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May 2010 • MOP 30 • ISSN 2070-7681 Safe Harbour Michael Leven of LVS on Marina Bay Sands’ wow factor Singapore in Focus: Crest of a Wave and Raising the Roof Perfect Timing: Walker Digital Gaming | Encore at Wynn Macau: Core Values Elegance vs. Opulence in Casino Design | Vietnam’s Long March
CONTENTS
May 2010
Safe Harbour
6 Crest of a Wave
16 Safe Harbour
22 Raising the Roof
30 Perfect Timing
32 Core Values
34 Elegance vs. Opulence
38 Vietnam’s Long March
40 Weighing Angkor
42 Sparkling Arrival
44 Regional Briefs
38 46 International Briefs
48 Events Calendar
30
2
3
Editorial
Marina Bay Sands
Many Happy Returns
Are Las Vegas Sands Corp (LVS) and Genting and its consortium partners going to lose money
on their respective Singapore casino resorts? It’s unlikely. The issue then is how much they will make
and how quickly.
LVS has, typically, set its stall out early and very clearly. It plans to achieve a 20% return on investment
(ROI) annually on total capital invested at Marina Bay Sands. That means it would achieve project payback
in five years (subject to any future decision to reschedule debt that it might attempt should business
conditions change).
Broadly speaking, annual ROI rates for new casino projects in Asia have been falling—in part as a
function of rising supply, but also as a function of ever-larger amounts being spent on building them.
Marina Bay Sands cost US$5.7 billion. LVS’s first-ever foreign casino, Sands Macao, cost 21 times less
at US$265 million. Sands Macao took less than one year to achieve payback. MBS—in order to achieve its
ROI target and assuming it is basing its ROI calculations on net earnings rather than on EBITDA—will have
to generate at least US$95 million net per month. That’s the equivalent of US$3.12 million net per day.
Sands Macao only needed to earn US$726,000 net per day to reach payback—even in such a short time.
Of course, MBS and Sands Macao are different types of product in different markets, launched at
Publisher
different times. Sands Macao’s stratospheric performance is never likely to be repeated in Asia, or
Kareem Jalal anywhere else for that matter. It was an overnight hit because it was Macau’s first truly mass market, Las
Vegas style plain vanilla casino, and in stark contrast to SJM’s VIP-focused operation. The Sands opening
Director also crucially coincided with mainland China’s easing of travel restrictions on its citizens wishing to visit
João Costeira Varela Macau, supplying a flood of new demand.
Anyone wanting a Singapore casino licence was always going to have to spend big on non-gaming
Editor facilities. The boosting of Singapore’s tourism infrastructure was the key requirement of the government
Michael Grimes in granting concessions. The good news is that Singapore’s lower gaming tax take (15% of the gross on
the mass market and 5% on VIP play, plus Goods and Services Tax at 7% on both segments) and the
greater per capita GDP of Singapore and Malaysia compared to the per capita GDP in Macau’s hinterland,
Business Development Manager
mainland China, should contribute to a better yield per customer and better margins than can be
Domingos Abecasis achieved in Macau. That’s even taking into account Singapore’s higher wage rates and the absence of
high volume junket play.
Contributors
Desmond Lam, Steve Karoul Too Much Too Young?
I. Nelson Rose, Richard Marcus A lot can happen in five years, inside and outside Singapore. So for LVS to start talking about
Shenée Tuck, James J. Hodl expanding into Japan when the performance of its Singapore IR hasn’t yet been calibrated may seem
Andrew MacDonald even to those investors without elephantine memories at best ambitious and at worst chutzpah—as
William R. Eadington if the warning issued by the company’s auditors back in November 2008 regarding LVS’s existence as a
going concern had never happened.
Graphic Designer The history of capitalism—especially the North American, heavily leveraged kind—is that you
Brenda Chao need to keep moving and growing. That does, however, create inherent structural challenges and risks
including the possibility of over extension and liquidity problems—as was dramatically illustrated in
LVS’s case following the global financial crisis of 2008.
Photography
Given the still delicate state of global capital markets, there might be some who think it would be best
Ike for LVS to make its current assets sweat a bit more before thinking about acquiring new ones. Members
of the Macau government probably fall into that group. The underperforming Macau conference market
Inside Asian Gaming and the metaphorical tumbleweed often blowing through Venetian Macao’s Cotai Expo facility is a case
is published by in point. Another is LVS’s failure so far to deliver on its often-repeated promise to ‘monetise’ its retail real
Must Read Publications Ltd estate on Cotai.
8J Ed. Comercial Si Toi Were LVS to step up its efforts to make its existing Macau assets work harder, it could actually be
619 Avenida da Praia Grande an important hedge against the proven volatility of the Macau gaming market—a volatility everyone
Macau conveniently tends to ignore or downplay during a bull market.
That apparently inherent volatility relates to several factors. One is the underlying character of
Tel: (853) 2832 9980
Chinese-style capitalism as practised initially in Hong Kong and now exported to mainland China.
For decades, Hong Kong’s economy has been a boom-bust roller coaster unrestrained by the kind
For subscription enquiries, of welfare state safety net policies practised in much of the West. Macau’s gaming market has
please email traditionally tracked the highs and lows of the Hong Kong economy, which for years supplied most
subs@asgam.com of the players. Now that mainland China is the biggest supplier of customers to Macau, new political
considerations have come into play. These include the central government’s need to control credit
For advertising enquiries, issuance and to maintain social harmony by protecting its own citizens from what it recognises is their
please email near pathological obsession with gambling.
ads@asgam.com Talk is of course cheap regarding LVS’s expansion into Japan. Despite media speculation, that
country seems no nearer to legalising casino gaming now than it has been at any time in the preceding
or call: (853) 6646 0795
decade. Political and administrative inertia—the two diseases that have caused the Japanese economy
nearly to flatline for the best part of two decades after spectacular post-war growth—show no signs of
www.asgam.com relinquishing their grip.
