Singapore’s big gamble begins

December 20, 2009
Singapore Democrats

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Muhammad Cohen
Asia Times Online

The crowd at the Resorts World Sentosa casino complex on Saturday night won’t be betting on cards or dice, but kids. The ChildAid charity concert series this weekend marks the beginning of Singapore’s attempt to reinvigorate – perhaps even to reinvent – itself with a pair of so-called integrated resorts (IRs).

Once seen as sure bets, Singapore’s IRs now mirror the gamble of rearing children: the outcome is uncertain, with lots of unexpected twists, and payoff, if any, is years away.

“Within five years, the integrated resorts will meet all the targets the Singapore government has set for increasing tourism and visitor spending,” a top industry consultant at this month’s Gaming Executive Summit Asia said on condition of anonymity. “But I think the operators will look at them as giant millstones around their necks.”
The cost of Resorts World Sentosa has risen to $4.7 billion from $3.9 billion. Owned by Malaysia’s Genting, operators of the Highland Resort outside Kuala Lumpur, this IR will open in stages. Company officials are standing by the original forecast of a soft opening in the first quarter of next year, but few bought Genting chairman and chief executive officer Lim Kok Thay’s statement last month that the resort will open in January, ahead of Chinese New Year (February 14). March is now being considered the earliest likely opening time.

Hard target

Across the causeway at Marina Bay is the casino resort of Las Vegas Sands Corporation (LVS). When the US-based company won the bidding for the resort in May 2006, it promised to have the $3.6 billion gaming and entertainment complex fully open by the end of this month. Now, the price tag for Marina Bay Sands has risen to $5.6 billion, and the resort will also open in phases, starting in the first quarter of next year, according to the company. The word is that it won’t open until June.

When finished – probably not until sometime in 2011 – the IRs will be the two most expensive casino resorts ever built (the $8.5 billion MGM City Center that opened in Las Vegas this week combines residential and office space with its hotel and casino).

Marina Bay Sands will include 2,500 hotel rooms, more than 93,000 square meters of retailing, a museum, two theaters – one for a resident production of The Lion King opening in September – and a pair of interesting, if impractical, crystal structures that appear to be islands floating in the bay.

The crowning jewel is the Sands SkyPark, a 1.2 hectare platform, longer than the Eiffel Tower is tall, with a pool area, observation deck, bar and restaurant linking three 55-story towers and towering 200 meters above Singapore.

The key to LVS winning the bid for the site in 2006, insiders said, was the 112,000 square meter convention center. Singapore wanted a world-class facility to accommodate big gatherings that it previously couldn’t handle. LVS almost single-handedly created the convention business in Las Vegas, leveraging that shift into a more balanced split of gaming and non-gaming revenue with its Venetian property, which features shopping and fine dining, previously dismissed as distractions from the main business of gambling. In the Las Vegas that LVS helped shape – and the IRs Singapore wants to have – casinos account for just half of total revenue.

Rocking the crowd

For Genting, the clincher was a Universal Studios theme park that will be the biggest in the world, with 18 of its 24 attractions new or adapted for the film studio’s only outpost in Southeast Asia.

Singapore long-wanted a world-class theme park and especially wanted it on Sentosa, an island south of the city that the government has tried for years to turn into a recreation and resort destination for locals and visitors, with limited success.

Resorts World Sentosa will also include six hotels, the world’s largest oceanarium, and Festive Grand, the theater where the ChildAid concert takes place. When the resort opens, the 1,800 seat venue will host Voyage de la Vie, the resort’s “resident musical extravaganza” developed by Mark Fisher, an alumnus of Cirque du Soleil and the Queen rock band tribute show We Will Rock You.

Building the resorts stretched the resources of both LVS and Genting, as well as Singapore; none of them really knew what they were getting into in 2006. Although LVS and Genting submitted the best IR plans, each had only built one integrated resort before embarking on these mega-projects. Under the guidance of Singapore’s government – which even now, weeks before gaming begins, still hasn’t issued its casino regulations – it was arguably a case of the blind leading the blind while throwing money down a hole.

For starters, developing the projects simultaneously – while Singapore was in the midst of a construction boom – put the IR operators in competition with each other for material and labor. That contributed to their inflated costs. The global credit crunch combined with lower revenues at its Macau and Las Vegas properties brought heavily leveraged LVS to the verge of bankruptcy late last year.

The company won a series of concessions from the Singapore government, including the phased opening and additional gambling tables within the maximum allowed 15,000 square meter casino.

LVS didn’t get everything it wanted, including government financing or a larger casino. Delegates at the Gaming Executive Summit Asia, held in Singapore earlier this month, believed LVS also asked the government to let it scale down the SkyPark, to separate, unconnected features on each roof. “They never intended to build it, but the government insisted,” one source said. On October 1, crews began lifting the first of 14 SkyPark steel structures to connect the three towers. Each section weighs 330 tons and lifting requires 24 hours.

Losing record

The performance of Venetian Macao, which opened a year after LVS won the Marina Bay bid, doesn’t inspire confidence, particularly in the areas that matter most to Singapore. Its Grand Canal Shoppes retail mall has failed to attracts shoppers or a buyer for the property. A Cirque du Soleil production developed for the Venetian Macao at a cost of more than $200 million, including its $150 million purpose-built theater, teeters on the brink of closure, unable to fill the house, despite promotions and complimentary tickets.

The convention business, the cornerstone of the company’s winning Singapore bid, has also failed to develop. With that track record, LVS might not have won the bidding for Marina Bay.

But Singapore is not Macau, and there are reasons to expect things will go better in the Lion City. “I believe revenues at the two IRs will surprise financial analysts,” University of Nevada Las Vegas Singapore Campus Dean Andy Nazarechuk said. “Singapore is already a financial business center and already has a solid tourism industry.”

CLSA gaming analyst Aaron Fischer said: “Both IRs benefit from Singapore’s location – 38 million people travel through the city’s airport each year. Infrastructure is excellent and can support a large number of overseas visitors.” Fischer forecasts $364 million in 2010 profits for Genting’s Singapore listed arm, to be driven by expected Sentosa profits.

Even before the IRs open, Singapore is the world’s third-most popular city for conventions. “The size of the Marina Bay Sands convention facilities puts Singapore in a whole new league,” said Robert Hecker, managing director of hotel and leisure consultant Horwath Asia Pacific.

For retailing, Singapore has a local market nearly 10 times larger than Macau’s 550,000 residents. “There is quite a bit of room for an increase in spending by the locals,” according to Devin Kimble, managing director of Menu, a restaurant and catering group. “The turnout for travel fairs is astounding. If Singapore actually had something for locals to spend money on here, perhaps they would keep some more of their money working in town.”

Yet even the most bullish observers admit the beginning will be tough, between the construction, rough edges on service, and the inevitable bad press it begets. Several analysts believe projected total IR revenue of $3.5 billion for the first three years will make it difficult for both IRs to survive given their huge construction costs.

“The IRs could be white elephants and go out of business,” the gaming consultant said. “Other gaming operators would love to get their hands on them as second-hand properties.” Though that might not be “as disastrous as the Singapore government thinks it would be,” he added.

But getting passed to new parents would only add to what is already shaping up to be a difficult childhood.

Special correspondent for Macau Business magazine and 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.

http://www.atimes.com/atimes/Southeast_Asia/KL18Ae01.html