Genting Singapore Plc (GENS) and Las Vegas Sands Corp. reported the lowest gaming revenue in at least 18 months at their Singapore casinos, signaling slower economic growth and tighter rules are restricting spending by gamblers.
“We have been waiting for the novelty factor of Singapore’s casinos to finally wear off, and that time may have finally come,” said Jonathan Galaviz, managing director of Galaviz & Co., a Las Vegas-based tourism industry analyst. “Gaming revenues are sometimes a leading indicator of overall macroeconomic activity in a region. This may be a sign of things to come economically for Southeast Asia.”
The decline in revenue from gaming coincides with a slowdown in the island-state’s economy, which the government forecasts will expand as little as 1.5 percent this year, from 4.9 percent last year. Efforts to lure gamblers with discounts and giveaways including free concert tickets have been stifled by the industry’s regulator, which charges local residents S$100 ($82) each time they enter one of the casinos.
Genting Singapore’s gaming revenue dropped 20 percent to S$528.4 million in the third quarter and profit slid 47 percent, the company said Nov. 12. Billionaire Sheldon Adelson’s Las Vegas Sands (LVS:US) said Nov. 1 gaming revenue in Singapore slumped 28 percent to $470.8 million. Its Marina Bay Sands resort was the only one of its seven locations to post a decline in the period.
Genting Singapore shares slumped 2 percent to S$1.21 at the close in Singapore, the lowest since July 23, 2010. The stock slid 20 percent this year, the second-worst performer on Singapore’s Straits Times Index (FSSTI), which gained 13 percent. Las Vegas Sands rose 1.7 percent in 2012, while the S&P 500 Index’s advanced 9.7 percent.
“Singapore is strict on regulations, and recently they have been stricter on the local mass market,” said Hoe Lee Leng, a Kuala Lumpur-based analyst at RHB Capital Bhd. (RHBC), who maintained her underperform rating on Genting Singapore after the earnings. “As long as the economy is uncertain, that could affect your general VIP volumes,” she said, referring to high-stake gamblers.
Genting Singapore’s Resorts World was fined S$600,000 by the regulator in September for illegally reimbursing entry fees through promotions including free concert tickets and passes to its Universal Studios theme park, according to the Casino Regulatory Authority of Singapore.
A month earlier, Marina Bay Sands was fined S$357,500 for offenses including waiving the levy for local gamblers, and Resorts World paid S$140,000 for “breaching social safeguard requirements,” according to the regulator.
Genting Singapore, which opened its casino resort in the city-state at the start of 2010, said in response to queries that it’s focusing on building its gaming customer database during the first two years of operations.
“On a backdrop of a softer Singapore gaming market and increased regional capacity, growing our gaming revenue remained challenging,” Tan Hee Teck, president of Genting Singapore and chief executive officer of Resorts World, said in an e-mailed statement on Nov. 12. “As we enter year three of our operations, our initiatives will focus on customer loyalty and increasing our foreign visitation.”
Singapore’s economy “slowed discernibly” in the past two quarters and will grow at below-potential levels for a second year in 2013, the Monetary Authority of Singapore said Oct. 30.
For Las Vegas Sands, the drop in Singapore revenue led to a larger-than-expected 18 percent slide in third-quarter profit. The Las Vegas-based company is increasing its marketing efforts in Singapore, which accounted for 30 percent of earnings before interest, taxes, depreciation and amortization in the quarter, by adding sales representatives, new shows and aircraft for its biggest-spending customers, it said.
Revenue at the company’s Venetian Macao casino in Macau rose 14 percent to $671.1 million, exceeding the contribution of Marina Bay Sands even though the Singapore site has 23 percent more gaming tables, according to data (LVS:US) compiled by Bloomberg.
While gaming revenue fell, Marina Bay Sands recorded a 12 percent increase in hotel revenue in the three months ended September, according to its statement. The resort filled 99.8 percent of the 2,560 rooms at the three-tower property connected by a roof-top garden and pool, which charged an average daily rate of $361. Both occupancy and room rates were the highest among the company’s operations in locations that include Macau, Las Vegas and Bethlehem, Pennsylvania.
Resorts World’s 1,800 rooms in six hotels were 93 percent filled at an average rate of S$432. Its Universal Studios theme park drew 9,100 visitors a day who spent S$86 each, it said in the statement. Resorts World is opening new attractions, including the Marine Life Park on Dec. 7.
Revenue from hotels and other operations may help the companies weather a downturn in demand for gaming, Galaviz said.
“The size of this drop cannot be explained by anything other than a fundamental downshifting of consumer appetite for gaming, at least temporarily,” he said. “Even with this significant downturn in casino revenues, the fact is that Singapore’s casinos remain highly lucrative and profitable for their owners.”
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