Singapore Casinos – VIP Gaming Spread & Strategy

Posted: April 13, 2011 in Uncategorized

Special Commentary of New Reports

13th April 2011  Wed


RWS secured with majority share of premium (VIP) market share - >60%

 As reported by Singapore news, for the year 2010 apparently Resorts World Sentosa (RWS) has managed to rob over 70%+ of total premium/VIP casino market shares vis-a-vis Marina Bay Sands (MBS).

RWS has turned the table around in the premium segment this time, against MBS’ more luxury casino-hotel property. No wonder Adelson recently (again) fired a few more of MBS senior management executives, including the senior vice president of operations.  MBS marketing team members have been axed and changed.

Under a relatively ‘clean’ premium market environment without the casino Junkets, both IR casinos still managed to make pre-tax profits of S$1.35b and S$833m respectively for year 2010. Not bad indeed.

Our experts would assess that, the Casino Regulatory Authority (CRA) will not easily give in to (casino) sponsored junket groups if the current situation remains unchanged, i.e. the business continue to be good for the two IR casinos. Why would the government of Singapore bring in the ‘negative’ element of Junket system if there is no pressing needs on IR’s business survival? Macau is a case in point, that junkets are ruling the casino industry once they are introduced into the equation. Singapore is aiming to be a special entertainment destination in the east, yet without all the bad stuff of social and money-laundry problems. Even the CRA later were to approve and issue junket licenses, we envisage that it will be done in very gradual pace, i.e. a few licenses to test the outcome rather than open the flood gate. Macau currently has at least 170 junket license-holders in operation on the ground.

Why Adelson has been openly opposing the idea of introducing junkets into Singapore? The reason is that in Macau, Sands China though is operating junket system but majority of its revenues come from the Mass gaming market still. In Singapore, he would try to compete with RWS based on Mass market strengths and direct VIP accounts to maximize MBS profitability, take advantage of Singapore’s low gaming tax regime. Do not forget that LV Sands Corp. is still holding on to huge debt liability. Overall, we expect that MBS operates with a higher cost structure than RWS, especially on staff salary etc.

But on the contrary, Genting has not much debt in recent years and they could optimize their credit play programs for VIP market segment and also, not too worried about paying high commission rates to junket operators. This strategy will push MBS into sideline of the premium/VIP market. The results of RWS having secured majority of premium/VIP market shares is an obvious sign that the strategy works.

Should the CRA ease off on the issuance of junket licenses this year, RWs will continue to surge ahead in their VIP casino revenue against MBS. Total gaming revenue for Singapore IRs with junkets in play could raise by another 30% over relatively short duration.

However, it is not without paying a dearly price for increase in premium/VIP market shares by RWS.  Operating costs for premium market is higher as compared with mass marketing volume operations. In particular, cost of customer acquisition for premium market including player rebates, credit exposure, commission and services are high. Casino has to sustain consistent high turnover of non-negotiable chips in play (& draw down) by granting more and more credits to players. Collection success rate is generally low based on experience. So, casino must be prepared to write off huge credit debts at certain point in time.  Therefore, it is better to bring in Junket system on the ground soonest so as to mitigate credit exposure and also, to square off the risk of volatility (with average win% of 2.7 – 3.3% for VIP gaming programs) over longer period of sustainable turnover pushed by junkets.

Once RWS be granted junket licenses to operate in the casino, we envisage that Adelson will have no choice but to follow the same.  Otherwise, MBS must be prepared to lose more market shares.

With a split of 60 – 40 percentage for VIP and mass market revenues, RWS may soon be on a lower operating margin game than MBS. Therefore RWS is looking forward to a more sustainable (with high churning) VIP market  risk-reward model and that has to come from Junkets.

  1. […] Singapore Casinos – VIP Gaming Spread & Strategy « Professional … Special Commentary of New Reports 13th April 2011 Wed. RWS secured with majority share of premium (VIP) market share – >60%. As reported by Singapore news, for the year 2010 apparently Resorts World Sentosa (RWS) has managed to rob . […]

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