The conservatism and caution often exercised by Japanese companies may account for why they
Inside Asian Gaming have a reputation for doing deals at or near the top of the market in the merger and acquisition sector.
is an official media partner of: That’s probably why in 1995, a certain Japanese company called SOFTBANK Corporation paid Interface
Group-Nevada Inc, run by Sheldon G. Adelson Esq., an impressive US$800 million for the latter’s Comdex
trade show and portfolio of 16 smaller exhibitions—at the very moment that revenue from Comdex
shows peaked. It was that deal that set Mr Adelson on the path to becoming a global developer and
operator of casino resorts. This time, it may be the Japanese who see him coming.
Michael Grimes
http://www.gamingstandards.com We crave your feedback. Please email your comments to michael@asgam.com
4 INSIDE ASIAN GAMING | May 2010
5
Crest of a
Marina Bay Sands
Wave
Marina Bay Sands is catching an historic tide in
gaming, say its creators
“W
e hope Resorts World does But from an investors’ perspective, no
well. I think they’re aiming at one is in any doubt that the engine that
a different market level than drives this whole enterprise—an engine so
we’re aiming at. Our success doesn’t depend big that if it could be represented in literal
on their failure. Neither does their success form in old fashioned pistons and valves, it
depend on our failure. I’m of the opinion probably wouldn’t even fit inside the huge
that we should work together to bring in atrium at the main entrance of the MBS
more and better quality and quantity of property—is casino gaming by gambling-
customers to Singapore.” obsessed Asian players.
So said Sheldon Adelson, Chairman and
Chief Executive of Las Vegas Sands Corp Upward and onward
(LVS), at the opening of his US$5.7 billion Wherever casino gaming is legal in
Marina Bay Sands integrated gaming resort Asia, regulators indicate an upward trend
in Singapore. in revenue, supported by GDP growth
Mr Adelson is justifiably proud of the well ahead of the Western economies. The
gaming, tourism and meeting amenities most famous and high profile example
that will be available at his new property of Asia’s gaming growth is Macau. Gross
when it is fully open in the second half of the gaming revenue there grew 70% year on
year. They include 2,560 luxury hotel rooms year in April.
and suites, 800,000 square feet of shops, 50 If LVS follows the financing pattern Sheldon G. Adelson
restaurants, two theatres, 1.3 million square established in Macau, don’t be surprised—
feet of convention space and the much subject, no doubt, to Singapore stated Mr Adelson just before the opening
talked about Sands SkyPark. The SkyPark, government approval—to see a listing of a ceremony for MBS.
will sit atop the three-tower hotel, making local LVS unit for Marina Bay Sands on the “When the tide goes up, it carries all
the complete hotel structure look like a giant Singapore stock exchange approximately boats. When the tide goes down, it carries
version of those cast iron boot scrapers seen one year to 18 months on from the full all boats. So nobody gets stuck outside the
on doorsteps outside townhouses in the opening of the property in June. movement of the tide. Nobody gets stuck
grander parts of New York or London. “I believe we are participating in a tide,” in the air, nobody gets stuck under water.
6 INSIDE ASIAN GAMING | May 2010
May 2010 | INSIDE ASIAN GAMING 7
8 INSIDE ASIAN GAMING | May 2010
Marina Bay Sands
Everybody goes up and down together.” middle. It’s too early to tell exactly”. ultimately the business success of the whole
That may be true, but it’s likely scheme and of Singapore’s IR experiment.
that in strict gross revenue terms, Forecasts That’s why most of the MBS casino opened on
gaming’s contribution to MBS will be Nonetheless, the annual revenue from 27th April, but some of the shops, the museum
proportionately smaller than gaming’s Singapore’s two casino resorts forecast by and some of the conference facilities did not.
contribution to the LVS operation in high- analysts (anywhere from US$2.5 billion Elsewhere in this edition, Michael
roller focused Macau. to US$5 billion per year, from most recent Leven, Mr Adelson’s right hand man as
“In Las Vegas, the casino contributes estimates) is what created the leverage to President and Chief Operating Officer of
30% to the bottom line,” Mr Adelson told the raise the cash (US$3.6 billion of it in loans and LVS, makes the point explicitly to Inside
assembled media on MBS’s opening day. US$2.1 in equity) to build such an ambitious Asian Gaming that the sort of infrastructure
“In Macau, it contributes between project in the first place. Revenue from the provided by the company’s resorts simply
70% and 75% to the bottom line. Here in casino is what will decide the rate of return cannot be sustained without casino
Singapore, it should be somewhere in the on investment on Marina Bay Sands, and gambling being in the mix.
New Package
Marina Bay Sands offers a very different perspective on an existing
integrated resort idea
W hat has Marina Bay Sands brought to
Singapore, Asia and the rest of the
world? The business aim of the property
on their sides, hence the local nickname ‘The
Durian’ or ‘Big Durian’. Marina Bay Sands
believes it is competing in that territory, and
Watching Mr Adelson perform his
opening act before the assembled world
media, his sense of personal pride in MBS
may be very similar to that of The Venetian it is hard to argue against its aspirations. and his aspiration to be taken seriously as
Macao—a one stop shop for every an all round resort developer certainly came
conceivable kind of legal entertainment— across. Why else would LVS go to the trouble
but the execution is quite different. and expense of installing a work by the iconic
The first thing to say is that in look and British sculptor Anthony Gormley in full
atmosphere—inside as well as out—MBS view of the main city side entrance to MBS?
is very different to The Venetian. Some This is Mr Adelson’s post modern answer to
may say hallelujah for that, though IAG did Steve Wynn hanging the odd Renoir or two
notice that in the heart of the MBS property, in the entrance to his properties. But Mr
beneath the tiered walkways of shops, there Adelson’s set dressing gesture feels less like
is a (currently waterless) canal. It seems showboating, given that Mr Gormley’s work
some ideas are just too precious to be let go is integrated into the property rather than
of easily. placed as an afterthought.
