Las Vegas Sands’ Singapore operations will grow over VIP gaming

The company was quick to realize the slowing growth in the U.S. and expanded in different regions.  In 2013, Singapore generated US $6.1 billion in revenues, a little short of US$ 6.5 billion generated at the Las Vegas Strip. “We believe Singapore operations will do well in the coming years, especially on the VIP gaming side. However, mass-market gaming will continue to see slower growth driven by tighter regulatory framework for the local gamblers.”

VIP Gaming

Las Vegas Sands’ rolling chip volume has increased sharply from US$ 22 billion in 2010 to US$ 60 billion in 2013. Apart from domestic demand, Singapore caters to gaming demand from neighboring countries such as Malaysia and Thailand, aiding the gaming industry’s overall growth. The company’s hold percentage on VIP gaming has historically been in the range of 2.5% to 3%. The figure stood at 2.5% in 2013.

This translated into estimated VIP gaming revenues of US$ 1.48 billion for the year. We forecast rolling chip volume to continue to grow in the coming years and be northward of US$ 73 billion by 2020. However, we don’t expect any change in the hold percentage. This will translate into annual VIP gaming revenues of US$ 1.82 billion by 2020.

Economic recovery in Singapore will predominantly drive the growth in the casinos. The casino business can be linked to the macroeconomic situation of the country. Higher consumer discretionary spending tends to be positive for casino companies. Singapore’s economy grew by 4.1% in 2013 and the Ministry of Trade and Industry expects it to grow anywhere between 2% to 4% in 2014.

The growth will gain momentum after 2014 as the external demand will strengthen and boost exports. Moreover, the rise in international tourists visiting Singapore will aid the overall growth. In 2013, international visitation went up by 7% to 15.6 million.

Mass Market Gaming

Non-rolling chip volume, which represents mass market gaming, has been flat over the past three years. It was at US$ 4.44 billion in 2011 and US$ 4.65 billion in 2013. The hold percentage has historically been in the range of 22% to 24%. The figure stood at 23.7% in 2013. Going forward, we don’t expect significant growth in the turnover and forecast it to be around US$ 5.7 billion by 2020. Similarly, the hold percentage should remain in its historical range of 22% to 24% in the coming years. This translates into annual revenues of US$ 1.35 billion towards the end of the forecast period.

The firm said that the reason for the moderate growth outlook on the mass market gaming in Singapore is the tight regulatory framework. The Singaporean government has introduced strict measures to minimize social costs from the casinos’ success, and imposed an entry fee of US$ 82 a day for Singapore’s citizens and permanent residents to enter the casinos. Also, there is a monthly limit on casino visits for low-income earners who generally play on mass-market tables. This will have an adverse effect on the mass market table games turnover for casino operators in Singapore.