New Package
Marina Bay Sands offers a very different perspective on an existing integrated resort idea
What has Marina Bay Sands brought to Singapore, Asia and the rest of the world? The business aim of the property may be very similar to that of The Venetian Macao—a one stop shop for every conceivable kind of legal entertainment—but the execution is quite different. The first thing to say is that in look and atmosphere—inside as well as out—MBS is very different to The Venetian. Some may say hallelujah for that, though IAG did notice that in the heart of the MBS property, beneath the tiered walkways of shops, there is a (currently waterless) canal. It seems some ideas are just too precious to be let go of easily.
From a purely real estate perspective, we have a property that is significantly different from not only other casino resorts that have been built around the world, but also to anything that’s been built in Singapore so far. Yet it’s also a property that has been clearly moulded in Singapore’s image of itself as a sophisticated world city, inhabited by people who are generally well educated and know the difference between Berlin Dada and Lady Gaga.
Making a statement
The number of iconic buildings in Hong Kong can probably be counted on the fingers of both hands, if not one hand. Most of the skyscrapers in Hong Kong are fairly dreary up-and-down rent-generating machines. Singapore has plenty of those, but it also has some really memorable historic buildings and some impressive modern structures including Esplanade – Theatres on the Bay, the roofs of which resemble giant fruit laying on their sides, hence the local nickname ‘The Durian’ or ‘Big Durian’. Marina Bay Sands believes it is competing in that territory, and it is hard to argue against its aspirations.
Mr Adelson says his architect, Moshe Safdie, has given him three iconic buildings in one project—the hotel towers and SkyPark; the upturned, Buddha-like ‘hand’ or lotus design of the still-under-construction museum, and the towering atrium space of the Shoppes at Marina Bay Sands. The LVS Chairman added, as a joke, that he hoped his comments wouldn’t lead Mr Safdie to push his price up threefold.
Watching Mr Adelson perform his opening act before the assembled world media, his sense of personal pride in MBS and his aspiration to be taken seriously as an all round resort developer certainly came across. Why else would LVS go to the trouble and expense of installing a work by the iconic British sculptor Anthony Gormley in full view of the main city side entrance to MBS?
This is Mr Adelson’s post modern answer to Steve Wynn hanging the odd Renoir or two in the entrance to his properties. But Mr Adelson’s set dressing gesture feels less like showboating, given that Mr Gormley’s work is integrated into the property rather than placed as an afterthought.
MICE work
For analysts of the so-called MICE (meetings, incentives, conferences and exhibitions) market, LVS has produced a list of events it says have already been signed up for MBS’s Sands Expo and Convention Center. Given the so far patchy performance of the MICE business at The Venetian Macao, sector commentators will be interested to find out if the ‘Build it and they will come’ approach applied to Singapore will inject fresh energy into the city-state’s conference market and create sustainable fresh demand for its services as a regional destination for big meetings.
“We’ve put together our development programme and operation with the belief that we will get in excess of 70,000 to 80,000 people coming per day to Marina Bay Sands,” stated Tom Arasi, President and Chief Executive Officer of MBS, ahead of the opening ceremony.
The Engine Room
An in-depth look at Marina Bay Sands’ gaming offer
How many of Marina Bay Sands’ expected 80,000 daily visitors will be supplying the financial fuel for the MBS engine room, the casino? There is a Paiza Club for high rollers, just as in The Venetian Macao. At the media event for the opening, we were not shown that facility, which could be for any number of reasons—including LVS not giving priority to VIP play in its business model, unlike in Macau.
“As we said several months ago, we intend to run this casino without dependence on the Macau junket style of operations,” said LVS President and Chief Operating Officer Michael Leven at the opening press conference.
“We would run this [casino] business [at MBS] quite similarly to the way we run Las Vegas in terms of high quality VIP play independent with [operator] credit, as opposed to the junket situation. From an economic standpoint, assuming our [VIP] process works, it’s more profitable on the margin than the junket play, which requires higher commission rates. We never expected that the Macau-style junket play would be licensed under the Singapore regulations.”