From a purely real estate perspective, we Esplanade – Theatres on the Bay
have a property that is significantly different Mr Adelson says his architect, Moshe MICE work
from not only other casino resorts that Safdie, has given him three iconic buildings For analysts of the so-called MICE
have been built around the world, but also in one project—the hotel towers and (meetings, incentives, conferences and
to anything that’s been built in Singapore SkyPark; the upturned, Buddha-like ‘hand’ or exhibitions) market, LVS has produced a list
so far. Yet it’s also a property that has been lotus design of the still-under-construction of events it says have already been signed
clearly moulded in Singapore’s image of museum, and the towering atrium space of up for MBS’s Sands Expo and Convention
itself as a sophisticated world city, inhabited the Shoppes at Marina Bay Sands. The LVS Center. Given the so far patchy performance
by people who are generally well educated Chairman added, as a joke, that he hoped his of the MICE business at The Venetian Macao,
and know the difference between Berlin comments wouldn’t lead Mr Safdie to push sector commentators will be interested to
Dada and Lady Gaga. his price up threefold. find out if the ‘Build it and they will come’
approach applied to Singapore will inject
Making a statement fresh energy into the city-state’s conference
The number of iconic buildings in Hong market and create sustainable fresh demand
Kong can probably be counted on the fingers for its services as a regional destination for
of both hands, if not one hand. Most of the big meetings.
skyscrapers in Hong Kong are fairly dreary “We’ve put together our development
up-and-down rent-generating machines. programme and operation with the belief
Singapore has plenty of those, but it also has that we will get in excess of 70,000 to
some really memorable historic buildings 80,000 people coming per day to Marina
and some impressive modern structures Bay Sands,” stated Tom Arasi, President and
including Esplanade – Theatres on the Bay, Artist’s impression of Sands Expo and Chief Executive Officer of MBS, ahead of the
the roofs of which resemble giant fruit laying Convention Center opening ceremony.
9Marina Bay Sands
The Engine Room
An in-depth look at Marina Bay Sands’ gaming offer
H ow many of
Marina Bay
Sands’ expected 80,000 daily
independent with [operator] credit, as
opposed to the junket situation. From an
economic standpoint, assuming our [VIP]
importance of Singapore customers to the
MBS business model.
“Singapore is absolutely the most vital
visitors will be supplying process works, it’s more profitable on the market for us, but it’s clearly not the only
the financial fuel for the MBS margin than the junket play, which requires market,” stated Mr Adelson at the main press
engine room, the casino? There higher commission rates. We never expected conference.
is a Paiza Club for high rollers, that the Macau-style junket play would be “The surrounding countries of Malaysia,
just as in The Venetian Macao. At the licensed under the Singapore regulations.” Indonesia, Thailand, Vietnam; parts of China;
media event for the opening, we were Mr Leven is clearly closer to the process from Australia, Korea, Japan and Taiwan.
not shown that facility, which could be for any and the government decision makers These are all in our markets. We have MICE
number of reasons—including LVS not giving than the gaming industry media, but it is business coming from other parts of the
priority to VIP play in its business model, difficult to see how LVS and Genting could world outside of Asia.”
unlike in Macau. be anything other than disappointed, even Singapore is home to a lot of rich people.
“As we said several months ago, we if not surprised, that high volume (albeit According to the World Wealth Report 2008
intend to run this casino without dependence low margin) junket play has effectively been produced by Merrill Lynch, an investment
on the Macau junket style of operations,” ruled out by the toughness of the financial bank, and Capgemini, a consultancy, there
said LVS President and Chief Operating reporting conditions and probity checks were 77,000 US dollar millionaires resident
Officer Michael Leven at the opening press required by the Singapore government. in the Lion City in 2007 out of a then total
conference. population of 4.59 million. Although it’s
“We would run this [casino] business Importance of being local reasonable to assume the number of
[at MBS] quite similarly to the way we run Mr Leven and Mr Adelson both went millionaire residents may have fallen since
Las Vegas in terms of high quality VIP play on record on the opening day stating the the financial crisis of September 2008, that’s
still a good sized domestic target market for a
casino. But how many of them will be willing
or able to play in the IR casinos is open to
question. There are some other regulatory
issues aside from the tough junket rules that
could put a crimp even in the direct credit
VIP play model.
Section 108(7)(a) of Casino Control Act
states: “……a casino operator or a licensed
junket promoter may provide chips on
credit to a person:
(a) who is not a citizen or permanent
resident of Singapore (as defined in
section 116(9) or
(b) who is a premium player.”
A premium player is described under
Part I (3)1 of the Casino Control Act (Credit)
Regulations 2010 as someone of whom:
“….the total amount of money, chips or
any cheque or traveller’s cheque credited to
the patron’s deposit account in accordance
with paragraph (2) is not less than $100,000
[Singapore].”
In other words, Singapore citizens
Singapore’s tough rules on junkets mean MBS will need to use Las Vegas style direct credit for high and permanent residents can play as high
roller play rollers and attract the lower tax rate on
10 INSIDE ASIAN GAMING | May 2010May 2010 | INSIDE ASIAN GAMING 11
Marina Bay Sands
Wiggle room
“In theory, that could make Singapore’s
premium offer very competitive with Macau.
Outside of high quality accommodation,
premium player ‘comps’ as understood
in Las Vegas hardly exist in the Macau
VIP segment. The junkets in Macau need
to make their margin. Junkets in Macau
generally incentivise players by offering cash
commissions on the players’ volume of play,
rather than other value added services.
“The problem I see for premium play
in Singapore is that even on a direct
credit basis, many players may be put off
because of the depth of scrutiny they will
Entry to the MBS casino—one door for Singaporeans, one for foreigners
be subjected to by the authorities. And the
their gross of 5% (plus 7% GST) if they taking of extracts from them and the direct player pool is already relatively small
physically check in S$100,000 and above making copies of them; and given that so many Asian VIP customers are
in cash, but they cannot play on a credit (b) furnish to the Authority all such basically controlled by junkets.
basis—even if that credit is supplied information as the Authority may require “I think the strong market for top end
directly by the casino as a marker. in connection with any such records.” business in Singapore is going to be Malaysia,
and to a degree Indonesia. The question
Scrutiny In other words, it appears the reporting mark is how much Genting will soften up
Even if a Singapore citizen or permanent requirements for direct players—whether in the face of competition from MBS in that
resident were to check in cash for high roller on a cash check in or cheque deposit premium segment.”
play, it appears from the local law that his or basis—are potentially as onerous (in terms The source suggested players from
her casino transaction records would need of the Singapore authorities looking into mainland China were virtually ruled out
to be submitted to the Casino Regulatory people’s personal backgrounds) as are the because of the absence so far of junkets.
