(Source: http://www.asgam.com/features/item/1729-slugging-it-out-in-singapore.html)
The runaway growth of the early days may be a thing of the past in the
world's second most profitable casino market, but the two-horse race
in the Lion City is getting more interesting all the time
Thursday, 13 September 2012

Marina Bay Sands

Gazing at the three Marina Bay Sands towers that have now become a
Singapore icon, it's hard to believe that the city-state's two casinos
are only just over two years old. It has become difficult to imagine a
Singapore without Resorts World Sentosa and Marina Bay Sands. The two
integrated resorts have burrowed themselves deeply into the island
nation's social and economic fabric—the restaurants, hotels and
postcard-perfect pictures ubiquitous for locals and visitors alike—and
in a very short time they have become household names around the

From a business perspective, the two resorts have been a resounding
success. Singapore has now overtaken Las Vegas in profitability and is
second only to Macau globally. And not only have the casinos been
pulling solid numbers onto the gaming floor—both mass-market and
VIP—but hotel occupancy has been phenomenal, as well as patronage of
the restaurants and malls. But while the two operators—Genting and
Las Vegas Sands Corp—have been broadly successful in their ventures,
they have followed different paths to growth and profitability, and
their fortunes relative to each other have ebbed and flowed.

Resorts World Sentosa opened its doors on 14th February 2010, on the
first day of the Chinese "Year of the Tiger," and the 49-hectare,
US$4.3 billion resort created an immediate buzz and was profitable
from the get-go. It pulled in S$860.8 million (US$687.4 million) in
revenue in its first full quarter. Hotel occupancy reached 70%. And
Genting Singapore's group profits amounted to S$397 million. The
project was so successful the group decided to divest its UK
operations and focus on large-scale integrated resorts in Asia

Marina Bay Sands opened to similar fanfare on 27th April that year and
generated US$94 million in earnings during its first 65 days of
operations. LVS originally said it expected to recoup its US$5.5
billion investment within five years, aiming for more than $1 billion
in earnings before interest, tax, depreciation and amortization
(EBITDA) on an annual basis. This was above and beyond the
expectations of analysts, the most optimistic of which topped out
somewhere around the $800 million mark. Sheldon Adelson, chairman and
chief executive of LVS, said he expected the property to be a "slam
dunk home run". And so it was. In its first quarter of operations it
took in US$485.9 million in revenue. (The company's revenue in its
home base of Las Vegas was only $290.7 million over the same period.)
EBITDA for the quarter came in at $241 million, roughly on track to
hit Mr Adelson's $1 billion goal. In fact, six months after the casino
opened, it was generating revenue of $8.4 million per day.

But while both casinos were profitable immediately—and their operators
were optimistic about recouping their investments fairly quickly—total
earnings, especially when looking at EBITDA, have not been evenly
split between the two.

Initially, Resorts World outperformed Marina Bay Sands, but in the two
years since, MBS has overtaken its rival, and although both casinos
took an earnings hit in the most recent quarter, MBS now appears to be
growing more robustly.

Shifting Momentum
Genting Singapore reported EBITDA of S$311 million in the second
quarter of this year, compared with S$345.8 million during the same
quarter a year prior, or 17.4% less. The non-gaming side performed
well. Hotel occupancy was at an all-time high of 92%. But gaming
revenue took a hit, which the company blames on the economic slowdown
in Asia. Core net profit of S$393.6 million over the first six months
was down 27% year on year, and revenue of S$1.5 billion was down 9%.
Second-quarter EBITDA and the 44% EBITDA margin were the weakest on

"A lot of effort put in, but not much to show for it," writes Maybank
Kim Eng analyst Samuel Yin in an August report. "The two new IMAs
[International Market Agents that are holding junket promoter licenses
issued by the Casino Regulatory Authority of Singapore] (since March
2012) and the new Equarius Hotel & Beach Villas (since February 2012)
failed to lift VIP volume. [Genting Singapore] attributed this to a
poor economic environment. Coupled with 1,300 new employees to staff
the Marine Life Park, which is expected to open by year-end, margins
are expected to remain subdued for the next two to three quarters."

LVS also had a disappointing second quarter. It said that its hold
fell across its Las Vegas, Macau and Singapore casinos. And higher
provisions for bad debts also took a chunk out of its profitability,
especially in Singapore, where it provides a great deal of credit
directly to VIPs—putting its balance sheet behind it—as it does not
have the benefit of using junket operators as intermediaries.

