Singapore casinos to struggle against Asian competitors?

While the Singapore Government looks to maximise economic profits and minimise social costs with tighter gambling rules, it appears that its two casino operators are losing out to other Asian gambling markets.

In December, Deutsche Bank halved its forecast for Singapore's two gambling operators, the Las Vegas Sands' Marina Bay Sands and Genting Singapore's Resorts World Sentosa to 3% this year in a market worth $1.3 billion.

This followed both casinos experiencing a contraction in gambling volume during 2012. For Genting Singapore, gambling revenues at Resorts World Sentosa fell 15% in the first nine months of last year from the same period of 2011 while third-quarter casino revenues at Marina Bay Sands fell nearly 30%.

However, Marina Bay Sands (pictured above) gross profit margin of 40% remains higher than any of the company's US and Macau properties.

Singapore's development of Marina Bay Sands and Resorts World Sentosa has been massively successful in broadening its international appeal beyond its role as a financial and commercial hub and into an international attractions and tourism creating both jobs and revenue.

The Singapore Government's 2005 decision to link the granting of gambling licences as part of the development of wider attractions saw the creation of the concept of 'integrated resorts'. Within these resorts the gambling is downplayed, with the casinos virtually hidden within the massive resort complexes, in spite of the gambling revenue underpinning the resorts.

The Singapore Government imposes strict levies to discourage local gamblers while the casino operators are subject to stiff fines and publicly reprimanded for any regulatory failings.

Recent amendments to Singapore's Casino Control Act are set to introduce a tougher regulatory regime and while its casinos are expected to still be profitable, international operators may be tempted by other, less regulated, Asian gambling markets.

With revenues of US $40 billion a year, Asia's largest gambling market, Macau dwarves that of Singapore, and is seen as a more gambling-orientated destination for the continent's serious 'high-rolling' gamblers as well as being a more convenient location for China's growing middle class.

With predictions that mass market gambling by Asia's middle classes will grow in the coming years, there are fears that Singapore's focus on 'high-rolling' gamblers and its regulatory regime may hamper it ability to appeal to regular patrons.

In addition, the rise of the Philippines as a gambling destination, with its giant Solaire Manila Resort casino having just opened, creates more competition in Asia's gambling market. Built on reclaimed land in Manila Bay, 'Entertainment City' will eventually house three other major gambling/integrated resorts, each backed by foreign investors, as well as a cruise ship terminal.

Explaining Singapore's regulatory changes, Yap Wai Ming, a partner at Stamford Law Corp who tracks casino regulation, stated "it is timely that the legislation be reviewed and further tweaks be made to ensure that the objectives of setting up the integrated resorts are achieved.

"(The casinos) have already invested billions of dollars and the casinos are still generating very healthy profits despite the enforcement actions."

The growth of integrated resorts in Asia is explored in a feature in the March/April 2013 issue of Australasian Leisure Management.

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