| Casino operators grasp Singapore concept |
Less than one year after broaching the topic of legalizing gambling in the Asian city-state of Singapore, the country's government last week issued a request for concept (RFC) to major international casino operators for the building of the country's first casino resort.
With a February 28 deadline for submissions, the RFC will glean design sketches, the operational structure and financial investments from the various interested casino operators in order to provide the Singapore government an overview on how a casino resort will fit into its strategic aim of reviving tourism to the island nation before issuing a more detailed request for proposal about two months later.
The RFC outlines government objectives and stipulations for any project, including an admission fee for local residents as well as other problem gambling initiatives to address concerns raised by a large and vocal minority concerned about the social impact from the country's first gaming venue.
"The problem gaming piece is the most important piece," says Jonathan Galaviz, principal at Galaviz and Ong, a market research firm tracking the global casino industry, and president of the Singapore Association of Nevada. "Singapore is looking for an operator that encompasses and embodies a commitment to limiting problem gaming ... Even though the government has so-called social safeguards, it is still a competitive advantage for any operator [that addresses problem gambling]."
While the restriction will limit the revenue potential of an integrated Singapore casino resort, major Strip casino operators interested in the Singapore venture are not expected to withdraw from the bidding because of the proviso since similar fees already exist in various jurisdictions across the U.S.
Although still reviewing the government RFC, casino operator Harrah's Entertainment says the emphasis on tourism sought by the Singapore government in any casino development is compatible with the model already functioning effectively in Las Vegas and elsewhere.
"The commitment's there," says Richard Mirman, Harrah's senior vice president of business development. "We're going to look at this very hard. We're committed to playing this out. It always comes down to one company's belief about what the demand is going to be versus another company's. I don't know how to answer that. Nobody knows. We're in that process right now."
Government leaders in Singapore first introduced the possibility of legalized gambling in March last year as a component of a potential multi-million dollar effort to build a 1,235-acre resort and residential development on the islet of Sentosa as means to diversify its economic base by boosting the country's profile as a tourist destination.
Major Strip operators have traveled frequently to Singapore in past few months for meetings with government officials and potential local partners in an effort to position themselves favorably in the eventual bid.
On December 29, Singapore Ministry of Trade and Industry officials, including members from its affiliate Tourism Board, held a press conference announcing the RFC.
According to Galaviz, the launch of the RFC process demonstrates the Singapore government will not retreat from its intentions of building a casino. However, with Singapore public opinion almost evenly split over the development, the government has taken pains to limit local participation and assuage anxieties.
While foreign tourists will have unfettered access to the casinos, local residents will have to pay an admission fee of 100 Singapore dollars (about US $61) per 24-hour visit per local resident or 2,000 Singapore dollars (about US $1,218) for unlimited access for a year.
Similar to, though significantly less expensive, fees in the U.S., the government will collect the money primarily for gambling addiction treatments, education, marketing campaigns and so forth. Galaviz says the stipulation will impact the bottom line on any eventual casino but should not affect the number of U.S companies participating in the RFC, which is expected to include operators Harrah's, MGM Mirage, Venetian operators Las Vegas Sands and possibly Wynn Resorts.
"[The fee] will reduce the economic viability of building a large integrated casino resort," he notes. "Operators are going to have to realign their demand market forecasts for Singapore and readjust their willingness to invest based on it. There will still be strong interest from large Las Vegas operators. There will be interest activity and investment, but to the scale of the potential market."
That prospect is enormous. Even without legalized casino gambling, Singapore residents are already spending about $720 million annually in casinos in neighboring Indonesia and Malaysia as well as casino cruises just outside Singapore jurisdiction.
According to Mirman, locals also spend about 900 Singapore dollars (about US $548) annually per person on the legal lottery. While one report shows a Singapore casino's projected annual revenues doubling from $1.5 billion to $3 billion if locals are allowed unrestricted admittance, Mirman noted that Harrah's has numerous blueprints to match whatever the size.
"I don't know how the numbers are going to play themselves out but we're going to have to work on that," he says. "I'll tell you this. I think if you look at all of our casinos, I would argue that they're all built to the market. Some of the markets are huge. Our Atlantic City property is huge. And some of the markets are small and the properties are small. We're going to try to figure out what the right thing to build is. And that's what we're going to propose. But we're not [going to use] a cookie cutter approach."
With Macau paying off handsomely for the Venetian and the overall Asian gaming market expected to produce $23 billion in revenues by 2010, Harrah's interest in Singapore is to make the low tax, business-friendly city-state its Asian headquarters while gradually developing the various opportunities in places such as Thailand and Vietnam as they open up, much the same way Las Vegas is the center to the 28 casinos in 13 states that the company owns and operates in the U.S.
"The market we're really excited about is Singapore because we think that that government and the way that they're doing things is very consistent with the way that we are interested in pursuing development in Asia," Mirman says. "We think of Singapore as a jumping off point. We'd like to have that as a hub ... I think that's where the distribution model comes in. We're only interested in Asia because we think that there are a lot of various markets that are going to open up. So we'll have the concentration of management that will make that successful."
With only two months to answer the RFC, Harrah's is putting together a team including architects to address each point. At the same time, the company is close to finding a local partner with which to enter the Singapore market, although Mirman declined to name the firm or when such a partnership deal would be signed.
The speed with which the Singapore government has moved from opening up the gambling debate to opening up the casino-bidding process was unusual compared to other markets, which takes years to evolve, Mirman notes. That velocity could, however, open up the other opportunities for which Harrah's will be looking from Singapore, should it receive the eventual gaming license, since everyone is currently looking at Singapore.
"We're always looking for opportunities," Mirman says. "I think Singapore is the real jumping off point. I hope Singapore recognizes that we are looking at it as a jumping off point. And two, I hope people recognize that when it comes to social issues, there's really nobody who does it any better than Harrah's ... You're going to see other Asian countries watch Singapore very carefully. Because I think they're sort of a model country in an interesting, turbulent part of the world. I think if they do it and they can do it well, I'll think you'll see other people come out and do it. [We] look at each market there in different ways. But it remains to be seen. Our focus is right now on Singapore."
stevenm@lvpress.com | 702-871-6780 x340
HIGH STAKES
ISSUE: Request for concept for casino
DUE: February 28, 2005
PROJECTED GROUNDBREAKING: First quarter, 2006
LOCATION: Singapore
POPULATION: 4.6 million people (2002 figures)
GROSS DOMESTIC PRODUCT: $112.4 billion USD
LOCAL SPENDING ON GAMING: $720 million
Source: Las Vegas Business Press
Friday, 31 December 2004
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