Authority for scrutiny. regulations for junkets and junket players. “If it’s an overseas direct player, the
This would probably also rule out many high casino has got to be able to collect, and as
According to part 3 Section 11(2a) of the rollers from mainland China—even on a we know, you can’t collect a gambling debt
Casino Control (Credit) Regulations 2010, direct credit basis. in China,” stated the insider.
“A casino operator or a licensed junket “Given that VIP tax in Singapore is “A Singaporean gambler who wants
promoter shall, whenever requested by half the mass gaming tax, the casinos in to come in and play for high stakes at the
the Authority to do so: Singapore have in theory seven and a half casinos in Singapore is going to be subject
(a) produce to the Authority all records percent to play with, which they can use for to financial reporting requirements
referred to in paragraph (1) and permit promotions with VIP players,” suggested an as well, which he or she may not be
the examination of those records, the industry source. comfortable with.”
High Mass
The main floor could be the key to MBS’s gaming success
I f premium play is not going to be the
powerhouse of the gaming operation in
Singapore that it is in Macau, what about the
mass floor at MBS? In appearance, the main
floor owes much to the stadium-style gaming
space created by Paul Steelman at Sands
Macao, with its concentric rings of balconies
looking down into the ‘cockpit’ of the table
gaming area. At around 161,000 square feet,
the MBS main casino floor is more spacious
than that of Sands Macao, though according
to the company MBS will (initially at least)
have fewer tables—600-plus compared to
Sands Macao’s 740. MBS is also scheduled to The casino main floor at MBS
12 INSIDE ASIAN GAMING | May 2010May 2010 | INSIDE ASIAN GAMING 13
“The bigger slot clubs in Singapore
were producing house win per unit per day
of US$2,000 on a return to player (RTP) of
only 82%,” says one source familiar with
that sector.
“Anecdotally, I’ve heard some machines
at Resorts World Sentosa have been doing
[win of ] US$1,800 per day,” adds the insider.
Mr Adelson may be correct in saying
the Singapore IR market is not a zero sum
game involving one resort succeeding on
the failure of the other. It’s difficult, however,
to see how Singapore’s casino resorts can
Sands Macao’s main gaming area succeed in the slot segment without that
success coming at the expense of the city-
have 1,500-plus slot machines, compared to state’s slot clubs.
Sands Macao’s 1,250.
Tom Arasi, President and Chief Executive Return to player
Officer of MBS, said at a press conference Return to player percentage on slots
that the property is concentrating initially in the Singapore IRs has been set by law
on the proven most popular table games in at 90% of theoretical win [according to
Asia and Southeast Asia. the Casino Control (Gaming Equipment)
“We decided to stick with the six or eight Regulations 2009]. In the slot clubs, the
major games,” said Mr Arasi. existing tax burden forces the clubs to run
“We made sure our people were well at 82% RTP, say industry sources. An RTP of
trained on those games. We wanted to make 82% makes it hard for club players to have
sure the staff were quite focused before we much fun or even gambling entertainment.
got into some of the more speciality gaming In fact, the Singapore slot club RTP is so
tables and devices.” low it would actually be illegal in some
other gaming jurisdictions such as New
Old favourites South Wales in Australia.
It appears from IAG’s brief visit to the Previously, Singapore slot players had
main floor that the table games are mainly no alternative. Now, with the advent of the
given over to the two workhorses of Asian Singapore IRs they clearly do have a choice,
table play—baccarat and blackjack—with and one offering the very latest machines
Thomas Arasi
smaller representation from other games and the latest and most plush décor and
popular in Southeast Asia, including roulette that mass-market tables will be the main amenities. One interesting question is
and sic bo. revenue earner at MBS. But it does hint at whether those local slot club players will
Minimum table bets on the main floor the fact that Singapore, unlike Macau pre decide it is worth paying a daily entry fee
when we visited appeared to be set at S$50. market liberalisation, does already have a of S$100 (or annual fee of S$2,000) to get
That’s the equivalent at current exchange base of players well educated in slot products access to the better product and better
rates of HK$280, and therefore 40% higher thanks to Singapore’s slot clubs sector. RTP at the IRs. An industry source with
than the minimum bet typically seen on the knowledge of both segments gave IAG a
main floor in many Macau casinos. Minimum Club’s house win perspective on this.
bets are of course only a rough guide for According to industry sources, some “If you sit at a machine for a couple of
predicting mass floor revenue, given that of the bigger slot clubs in Singapore were hours, and take S$100 to gamble with, you’ll
casino managements can use back of house regularly producing house win equivalent find if you’re in a [Singapore slot] club, you’ll
and tableside technology to adjust instantly to US$2,000 per machine per day prior to have lost it after a couple of hours. In either
their minimum bet levels in line with peak or the opening of the integrated resorts (IRs). of the casinos, you’ll still have 50 bucks left.
quiet periods on the floor. The only regional gaming market IAG is That’s the best way of comparing the slot
If anecdotal reports of the early aware of that can beat that is Vietnam, clubs and the casinos.”
performance of Resorts World Sentosa are a where some machines have been known So the message seems to be that the
guide, it seems slots are likely to be a much to bring in US$3,000 per day. Such a high longer a local Singapore slot player wishes
bigger component of gross gaming revenue house win per day can be a function of low to play for entertainment purposes, the
in Singapore than they are in Macau (where machine numbers rather than necessarily more likely they are to opt to pay the entry
they currently contribute around 5.5% of the high consumer demand. It certainly fee at the casinos. At the IRs, the players get
gross). This isn’t necessarily at odds with Mr suggests a market capable of supporting not only newer machines, but also more
Leven’s suggestion in our interview with him more slot product. options to play more lines.
14 INSIDE ASIAN GAMING | May 2010Marina Bay Sands
much lower tax rate (15% gaming tax in the
mass segment plus 7% Goods and Services
Tax, versus Macau’s 39% on the gross), it’s
not hard to see how Singapore’s IRs can
potentially produce a better yield per slot
player despite the higher wage costs and
general overheads associated with doing
business in Singapore.
