Singapore Integrated Resorts – Winning Conditions

Posted: November 13, 2009 in Uncategorized

ACS 2009

Special Report – Keynote Address On Singapore IRs, Asian Casinos Symposium 2009

Reviewed by:   Editor, Professional Ground 13th November 2009

The following is a partial extract from one of the symposium speakers Mr. Felix Ling, senior partner of Platform Asia.  Mr. Ling delivered the keynote address on “Singapore Integrated Resorts – Setting the pre-conditions for a uniquely Singapore gaming experience & staying ahead in Asia”. Besides an overall illustration of how Las Vegas and Macau succeeded in building their respective gaming & entertainment landscape, Felix also stressed upon the key success factor for Singapore IRs – setting the RIGHT Pre-conditions for winning in Asia’s competitive landscape of emerging mega resorts. In essence, Felix was speaking about the following concerns that would shape Singapore IR’s future scenarios.

IR’s VIP Segment

What’s the desired market share for IR VIP gaming revenue?

– Singapore: Encourages higher proportion VIP (high roller) gaming activity and revenue with lower tax regime in order to avoid negative impact on local scene

– Most Analysts: VIP gaming revenue estimated at 55% of total casino revenue

– Likely scenario: A more realistic VIP gaming market share between 30 – 35% of total casino revenue the first few years, with estimated up to 25% total casino revenue of what Macau generates

Desirable Pre-conditions for Staying Ahead in Asia

– Casinos that give greater emphasis on direct play & consistent services

– Casinos that could manage rolling play at high volume and manage credit risk well

– Casinos that tap on new growth pipelines instead of scrapping the bottom of barrel on traditional direct play markets

– Well formulated casino regulatory regime that meets Singapore’s requirement for high standard of compliance yet business friendly

– Teamwork between the IR operators & authority to create impactful launch, promotions & raise service standards to the next level

– Grow industry service-support clusters that provide good connectivity in and around the Integrated Resorts (transport, ticketing, dining, transfer, life-style, entertainment, etc.)

– Well positioned with efficient casino promotional distribution channels (Mass & VIP)

In conclusion, Felix shared the four (4) plausible scenarios that could derive from the discussion of the above mentioned pre-conditions. As for the first few years of operations, the IR will likely to rely on casino revenue (up to 70 – 75% of total revenue) to deliver its EBITDA and margins.

According to Felix, the best scenario that all should aim for will be the “Star Performer” at the top right-hand corner. However, for the IRs to achieve Star Performer outcome it requires all the above pre-conditions to be met with great efficiency.

It is therefore still quite a heart-warming outcome for the IR to be able to achieve an “Alternative Scenario” according to Felix, in its first few years of operations, before the non-gaming elements within which can be developed in full-swing to balance up as strong business driver. This is represented by a smaller Star as in the top left-hand corner in the following scenarios chart.

The uncertain scenario that carries an impact to the integrated resort’s future would be the “What If” that happens when the two IRs open. That scenario in the lower right-hand corner indicates a weak or inconsistent mass market (gaming) volume that persists for the initial period (i.e. first 2-3 years) of IR operations. Should this scenario happens, both the tourism authority and IR operators need to re-examine the fundamental concept of heavily relying on the current 5 major sources of tourism traffic supplies with higher expectation, and why there isn’t significant growth in any of potential new growth pipelines? IR’s operating margins under this scenario will be at the bottom level simply due to lack of critical mass to sustain the IR’s gaming revenue contribution, which is the critical sustainability factor in the first 5 years of Singapore IR’s competitive landscape. When this scenario is unfolding, will the authority allows the casino operators to adopt more aggressive casino marketing to the locals? If really such scenario happens and to allow this uncertain environment continues, it will quickly evolve into high risk of failure.

The worse scenario of the four is rather unlikely to happen. It is at the lower left-hand corner indicated by a red no-through road sign. If it does happen, then it is really a “Surprise, surprise”.

Participants of the symposium were impressed by Felix’s scenario-thinking approach towards analyzing Singapore IR’s business model. The Asian Casinos Symposium 2009 was organized by T.U.N. International and held in Singapore during the period 10th – 11th November.

Highly probable scenarios for Singapore IRs

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