decline in 2012, the Singapore gaming industry still has growth potential, as there is sufficient demand in the region. Despite a slowdown in the VIP segment, visitation continues to be solid, supporting revenue rates in the mass market. “After a very quick ramp up in gaming revenue in its initial years, we expect growth in the market going forward will be more correlated with GDP growth. In 2013, we expect gaming revenue growth in the 0% to 5% range in Singapore,” he adds. Asia Pacific Gaming (APG) Consultancy Macau president and CEO Ciarán Carruthers says he believes that the fall in local numbers is likely to be a short-term issue as opposed to anything significant long term. Both properties ramped up very quickly and were successful opening up into a market that was already quite familiar with gaming as a form of entertainment. “The new resorts obviously offered so much more and brought in significant crowds and revenues, both from local mass players and from overseas tourists playing on their mass gaming floors. I don’t believe that there has

Joe Poon

Jonathan Galaviz

Vicky Melbourne

been a change in attitude towards gaming within the mass market, but perhaps the novelty of the current offering has worn a little thin. If this is the case, then you have two highly experienced, proactive and motivated executive management teams who will address this and who will know how to do it effectively,” he says. It is the new proposed laws which will cap the VIP segment that has analysts most concerned. Not a gaming hub Barclays Wai Ho Leong sees that gaming is but part of the overall visitor experience in Singapore and the situation here tends to be more heavily driven by business traffic – the conventioneers, exhibitions, conventions, business visitors as well as leisure tourists. This is unlike other places which are driven by grind gamblers and leisure, which could be more affected by tighter rules on junket operators. Union Gaming Group’s Grant Govertsen said further IMA restrictions will likely have a minimal impact on the market given that the contribution of the existing IMAs is nominal (accounting for a very low single digit percentage of VIP business). However, by not expanding the IMA program, the effect could be to artificially cap the VIP potential of the Singapore market. Standard and Poor’s director Joe Poon said the Singapore government never intended to promote itself as a gaming hub in the region. The new laws imposed by the Singapore government are designed to ensure gambling does not become a social

Singapore Gaming Revenue

SINGAPORE BUSINESS REVIEW | FEBRUARY 2012 27


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