Singapore lets the crapshoot begin
By Muhammad Cohen
SINGAPORE - The first casino in Singapore, the US$4.6 billion Resorts World
Sentosa, opens on Sunday. But don't expect pigs to fly, lions to lie down
with lambs or Satan to buy snowshoes.
"Casinos are new to Singapore but gambling is not," Singapore Management
University president Howard Hunter said. A majority of Singaporeans already
gamble, whether it's through Singapore Pool's enormously popular lotteries, 72
racing dates a year at the Singapore Turf Club, slot machines at many private
clubs or the family mahjong game over the Lunar New Year holiday, which
begins on Sunday.
Casinos at the center of multi-billion dollar retail and
entertainment complexes - Singapore refers to them as integrated resorts (IRs)
- change the scale and scope of the gambling opportunities. They also seem to
run against the hard-driving ethos of founding father Lee Kuan Yew and the
family's little island nation that could. But casinos do fit the Singapore
tradition in a key way: the city-state and the gaming table are both all about
playing by the house rules.
Singapore authorities have showed flexibility, allowing Resorts World Sentosa
(RWS) to open its casino in time for the Lunar New Year holiday, which is
celebrated across much of the region, even though the Universal Studios segment
isn't fully operational. The theme park will be open only for evening previews
(at the discount price of S$10 (US$7), with full operations at least a week
away. Final preparations and testing of the world's largest Universal Studios
and first in Southeast Asia will continue during the day during the soft
opening period.
Singapore also showed flexibility in late 2008 when Marina Bay Sands IR
developer Las Vegas Sands (LVS) teetered on the brink of bankruptcy. That
crisis led authorities to allow partial openings for both IRs. Despite bending
the rules in these two cases, don't bet on Singapore letting the IR operators
always getting their way.
RWS, a subsidiary of Malaysia-based Genting, began pushing for its casino
license weeks ago, hosting a charity event in December and declaring its casino
"ready" for business last month. RWS opened four hotels on January 20 and began
running television ads promoting aspects of its integrated resort, including
the unopened theme park. Approval to open the casino didn't come until the RWS
had its centerpiece - the theme park, not the casino - ready for guests.
"Singapore’s goal is to open an integrated resort, not just a casino. The
operators will need to learn how to operate in this type of environment.
Singapore will not allow anything to damage its international image and will
wait until the IR is truly an IR," University of Nevada-Las Vegas Singapore
campus Dean Andy Nazarechuk said.
Last weekend's low-key announcement of the casino license approval has set off
a frenzy of activity this week. Opening for Lunar New Year is considered
auspicious. While it's better to have the casino open for the holiday than not,
experts are divided on how much of an advantage RWS will get.
"If they are opening a major part of the hotel as well as the casino with
associated F&B [food and beverage] and retail components, it should be a
significant opening for them," leisure consultant YWS Asia operations director
Michael Stewart said. "Chinese New Year is big even in Las Vegas."
CLSA head of Asian gaming and retail research Andrew Fischer said, "They will
definitely have the first mover advantage. It will give RWS time to sign up
players to their loyalty programs under the S$2,000 [US$1,418] annual fee."
Singapore citizens and permanent residents are required to pay a
casino-specific admission tax - to the government treasury, not the casino - of
S$100 a day or S$2,000 per year.
But
Platform Asia's Ling downplayed the timing of the opening. "RWS opening for Chinese
New Year is not significant at all. This is not the Macau golden week", the
holiday period following China's October 1 National Day that fills Macau's casinos.
"A first move does not secure their long-term market share vis-a-vis
Marina Bay Sands."
A spokesperson for Marina Bay Sands, the US$5.6 billion IR scheduled to open
near Singapore's financial district in April and displace RWS as the world's
most expensive casino resort project, offered good wishes to its rival.
"Congratulations to RWS and to Singapore. The Year of the Tiger will be a year
of magnificent change for Singapore."
However, parent company Las Vegas Sands chairman and chief executive officer
Sheldon Adelson expressed a different point of view late last year. "I'm glad
that they are opening first," he said, according to published reports. "This is
sailing in unchartered [sic] waters. We'd rather they make the mistakes and we
learn from it, rather than we make mistakes."
Stock market reaction reflected divided investor opinions. Genting shares in
Singapore and Kuala Lumpur surged early on Monday amid enthusiasm about the
license approval, but finished the day down significantly and hadn't revisited
their highs through Wednesday trading. The smart money is less concerned about
when the IRs open than with what will happen when they do.
A ticket to ride
Late in the afternoon on (Western) New Year's eve, Singapore's Casino
Regulatory Authority (CRA) issued its long-awaited regulations on junket
operators. In Macau, where VIPs account for two-thirds of gaming revenue,
junket operators provide a crucial link to high rollers, especially those from
mainland China.
Junket operators identify VIP players and deliver them to casinos, but that's
just part of their role. Due to currency limits on travelers leaving China,
mainland gamblers rely on junket operators to provide them with credit. Due to
the difficulty in ensuring repayment of gambling debts in China, junket
operators are believed to employ strong-arm collection methods. Macau junket
operators are frequently suspected of having underworld ties.
While leaving plenty of wiggle room for junket operators who want to try to
qualify to do business in Singapore, the CRA's regulations virtually guarantee
that no high roller will want to come to Singapore on a junket. The most
onerous provisions require advance notice to the CRA about junket players and
organizers at least one hour before they arrive in Singapore. The only thing
most VIPs enjoy less than losing is having anyone's government keeping tabs on
them. Junket operators will also have to document all benefits given to their
players, with the records stored and available in Singapore.
"My view is that [CRA regulations] will prevent mainland Chinese junket
operators from freely entering and operating in Singapore," Macquarie
Securities senior gaming analyst Gary Pinge said.
The CRA doesn't require similar advance notice for VIP players that casinos
attract independently. Singapore also has one of the world's lowest tax rates
on VIP play at 12%, roughly a third of the rate levied in Macau. So there is
incentive for both the casino operators and VIPs to get together independently,
but gaming experts doubt that will happen.
"The authority prefers the casinos to cultivate their own direct VIP players,
and that is a difficult task for many casinos, especially in Asia," Platform
Asia senior partner Felix Ling said. The key issue is credit, Ling said, which
casinos are reluctant to provide without collateral. Singapore law says
gambling debts are enforceable in its courts, but judicial clout generally
stops at the border.
Deterring junket operators will cost Singapore's casino operators billions of
dollars in potential gaming revenues. At this point, it's a sacrifice
authorities are willing to force on local casinos in the name of playing by
Singapore's house rules.
For the IRs to succeed, particularly with the VIP market crimped by stringent
regulations, they will need to do precisely what the Singapore government wants
them to do - significantly expand visitor arrivals and spending. Even then, the
IRs will need to outperform the world's most profitable casinos to date to earn
decent returns, analysts say.
Some experts believe that Singapore will eventually demonstrate flexibility on
junket rules to improve the IRs' odds on their collective US$10 billion-plus
bet. But remember that they're playing on Singapore's turf, and never forget
the most important rule that applies to almost any betting: the house always
wins.
Former broadcast news producer Muhammad Cohen told America’s story to the
world as a US diplomat and is author of
Hong Kong On Air,
a novel set during the 1997 handover about television news, love, betrayal,
financial crisis, and cheap lingerie. Follow
Muhammad Cohen’s blog for more on the media and Asia, his adopted home.
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