‘There are a lot of two cent machines in
the Singapore IRs,” says the industry source.
“A 50-line two-cent machine means a
[Singapore] dollar bet. That’s the equivalent
of more than five Hong Kong dollars, which
in Macau would be approaching the VIP slot
market segment.
Common denominations
“At Genting [RWS], you have 100-lines
games from Aristocrat and you’ve got 50-
line bets for everybody else. The 100-line
games are not super popular in RWS at
Slot machines in Macau come in denominations as low as HK$0.02. The lowest in Singapore is
14 times more, and equivalent to HK$0.28 the moment. The 50-line games are, and
the low-denomination is at the moment
“What they’re used to if they’re Singapore 90% RTP. That can be a combination of a dominating—that means under ten
slot club players is a very tough 82% RTP machine and a link. But it has to be overall [Singapore] cents (HK$0.28). The five- and
with five line games, nine lines maximum a return [to the player] theoretically on the two-cent games are, I think, going to be the
bets,” the industry source tells IAG. machine of 90%.” winners [in Singapore],” explains the insider.
In Macau, low denomination machines “Now two casinos are there, overnight
Tax issues are available in as little as HK$0.02 or HK$0.01 the club industry has fallen from 100% of
“The way the tax on club gaming multiples in some casinos. That doesn’t the market to 35% of the market, though
is structured, the clubs can’t make any even register on the scale in Singapore admittedly the market itself is also growing.
money unless they set the RTP at 82%. dollar terms. In the Singapore IRs, the By this time next year, the club market share
What the players are getting [in the IRs] is lowest denominations are typically S$0.05 could be as low as 25%.
an RTP set at 90% minimum, with 25, 50 to S$0.10. That’s equivalent to HK$0.28 to “I think by the third quarter this year,
and 100 lines. The casinos in Singapore are HK$0.56 per bet. Given the differential on the Singapore casinos will start to see
not allowed to operate their games under currency exchange rates and Singapore’s momentum really taking off.”
A Sure
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May 2010 | INSIDE ASIAN GAMING 15Cover Story
Safe Harbour
Michael Leven of LVS tells IAG why he thinks Marina Bay Sands will be a big success
A
mid the justifiable razzamatazz surrounding the opening of
the ambitious and impressive Marina Bay Sands integrated
gaming resort in Singapore, there’s a multi-billion dollar
question. How big is the Singapore gaming market going to be?
Elsewhere in this edition, CLSA Asia Pacific Markets, an
independent brokerage and investment group, offers its latest
assessment on the city-state’s new casino market.
Here, Inside Asian Gaming gives the perspective of a key member
of the Las Vegas Sands Corp (LVS) leadership masterminding the
company’s expansion into Singapore.
Michael Leven, President and Chief Operating Officer of LVS,
spoke about Singapore gaming revenue, the thorny question of
table quota in Macau, and about the company’s aspirations for an
integrated resort (IR) in Japan.
Inside Asian Gaming: What’s your anticipated return on
investment for the Marina Bay Sands project?
Michael Leven: Our expectations are to get at least a 20%
return on investment [per year]. The investment is US$5.7 billion,
so that’s US$1.14 billion a year over a five-year period to achieve
payback. There are various ways of looking at return on investment.
If you want to dig into it, and to look at our return on equity, we
had US$3.6 billion of financing, and we put up US$2.1 billion dollars
[equity]. So a 20% return on equity would only be US$450 million a
year, roughly. We prefer to look at the return on total investment.
Do you anticipate most of that return coming from the
tables?
I think initially most of our return will come from the tables. Michael Leven
16 INSIDE ASIAN GAMING | May 2010Cover Story
I think over a five year period, there’ll be a flattening out of that a soft opening. We knew that if we made the April 27th date,
[table] return. I think one of the things that most of the financial we would be able to have a hard opening on 23rd of June. But
people seem to be missing is how great this facility will be in its part of the [MBS] product—for example the Louis Vuitton Crystal
totality. They’re focusing primarily on the gaming based upon Pavilion—will not be finished until February [2011]. But if you
Macau-type numbers. I think over time what will be proven is that don’t start, and you don’t set a date, you really never get going.
there will be an equalisation of gaming revenue to hotel, MICE If you waited to finish everything [before opening] you wouldn’t
[meetings, incentives, conferences and exhibitions], entertainment get there.
and shopping revenue. Shopping is going to be a big area here
in Singapore. Actually, I’m referring to an equalisation of income,
rather than revenue. The revenue from gaming is much higher
and the margin of profit is less. I think the equalisation on income
[gaming to non-gaming] will come maybe by the time we reach
year three [of MBS operation].
What do you think the size of the gaming market is going
to be in Singapore? Your chairman, Sheldon Adelson, said
he thought a figure quoted recently for Resorts World
Sentosa of US$3 million per day gaming revenue for RWS
was incorrect. How far out do you think that figure is?
The numbers we are getting out of Genting’s operation [RWS]
so far are pure observation numbers. One of the frightening things
for me is that people have talked about win per [slot] unit per day
in the area of US$1,000 to US$1,100 dollars per slot machine. That’s
significantly higher than anything that anyone’s ever seen in the
gaming business—and win per unit on the tables estimated at The Louis Vuitton Crystal Pavillion will open in early 2011
US$5,000 to US$6,000 per unit per day. Nobody’s estimating the VIP,
because we don’t know what’s going on in there.
Tom [Arasi, President and CEO of Marina Bay Sands] mentioned
to me the other day that the estimate on slots has come down to
about US$800. That’s still an unbelievable size number, and no one
knows the sustainability and how deep the market is of that kind of
play. It’s really too early to tell.
Analysts have estimated the total [annual] gaming market
for both us and Genting at anywhere from three to five billion US
dollars—I’ve maybe seen a low of US$2.5 billion. But it’s such a
hypothetical; I don’t know where they get numbers from, because
it’s never happened here before. When I ask them the question
where they’re getting their estimates, it seems they talk to some
of our gaming people. The people that deal in the VIP market,
they’re excited, but they’re sales people. In general they exaggerate
everything—and sometimes they’re right!
