SOUTH EAST ASIA 32
SINGAPORE
Entry levy hikes hit mass market The hike in the casino entrance fee for local Singaporeans is further deterring already declining visitation to the island state’s two integrated resorts by residents, analysts said.
T
he government hiked the levy by 50 percent from $100 to $150 a day, or from $2000 to $3000 a year in April. The increase, coupled with announced tax rises, came as a sting in the tail to a decision to allow the casinos to expand. The higher fees were seen as an attempt to encourage the operators to put their focus on visitors to Singapore and to help alleviate problem gambling. Analysts noted the impact of the levy in the recently announced second quarter results. At Las Vegas Sands’ Marina Bay Sands property, mass market gross gaming revenue declined 4 percent from the prior year and 7 percent quarter-on-quarter, while slots GGR fell 3 percent. “Mass play was partly impacted by an increase in the locals levy and continued disruption from casino floor redevelopment,” analysts at Bernstein Research noted. “Locals play in Singapore has been declining for some time and the levy increase just adds to the pressure. Singapore is likely to continue to see softness in gaming revenue from Singapore customers, offset by foreign inbound visitation strength and focus on more premium customers,” it said. Last year, just 4 percent of the adult local population visited the casinos, a drop of 50 percent compared to 2010, when the casinos opened. In the same period, problem gambling has also declined from about 2.6 percent of the population to about 0.9 percent in 2017. Since the casinos have opened, the fees have generated $1.2 billion for the government. Genting Singapore, operator of Resorts World Sentosa, also reported weakness in its mass market sector in its latest results. Analysts had expected the company to be affected worse than Marina Bay Sands. Morgan Stanley noted in April that the
Asia Gaming Briefings | October 2019
company gets about 25 percent of its business from Singaporeans and that at least 10 percent of those would be put off by the higher entry levy. Genting’s 2Q19 mass market GGR fell 3 percent year-on-year to $340 million. It was down 10 percent from the prior quarter, prompting Genting to say it will take some time for the mass market to stabilise. Both companies reported lacklustre Q2 results. A low hold rate held back Marina Bay Sands’ VIP GGR, which was up 7 percent on the year and down 20 percent sequentially. Hold in the segment was just 2.5 percent compared with 3.1 percent in the first quarter. Its hold-adjusted EBITDA was flat at $384 million. Genting’s EBITDA rose 11 percent year on year, but it was boosted by a high VIP win rate of 3.7 percent, which was up 110 basis points from the same period last year. Analysts also noted with concern a gain in impairments in Genting’s trade receivables, which rose to $47.3 million, the highest rate since Q3, 2016. Longer term, analysts remain optimistic, saying the positive impact from the operators’ expansion programs will outweigh the impact from the higher levy. Under the expansion plans, both IRs will invest S$4.5 billion to expand non-gaming facilities. In return, they will be allowed to add more gaming space and additional gaming machines. However, given the overall expansion in the resorts, the total ratio of gaming space to non-gaming space will decline. The IRs have indicated that the additional gaming provisions will be targeted at higher-tier non-mass market players, who are mainly tourists. The permission to expand also came with higher taxes. At the end of a current tax moratorium in February 2022, it will also introduce a higher tax structure, which will also include more tiers. For premium gaming the rate will rise to 8
percent from 5 percent on the first $2.4 billion in GGR and will rise to 12 percent thereafter. For mass gaming, the tax rate also gains by three percentage points to 18 percent for the first $3.1 billion in GGR and then 22 percent thereafter. Singapore did get more international visitors in Q1, but according to a breakdown of tourism statistics spending fell 4.8 percent to $6.5 billion. As always, spending on sightseeing, entertainment, and gaming made up the largest part of tourism spending, contributing $1.4 billion, down 3 percent. This was followed by shopping, at $1.4 billion, down 7 percent and food & beverage, at $588 million, also down 7 percent. International visitor arrivals grew one percent year-on-year to 4.7 million visitors. The top visitor market was China at 960,000 arrivals, followed by Indonesia (725,000) and India (300,000).
