Singapore focuses on non-gaming attractions to attract visitors

Casino operators and regulators across Asia are keeping an eye on Singapore's two multi-billion-dollar gaming resorts as they focus on tourists and trade shows to boost revenue in response to restrictions on gambling and a generally sluggish market.

The city-state has become a playground for Asia's rich and famous, with attractions ranging from fancy clubs and restaurants helmed by Michelin-starred chefs to the world's only night-time Formula One race.

Las Vegas Sands, which owns the Marina Bay Sands (MBS) casino in downtown Singapore, says its 2,500-room hotel is packed and it is eager to expand its holiday accommodation and convention facilities near its three iconic towers.

"Obviously at 99 percent occupancy in the hotel, we think we can sell a few more hotel rooms. So we'd love to increase our inventory of rooms," MBS CEO George Tanasijevich said in an interview.

Genting Singapore, which runs Resorts World at Singapore's Sentosa island, is building a mid-tier business and leisure hotel in the suburbs to house guests that it will ferry to its Universal Studios theme park, aquarium and other attractions, in the hope some will also patronise the casino.

The Singapore casinos' strategy of burying gambling floors inside family-friendly resorts is catching the attention of governments from Japan to Vietnam, which are attracted to the income casinos provide but wary about becoming too dependent on gaming revenue and the social impact of casino liberalisation.

Non-gaming revenue accounted for about a quarter of the two resorts' total combined revenue of about us$ 1.3 billion in the quarter ended June, a high proportion compared with regional casino capital Macau where non-gaming is only about 10 percent of total revenue.

Genting said its Marine Life Park and Universal Studios had more than 1.7 million visitors in the second quarter of this year, mostly families on vacation including many from regional countries such as Malaysia, Indonesia, China and India.

Sentosa and Sands' Skypark, a huge observation deck and recreational area with an infinity pool on the 57th floor, are among the most-visited paid attractions for foreign tourists to the city state, according to a Singapore Tourism Board survey last year.

Visitor arrivals in Singapore have jumped by nearly 50 percent to an estimated 14.4 million in 2012 compared with the end of 2009. The first casino opened in February 2010.

Betting on tourism

Bollywood shows, musicals including Broadway's longest-running show "Phantom of the Opera", and fashion events are some of the non-gaming attractions Singaore's resorts have hosted to boost their visitor numbers. "They are focusing on non-gaming. That's how they get captive customers for their gaming business, especially Genting Singapore. If a family checks in, usually one or both parents would go to the casino and the kids would end up at the attractions," said Nandini Vijayaraghavan, Fitch Ratings' primary rating analyst on Genting Singapore.

"If they have to get repeat customers, they would necessarily have to offer a lot more than just gaming in their premises. We do believe that the hotel and attractions give an element of stability to earnings."

The drive for diversification will be familiar for Las Vegas-based operators like Sands. The U.S. gaming city largely failed in a similar expansion in the 1990s, when casinos began offering family-friendly attractions as competition grew from riverboat gambling and other local markets.

Billionaire Kirk Kerkorian's MGM Grand casino, themed after the "Wizard of Oz" movie, opened a theme park featuring a riverboat cruise and a journey to the center of the earth. It was largely replaced in 2002 with a high-rise luxury condominium and hotel complex.

Vegas impresario Steve Wynn, a major player in Macau through Asian offshoot Wynn Macau, spent us$ 450 million to open the Treasure Island resort and casino in 1993 with whimsical pirate features. By 2003, Treasure Island had largely abandoned its pirate theme, replacing the arcade and family-friendly pool area with a hot tub and night club. The experiment with Vegas as a family destination was all but over by the time the city adopted its "What Happens in Vegas, Stays in Vegas" advertising slogan in 2001.

Concerns grow in Macau

In Asia, Genting and MBS's profitable non-gaming attractions differentiate Singapore from Asia's casino capital of Macau, which sets the pace in terms of gambling revenue but not as a family tourism destination. Casino space accounts for less than 5 percent of the gross floor area at MBS and Resorts World, compared with Macau where it can consume more than 20 percent at some resorts.

While this formula works for Chinese high-rollers and the junket operators who bring them in from the mainland, it has raised concerns in Macau about the government's over-reliance on gambling revenue and the lack of alternative employment options for Macau residents.

Aware of this, Macau now demands new casinos devote most of their property to non-gaming segments such as restaurants, hotels, retail and event space. The number of new gaming tables will be allocated according to the properties' non-gaming amenities.

More than three years after Singapore allowed casinos to open, revoking a decades-old ban, the two casino-complexes have emerged as the showpiece of the city-state.

But to deter problem gambling, citizens and permanent residents have to pay a casino entry levy of us$ 80 a day or us$2,000 for an annual pass. New regulations include a fine of up to 10 percent of the operators' gaming revenue for violations.

The Singapore government has made it clear that the two operators will not be allowed to expand their gaming floor area, leaving executives like Tanasijevich with little option but to turn to tourism and conventions for growth. 

Tanasijevich, who played a key role in Sands' bid to develop the second integrated resort in Singapore, said the Singapore model could be replicated in other Asian countries such as Vietnam and Japan. "Our intent, if we had the opportunity to go into these new markets, is to design and develop and programme something that is similar to a Marina Bay Sands-style property that has this great mix of gaming and non-gaming elements. The non-gaming piece of it is extremely important," he said.

MBS expects to clock 70-plus trade shows or exhibitions this year, up from 51 last year. Its rooms and conventions posted higher revenue growth than the casino in the quarter ended June.

Gaming revenue at Genting Singapore fell 2 percent, while non-gaming revenue jumped 19 percent. "The gaming component in Singapore is not growing due to a combination of increasing pressure to inhibit local play, plus the lack of the volume multiplier which are the junket operators in Macau," said Ben Lee, Asian gaming consultant at Macau-based consultancy IGamiX. "Is that a bad thing? Not necessarily, as the Singapore government's objective was to increase tourism, not gambling. Gaming was merely the tool for them to achieve their objective."