Even when the gaming revenue [statistics from the Casino
Regulatory Authority] comes out in May for the first quarter, it’s
going to be inflated by Chinese New Year dramatically. That sends
the numbers way up both here and in Macau.
We really won’t know until Genting is open about six months
and then we’re open for six months. Genting doesn’t have all the
tables open. We’re going to have a significant amount of our tables,
but not quite all of them. But we’ll have a higher percentage of our
tables open [in the first six months] than them.
The question is a very good question, but it’s really too early to
answer with certainty.
Why did you decide to have your soft opening on 27th
April? Were there any covenants on an opening date from
lenders or was there any pressure from the markets?
We decided a couple of months ago that April 27th was the
date, in order to provide a target for everybody to shoot at as
May 2010 | INSIDE ASIAN GAMING 17Cover Story
How important will Marina Bay Sands be in terms of its
contribution to your global operation?
Marina Bay Sands will be the most important product in our
system, although it doesn’t have the amount of [hotel] rooms that
[our] Las Vegas [offer] has. From a financial investment as well as a
return on investment standpoint, Singapore should be the largest
[operation] in the company.
When Singapore is open and mature, about 85% of our EBITDA
[earnings before interest, taxation, depreciation and amortisation]
for the company will come from Asia—that is, Macau and Singapore.
Only 15% will come from the United States.
The major market for Singapore is Singapore itself from an
integrated resort standpoint. From a casino standpoint, Indonesia
and Malaysia will be the second most important markets. A little
bit after that would probably come India, Hong Kong. We are not
targeting mainland Chinese. There will be some tourism business
The Macau government announced a 5,500 table cap limit in March
[from China]. The tour business has increased in Singapore from
mainland China, but it [that business] would not necessarily be a other facilities until we get the tables in 2013. In other words,
gaming target. As the middle class in China grows, there may be we will use some tables we currently have that are not being
some visitation from China. maximised.
Do you anticipate having the gaming industry trade Do you have any further ambitions in Asia?
show G2E Asia at MBS? Our first target really now is Japan. The press has said that
I haven’t heard anything about the possibility of that. Actually Japan is considering seriously building an integrated resort. We
we’d probably like them to stay in [The Venetian] Macau. I don’t have visited both Tokyo and Osaka, and contacted people on the
think we’ll need it here. Macau right now is a little slower on the ground there.
MICE. It’s still getting out of the ‘blocks’. But G2E Asia might come If there is hope Japan will do it, we believe it will be done on an
here one day. integrated resort basis in Tokyo or Osaka or possibly Okinawa, which
is not really our target, but the first two are.
I said to Mr Adelson recently: ‘I think we ought to spend all
our time on Japan right now and not diversify our effort [away
from Asia].
There have been some inquiries from [South] Korea. Korea is
a little bit more difficult because they do not allow locals in all
but one casino. We would not do an integrated resort if locals are
not allowed, even if there has to be a fee [for entry] as with the
Singapore model. That model, with a fee payable by locals [for
casino entry], would be the model we would propose if we went
into Korea.
Also the tax rates in Korea are a little egregious for gaming. They
would need to be modified [from the LVS perspective]. Korea would
like to have an integrated resort, but you can’t support our kind of
integrated resort there [with the no locals rule].
We have a delegation coming in from Korea for the grand opening
of Marina Bay Sands on 23rd June.
A hotel suite at Marina Bay Sands There’s been talk about Japan legalising casino gaming
for at least the last ten years. There’s no guarantee the
I want to turn now to Macau and Cotai plots five and government will do so. Could you do a Japanese resort
six. Mr Adelson has told us that you are going to get the without gaming?
workers you need for Cotai five and six. But will you get You can’t support our sort of infrastructure without a gaming
all the tables you need? base of revenue. Mr Adelson’s proposal is that the gaming allows you
The conversation with the [Macau] government at this point is to build the other facilities. To wait for the MICE business to mature
that we’re guaranteed a certain amount of the tables we need to and to wait for the transient business to mature is something you just
open, and the maximum amount of tables we need in 2013. can’t afford to do.
Nobody would come in and build a 2,500-room hotel like this
A ‘certain amount,’ but not all before 2013? [at Marina Bay], with all these facilities, without gaming. You can’t
We will support those ‘missing’ tables with tables from our pay for it.
18 INSIDE ASIAN GAMING | May 2010May 2010 | INSIDE ASIAN GAMING 19
“Marina Bay Sands will be the most Cover Story
important product in our system,
although it doesn’t have the amount of
[hotel] rooms that [our] Las Vegas [offer]
has. From a financial investment as well
as a return on investment standpoint,
Sands Skypark
Singapore should be the largest
[operation] in the company.”
Theatres
Hotel
Casino
The Shoppes at
Marina Bay Sands
Museum
Sands Expo and
Convention Center
Event Plaza
Crystal Pavillion
How do you sell the idea of an IR to the Japanese
authorities?
With gaming as a base to develop an IR in either Tokyo or
Osaka, it could provide a whole lot of incentive for people to bring
international meetings to Japan. I think the Japanese authorities are
intelligent enough—looking at this [Marina Bay Sands] to see they
need a boost of tourism. Japan’s economy is relatively flat, so they are
looking for opportunities to develop.
The Tokyo facilities for conventions and meetings are not very
adequate for the demand that could be created, and the same
in Osaka. They have facilities, but they’re really not very good in
terms of the size and the infrastructure of hotel rooms. They can’t
develop it.
Look at where Japan currently ranks in the MICE business
compared to Singapore. You’ll see my point. Japan is way down
the list. It’s somewhere on a par with Stockholm as a convention
destination for goodness sake. That’s ridiculous relative to Japan’s
importance as a country and as an economy.
The pressure to legalise casino gaming in Japan seems
to be coming from local government—the prefectures—
rather than the national government.
There have been various politicians in the Diet [Japanese
Parliament] who have taken up the gaming cause in terms of having
an integrated resort, and one of the governors from one of the
prefectures and his staff has also looked at it.