Mr Leven is clearly closer to the process and the government decision makers than the gaming industry media, but it is difficult to see how LVS and Genting could be anything other than disappointed, even if not surprised, that high volume (albeit low margin) junket play has effectively been ruled out by the toughness of the financial reporting conditions and probity checks required by the Singapore government.
Importance of being local Mr Leven and Mr Adelson both went on record on the opening day stating the importance of Singapore customers to the MBS business model.
“Singapore is absolutely the most vital market for us, but it’s clearly not the only market,” stated Mr Adelson at the main press conference.
“The surrounding countries of Malaysia, Indonesia, Thailand, Vietnam; parts of China; from Australia, Korea, Japan and Taiwan. These are all in our markets. We have MICE business coming from other parts of the world outside of Asia.”
Singapore is home to a lot of rich people. According to the World Wealth Report 2008 produced by Merrill Lynch, an investment bank, and Capgemini, a consultancy, there were 77,000 US dollar millionaires resident in the Lion City in 2007 out of a then total population of 4.59 million. Although it’s reasonable to assume the number of millionaire residents may have fallen since the financial crisis of September 2008, that’s still a good sized domestic target market for a casino. But how many of them will be willing or able to play in the IR casinos is open to question. There are some other regulatory issues aside from the tough junket rules that could put a crimp even in the direct credit VIP play model.
Section 108(7)(a) of Casino Control Act states: “…a casino operator or a licensed junket promoter may provide chips on credit to a person:
(a) who is not a citizen or permanent resident of Singapore (as defined in section 116(9) or
(b) who is a premium player.”A premium player is described under Part I (3)1 of the Casino Control Act (Credit) Regulations 2010 as someone of whom:
“…the total amount of money, chips or any cheque or traveller’s cheque credited to the patron’s deposit account in accordance with paragraph (2) is not less than $100,000 [Singapore].”
In other words, Singapore citizens and permanent residents can play as high rollers and attract the lower tax rate on their gross of 5% (plus 7% GST) if they physically check in S$100,000 and above in cash, but they cannot play on a credit basis—even if that credit is supplied directly by the casino as a marker.
Scrutiny
Even if a Singapore citizen or permanent resident were to check in cash for high roller play, it appears from the local law that his or her casino transaction records would need to be submitted to the Casino Regulatory Authority for scrutiny.
According to part 3 Section 11(2a) of the Casino Control (Credit) Regulations 2010, “A casino operator or a licensed junket promoter shall, whenever requested by the Authority to do so:
(a) produce to the Authority all records referred to in paragraph (1) and permit the examination of those records, the taking of extracts from them and the making copies of them; and
(b) furnish to the Authority all such information as the Authority may require in connection with any such records.”
In other words, it appears the reporting requirements for direct players—whether on a cash check in or cheque deposit basis—are potentially as onerous (in terms of the Singapore authorities looking into people’s personal backgrounds) as are the regulations for junkets and junket players. This would probably also rule out many high rollers from mainland China—even on a direct credit basis.
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“Given that VIP tax in Singapore is half the mass gaming tax, the casinos in Singapore have in theory seven and a half percent to play with, which they can use for promotions with VIP players,” suggested an industry source.
Wiggle room
“In theory, that could make Singapore’s premium offer very competitive with Macau. Outside of high quality accommodation, premium player ‘comps’ as understood in Las Vegas hardly exist in the Macau VIP segment. The junkets in Macau need to make their margin. Junkets in Macau generally incentivise players by offering cash commissions on the players’ volume of play, rather than other value added services.
“The problem I see for premium play in Singapore is that even on a direct credit basis, many players may be put off because of the depth of scrutiny they will be subjected to by the authorities. And the direct player pool is already relatively small given that so many Asian VIP customers are basically controlled by junkets.
“I think the strong market for top end business in Singapore is going to be Malaysia, and to a degree Indonesia. The question mark is how much Genting will soften up in the face of competition from MBS in that premium segment.”
The source suggested players from mainland China were virtually ruled out because of the absence so far of junkets.
“If it’s an overseas direct player, the casino has got to be able to collect, and as we know, you can’t collect a gambling debt in China,” stated the insider.
“A Singaporean gambler who wants to come in and play for high stakes at the casinos in Singapore is going to be subject to financial reporting requirements as well, which he or she may not be comfortable with.”
