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Marina Bay Sands confident of a win |
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| Marina Bay Sands Singapore
development general manager and vice-president - George
Tanasijevich. |
By Mak Ying Kwan
The world economic outlook is decidedly less rosy today than it was two years ago in May 2006 when Singapore announced the award of its first casino licence to Las Vegas Sands (LVS).
The recent upheavals caused by high oil prices in excess of US$100 per barrel, stock markets falls, a global credit crunch and the US on the verge of a recession have caused economic confidence to nosedive.
Naysayers commented this uncertain scenario and the soaring cost of developing the Marina Bay Sands integrated resort (IR) in Singapore, which houses the casino, has put the financial viability of the project into question.
However, LVS remains confident Marina Bay Sands will not slip into the red, despite the economy and its project cost exceeding the original budget of S$5 billion (US$3.6 billion) by up to US$1.4 billion (almost 40 per cent). Marina Bay Sands Singapore development general manager and vice-president, Mr George Tanasijevich, said: “We expect to be profitable from day one.”
The IR is scheduled to open in late-2009 and besides the casino, it will offer 2,500 rooms, 74,000m2 of retail space, 98,000m2 of convention and exhibition space, two theatres and a museum.
According to Mr Tanasijevich, it is not just LVS that is optimistic about the project. He said the success of the loan syndication also underlined “the enthusiasm and confidence the financial community has in the success of the Marina Bay Sands development”.
LVS secured a S$5.25 billion credit facility to finance the construction of the IR in February. This is the largest private Singapore dollar-denominated financing ever completed. The lenders probably had in mind LVS chairman and CEO, Mr Sheldon Adelson’s comments that Singapore will have only two casinos and “any place that has a duopoly will be very profitable”.
The country’s other casino will be part of the Resorts World at Sentosa IR opening in 2010.
The government said it would not offer another casino licence for the next 10 years.
Another reason for the upbeat assessment of Marina Bay Sands’ performance is its business model, where revenue is derived from multiple inter-related streams such as conventions and exhibitions, f&b and retail instead of just the casino.
It is believed gaming takes up one per cent of the space at LVS’s flagship Venetian resort in Las Vegas, and five per cent at the Venetian Macao-Resort-Hotel.
Mr Tanasijevich said: “All components of a fully integrated resort such as Marina Bay Sands complement each other – the conventions business drives f&b revenues, and the overall MICE (meetings, incentives, conventions and exhibitions) business will increase hotel occupancy.”.
In his view, “regardless of the economic situation, corporate meetings and exhibitions are a necessity and are part and parcel of a company’s operations”.
Mr Tanasijevich said LVS’s ability to “target customers in growing economies and maximise opportunities where they arise” through its “network of properties in Las Vegas and Macau, and our extensive network of travel operators all over the globe” would also help Marina Bay Sands’ bottomline.
Customers will most likely come from Asia, the same ones who helped turn Macau into the world’s number one gaming market last year, overtaking Las Vegas in the US.
A recent report from consulting firm, PricewaterhouseCoopers, predicted revenue from casinos and other regulated gambling activities in Asia would grow at an annual rate of 14 per cent from 2005 to 2010 – the fastest rate of growth in the world.
This comes at a time when casino revenues in Las Vegas are slipping. The Nevada Gaming Control Board reported gaming earnings dipped 1.3 per cent in Las Vegas – the first annual drop since 1991.
Recognising the weakness in the US market, casino operators are stepping up their efforts to woo Asian highrollers. News reports said LVS recently bought two passenger aircraft to fly highrollers from Asia to its casinos in Las Vegas.
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