Steve Wynn said recently he wouldn’t do anything
that would hurt his business in Macau. Would doing
something in Japan have an impact on LVS’s Macau
operation? I was thinking of the fact that the Four
Seasons brand that you have on Cotai seems clearly
targeted at Japanese customers.
Japanese business in Macau is a very small percentage of Macau’s
business. I hope Steve Wynn doesn’t want to go to Japan because we
want to go to Japan.
20 INSIDE ASIAN GAMING | May 2010May 2010 | INSIDE ASIAN GAMING 21
Raising the Roof
CLSA bullish on Singapore after opening of second integrated resort
C
LSA Asia-Pacific Markets is raising its
estimates on the size of the Singapore CLSA revised estimates on size of Singapore gaming market
gaming market now that both
integrated resorts are partially open and it
has a little more data to work with.
The independent brokerage and
investment group says it is increasing its 2010
Source: CLSA Asia-Pacific Markets
forecast in the part year for the whole market
by 3.1% to US$2.15 billion, and by 4.1% for more bullish on Genting Singapore based Malaysian day-tripper casino spending,
the full year in 2011 to US$3.69 billion. The on recent operational performance, we are which we increased from SG$70 to SG$100
report, Singapore casinos–Sector outlook [only] mildly moderating our estimates now based on our observation of the current
from Aaron Fischer, Jon Oh and Huei Suen that we have more tangible data points gaming appetite,” say the authors after a
Ng, says the revised figures take account of to work with and to re-validate our initial research trip to Singapore in early May. The
higher than anticipated spending by day assumptions. visit followed the soft opening of Marina Bay
trippers from neighbouring Malaysia. “We raised our 2010CL Singapore gaming Sands on 27th April and also reviewed the
“The opening of MBS is generally market size forecast marginally by +3.1% to progress made by Resorts World Sentosa
considered successful, and the IR is set US$2.15 billion, and +4.1% for 2011CL to since its first phase opening on 14th February
for a grand opening launch in June 2010. US$3.69 billion,” states CLSA. during Chinese New Year.
While we have every reason to be even “This is to account for an increase in CLSA estimated no change in its total IR
visitor forecast of 9.2 million for 2010 and
15.1 million for 2011.
CLSA acknowledges, however, that some
other analysts are more cautious on the
outlook for the Singapore gaming segment,
in light of some question marks over the
prospects for VIP play in Singapore in the
probable absence of junkets.
“Increasingly, consensus is turning more
bearish on the prospect of the integrated
resorts, and many are quick to conclude that
initial gaming revenues for both RWS and
MBS are disappointing and the casinos will
not be successful,” states the CLSA research.
Sunny side
“It seems that CLSA is one of the few
brokers still positive on the Singapore
Crowds gather for the opening of Marina Bay Sands gaming market. Just as we believe consensus
22 INSIDE ASIAN GAMING | May 2010May 2010 | INSIDE ASIAN GAMING 23
Market Outlook
is too bearish on Macau’s rapid earnings
growth, we believe that consensus have
CLSA forecast for RWS (gaming)
underestimated the potential of Singapore’s
gaming market,” adds the report.
CLSA stresses that its position is based
on its own experience from a day-long visit
to both properties spread across different
times of the day, combined with anecdotal
evidence from other sources. As such, CLSA
doesn’t claim its assessment to be entirely
scientific, but regards it as a reasonably
educated view based on available
information and comparison with trends in Source: CLSA Asia-Pacific Markets
Macau and other Asian gaming markets.
“We think it is too early to extrapolate CLSA forecast for RWS (gaming and non-gaming)
early performance of both casinos,
especially as we believe growth will
accelerate quite quickly over the first few
years. Given uncertainty about timing of the
openings for both IRs and as not all of the IR
products are open, we believe a significant
number of tourists have delayed holiday
bookings. Also, some will book visits after Source: CLSA Asia-Pacific Markets
some of the initial teething problems are immediately then went over to RWS and expected a decline of [RWS] customers in
ironed out. As a reminder, Macau gaming spent about 0.5 hours each time to gauge the first week of MBS opening, and have
revenues have grown by around 30% per the business in comparison.” been wrong,” say the CLSA analysts.
annum for the last six years; and the US The authors cite as evidence in support They issue a note of caution, however, on
and Australian gaming grew by between of their bullishness their witnessing of RWS’s mass market performance in coming
10-15% per annum for more than ten years resilience in Resorts World Sentosa’s mass- months. “We still expect cannibalisation
post-opening,” state the analysts. market performance in face of competition to happen in the mid-term, and think it’s a
from MBS. matter of time.”
Methodology “RWS mass-market gaming continues The authors did note Resorts World
“Nonetheless, CLSA conducted a to impress. Anecdotally, the RWS casino has Sentosa’s high limit tables appeared to be
simple study to gauge the performance of not seen any decline of foot-traffic and table performing better than they had expected.
the MBS casino versus the RWS casino. We drop since the five days of MBS opening. In “RWS VIP could surprise consensus
visited the MBS casino on 1st May 2010, much similar fashion to Genting Highlands on the upside. With over 170-210 tables
at 2pm, 6pm and 10pm. We spent about resort in Malaysia, RWS is starting to build dedicated to VIP now across Crockfords
1.0–1.5 hours each time at the casino and a loyal base of mass-market customers. We and Maxims Club, our recent visit to the
VIP floor suggests that the foot-traffic and
gaming appetite could surprise the market
on the upside. RWS is currently embarking
on an expansion renovation at Maxims Club
to include more rooms as the VIP tables are
running at high capacity. We estimated VIP
to be 37% of overall revenues.”
CLSA added, however: “We view the
hardware of the RWS VIP as disappointing.”
The authors said they were unable to
draw comparisons between RWS’s high
roller offer and that of Marina Bay Sands
during their trip.
“We were not privy to observe the
performance of the VIP floors during our trip.