But the company does not believe the second quarter is indicative of
its overall profitability in Singapore going forward. "One quarter
does not a trend make," Mr Adelson said on the conference call
announcing the results.

Observers tend to agree. "Momentum has definitely shifted to Marina
Bay in terms of profitability," says one Singapore-based gaming
analyst. "Best look at EBITDA and EBITDA split [between MBS and RWS],
it's probably like 60/40, whereas a year and a half ago it was 40/60,
so it has really shifted."

One of the principal reasons for this can be put down to the
property's iconic status. While Resorts World Sentosa has managed to
bring large numbers of people through its doors, partly thanks to the
opening of Universal Studios and the arrival of celebrity chefs like
Joel Robuchon, as the profile of MBS has grown both domestically and
internationally, it has secured the bulk of the business.

"When you're in the airport looking at the bookshops and you see books
on Singapore, I'd say 70% of all books have Marina Bay on the front
cover," says the same analyst. "It is very much an iconic attraction
for people coming from all around the world."

Moreover, good business sense at MBS has been able to successfully
translate that into chunky profit margins. The high prices the resort
charges for the attractions that go along with its casino beggar
belief, and yet it maintains near full occupancy in its hotel and
plenty of bums in seats in its restaurants.

"Any hotel that can charge that room rate and still achieve 99%
occupancy, that's something special," the analyst says. "And if you go
by for lunch over there or dinner, the bill is just horrendous. Their
pricing premium is really something to be marveled at."

One thing Genting has undoubtedly done well is pack Resorts World with
worldclass attractions to entice visitors, both domestic and
international, to make the trip across the water to Sentosa Island.
The year it opened, RWS premiered attractions like "Voyage de la Vie"
and the popular "Crane Dance". Mr Robuchon opened his restaurant in
April 2011, and the grand opening of Universal Studios went off with a
bang the following month. Rather than resting on its laurels, Genting
has continued to expand its attractions since then, opening the
Experiential Museum & Aquarium last October—the first component of its
adjoining West Zone development— and adding a popular "Transformers"
ride to Universal Studios in December.

Location, Location
While Universal Studios and Joel Robuchon undoubtedly attract both
local and foreign customers, MBS still seems to have broader appeal.
The clientele at RWS sometimes appears to be more local. But MBS
attracts arrivals from all over the world.

"If you stand back, take a look at the floor and look at the
customers, it's a far more diversified customer [base] than you find
at RWS," says the analyst quoted earlier. "It's far more global and
international at both the mass and VIP level, which is quite

Another advantage is location and the development of the surrounding
Marina Bay and downtown areas. And the opening of Gardens by the Bay
next door—a 101-hectare park on reclaimed land, part of which was open
to the public earlier this year—will only serve to heighten MBS'
advantage. This has also been reflected in the interest of foreign
visitors, who tend to cluster around hotel and entertainment areas in
downtown Singapore rather than venturing out to Sentosa, which feels
like more of an effort to get to.

"Resorts World would perform better if the government allowed them to
build another three to four thousand hotel rooms because most of the
hotels are skewed toward the city, not skewed toward Sentosa," says
the analyst.

Genting is still in the midst of its West Zone expansion. A new hotel
has already soft-opened, and the addition of more rooms may help its
casino win back some market share. Its Marine Life Park is set to open
in the third quarter of this year.

But the marketing and promotion of the casino and Sentosa Island as a
destination will always be more challenging. MBS is already a
Singapore icon; it sells itself on T-shirts, coffee mugs and postcards
all over the city and beyond. Its status should ensure that the ball
remains in its court for quite some time to come.

The gaming landscape in Singapore is still fresh, however, and may
still change. Regulators are mulling amendments to the Casino Control
Act. More junket approvals—only two small operators have been
licensed, both working with RWS—could be in the pipeline. There is
even the possibility of a third casino some time in the future.

Despite all that, knocking Marina Bay Sands off its perch is going to
prove difficult. The monolithic three towers of its hotel with the
cantilevered Skypark perched on top have already surpassed the Merlion
as the city's most recognizable icon. As long as LVS continues to
leverage that into gamblers at the tables, guests in the rooms and
spenders in the shops and restaurants, it should maintain its sweet
spot at the top of the pile for a while yet.

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