Singapore casinos lose appeal as revenue slides

Gaming revenue at Singapore’s two integrated resorts hit severely low levels in the third quarter 2012, signalling that the lustre in the two-year old market is wearing thin. Casino operators Genting Singapore and LV Sands saw profits deteriorate during the period by 47 percent and 18 percent, respectively.
The downturn coincides with Singapore’s fledgling economy, as analysts suggest the city-state is only expected to reach 1.5 percent growth in 2012, down from 4.9 percent in 2011, with inflation higher than previously anticipated.
Jonathan Galaviz of Asian consultancy firm Galaviz & Co., commented, “We have been waiting for the novelty factor of Singapore’s casinos to finally wear off and that time may have finally come. Gaming revenues are sometimes a leading indicator of overall macroeconomic activity in the region. This may be a sign of things to come economically for Southeast Asia.”
Singapore’s two colossal resorts both opened in 2010, following a 40-year casino ban lifted in 2005 to boost tourism. The conservative nature of the city-state didn’t stop the resorts from flourishing during the first two years, registering $5.42bn last year, compared to $6.07bn at the 55 Las Vegas Strip-area casinos.
VIP gamblers benefited from a leniency towards junket operations. However, efforts to entice gamblers with promotions have been hampered by social safeguard measures and exclusion orders introduced to prevent compulsive gambling.
As well as the S$100 a day and S$2,000 annual entry levies for Singaporeans, the governing Casino Regulatory Authority (CRA) sets a limit on the number of times a player can visit a casino each month and is currently proposing a betting limit.
Although in a lucrative position due to a cap on Singapore casinos until 2017, the companies are finding it increasingly difficult to operate under stringent regulations. An interest in online gaming could strain the casinos further, as the CRA is exploring the sector and recently announced an information-share agreement with Alderney.
Genting Singapore, operator of the $4.93bn Resorts World Sentosa that houses a 15,000m2 casino, saw its share price fall to its lowest level in two years on releasing its financial statement last month. The company’s third-quarter gaming revenue fell 20 per cent to $433m, with gross profit down 47 per cent year-on-year.
“On a backdrop of a softer Singapore gaming market and increased regional capacity, growing our gaming revenue remained challenging,” said Tan Hee Teck, Resorts World Sentosa CEO, “As we enter three years of our operations, our initiatives will focus on customer loyalty and increasing our foreign visitation.”
Las Vegas Sands reported that gaming revenue at its Singapore property Marina Bay Sands slumped 28 per cent to $470m during the third-quarter; VIP table volume fell 29.5 per cent and slot handle fell 6.1 per cent.
Despite recording a 12 per cent increase in hotel revenue, the Singapore property was the only one of the operator’s seven global locations to post a decline in overall revenues during the period ending September 30.
“The size of this drop cannot be explained by anything other than a fundamental downshifting of consumer appetite for gaming, at least temporarily,” added Galaviz, “Even with this significant downturn in casino revenues, Singapore’s casinos remain highly lucrative and profitable for their owners.”