As Sheldon Adelson [the LVS Chairman] has
stated the strategy of not engaging junkets,
we expect all VIP business to be direct. We
have not formed any views on this segment
Resorts World Sentosa—still very busy despite MBS opening of the [MBS] business, but are inclined to
24 INSIDE ASIAN GAMING | May 2010May 2010 | INSIDE ASIAN GAMING 25
Market Outlook
CLSA’s comparison of the Singapore IR’s
gaming offer
Source: CLSA Asia-Pacific Markets VIP gaming at MBS—artist’s impression
believe that it will be the stronger segment the mass market tables at Marina Bay Sands swing factor,” state the authors.
compared to RWS due to the higher quality of during their visits throughout the day. In its summary of the IRs prospects, CLSA
product offering and better VIP marketing.” “MBS mass-market gaming was says it expects MBS’s proximity to the city
CLSA said LVS had been the more surprising. The under-utilisation of the centre, including the central business district
aggressive of the two operators in opening mass-market gaming floor is perplexing, as and banking district, to help it do well with
proportionately more of its gaming floor we expected a stronger showing given the walk in visitors—especially in the retail and
from day one compared to RWS. existing familiarity with gaming now that dining segments.
“MBS launched with almost over 550 RWS has been open for over two months “MBS will see high overall foot-traffic.
tables in total, a statement that the casino already. We possibly attribute [it] to [MBS] The iconic status of the building is a tourist
is fully fitted out from the first day. This is having too many tables upfront, and yields attraction in its own right and will see a
in comparison to the soft-launch strategy would have been better with 15-20% fewer steady stream of visitors to the overall site
to RWS, which started with fewer than 300 tables based on the crowd we observed.” over time. Many other attractions such as
tables and have since ramped up to circa CLSA added that if RWS has made the SkyPark, museums, and conventions
450 tables by now. Table split between effective use of its first mover advantage and have yet to ramp up and will further boost
both casinos are still around 20-30% VIP managed to sign up Singapore citizens or traffic,” says the CLSA research paper.
and the balance for mass-market,” states permanent residents as table players under
the research paper. the S$2,000 annual entry fee or enrol foreign Visitors
players under its loyalty card programmes, The analysts quote industry sources as
Downside surprise that could have an impact on MBS’s mass estimating MBS’s daily traffic immediately
The authors added, however, they were table performance. after its soft opening as between 36,000 and
surprised by lower than expected numbers at “We hope that MBS VIP could be the 50,000 people per day.
Southeast Asia’s only Universal Studios theme park is located at RWS
26 INSIDE ASIAN GAMING | May 201027
Market Outlook
unlike Macau where it has now become an more combined gaming and non-gaming
CLSA estimates on
‘incremental’ market with stiff competition. activities than are available in Macau or
contribution of gaming
While it would appear one of the most elsewhere in Asia-Pacific.
market segments to
obvious points, we want to highlight that it “All these attractions will support more
Singapore
is unheard of globally for governments to than 17 million tourist arrivals by 2015 (+70%
allow two very major casinos in the middle from 2008). We expect average length of
of a city’s CBD. Melbourne and Sydney [in stay will increase to four days (from 3.2 days
Australia] do have large casinos, but not the currently), which compares with Macau’s
scale of Singapore, a city that also attracts 1.3 days. Lastly, Singapore’s airport sees 38
a larger number of tourists. The Singapore million visitors per year—visitors that could
government is providing easy access to its be convinced to stop over for one to two
five million population. days en route to further away locations. This
“We find the S$100 entry fee rather could represent some low hanging fruit for
nominal compared to typical bet sizes. the IRs.”
Also, the S$100 represents a light obstacle Finally, CLSA stresses the backing
Source: CLSA Asia-Pacific Markets compared to the public of Hong Kong who from Singapore’s government for the IR
have to travel over one hour to Macau via experiment as a big plus.
“MBS retail is impressive. The retail ferry; or for Malaysians living in KL [Kuala “There is strong government support,
offering at MBS surprised on the upside Lumpur] who have to travel to Genting with no policy pushbacks. Gaming taxes
with a slew of luxury brands and over Highlands or Singaporeans that currently are between 12-22% [inclusive of Goods
one million square feet of retail space. travel to Genting or board gaming cruises. and Services Tax] versus 39% in Macau and
Coupled with 16 restaurants in the IR, Also, [Chinese] mainlanders are restricted 25% in Malaysia. The success of the IRs is
we believe that this will change the to visit Macau once very two months, which in the interests of the government as this
lifestyle of upper-middle class and above dramatically constrains the size of Macau’s initiative represents a tool to attract tourists,
Singaporeans, and will be the centre of gaming market. create jobs and add to the increasingly
attraction for wealthy tourists.” dynamic cultural landscape of Singapore.
The report describes the decision of Tourism boost Furthermore, unlike the regional gaming
LVS to price entry-level rooms at the Marina “The Singapore government’s STB jurisdictions Macau (China visa policies) and
Bay Sands Hotel at S$450 (US$322) for a [Singapore Tourism Board] has recently Malaysia (religious backlash), Singapore IRs
relatively modest 300 square feet as “a high issued guidance for a 30% rise in visitor have the full support of the government,
rate for Singapore”. arrivals for 2010, on the back of the two ranging from guaranteed duopoly to no
“We still expect high occupancy,” say the IRs. The Singapore casino-resorts will offer immigration policy pushbacks for now.”
authors. CLSA expects RWS, located as it is
on another island some distance from the
CBD, will appeal particularly to lower end
day-trippers arriving by bus.
“We are bullish that RWS’s product
offering (especially gaming) is suited to the
low to mid mass market while [the] MBS
product offering is tailored to the higher-
end market,” states the report.
The authors do, though, issue a note of
caution regarding uncertainties over the
VIP segment.
“While we are more bullish than the
consensus, we still see upside risk to our VIP
estimate. We currently expect VIP to make up
around 33% of the market, which compares
to around 66% in Macau.
The report concludes in an upbeat mood.
“The IRs have completely transformed
the entertainment landscape of Singapore.
With average daily foot-traffic ranging
from 25,000 to 50,000 per day in each of
the two casinos, there is less of a doubt
now that Singapore is truly a gaming
market that was waiting to be unleashed.
Both the casinos are ‘transformational’, New heights—the IRs are part of Singapore’s master plan to boost tourism
28 INSIDE ASIAN GAMING | May 2010May 2010 | INSIDE ASIAN GAMING 29
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30 INSIDE ASIAN GAMING | May 2010You can also read
