Prosperity through Gamble?

Singapore's gamble

The city-state’s new casino cost a fortune but looks well-timed

May 4th 2010 | From The Economist online

WITH its three high-rise towers topped by a sweeping open-air SkyPark, the Marina Bay Sands casino, which opened on April 27th, is a striking addition to the Singapore skyline. It also symbolises an interesting, and potentially risky, new phase in the city-state’s highly successful government-led industrial policy.

The government has identified tourism as having big potential for growth, and offering visitors the opportunity to gamble is seen as a crucial part of its plan. Marina Bay Sands follows the slightly less spectacular Resorts World Sentosa, which opened in February and included Singapore’s first casino (as well as a Universal Studios theme park).

Yet whereas Singapore’s government has been unreservedly enthusiastic in its attempts to attract other industries, ranging from biotech to hedge funds, it clearly has mixed feelings about its pursuit of the gambling dollar. It can scarcely bring itself to utter the word casino, preferring instead to describe its new attractions as “integrated resorts”.

Locals are actively discouraged from exposing themselves to the perils of gambling, not least through a S$100 ($73) charge that they, but not foreign tourists, must pay simply to enter the integrated resorts. This did not stop 36,000 people, including many locals, turning up at Marina Bay Sands in its first 24 hours. Bankrupts are banned from the new casinos, and a free telephone line has been created for families to call to get their relatives banned—not something one would imagine Las Vegas or Macau offering.

The gambling industry is risky not only for punters but also for investors and the places that host it

The recent travails of those rival resorts are a reminder that the gambling industry is risky not only for punters but also for investors and the places that host it. Yet Singapore’s timing may be good. Macau has rebounded strongly from its post-financial crash low, while even Las Vegas is becoming less of the ghost town it seemed a year ago, when visitors were scared off by a combination of recession and Barack Obama’s criticism of firms holding conventions there.

Shares in Las Vegas Sands, which operates Marina Bay Sands as well as the Venetian in Las Vegas, among others, have been trading at around $25 in recent days, up from their 12-month low of barely $6. Shares in Sands’s rival, Wynn Resorts, at around $92, are also up sharply from their 12-month low of $30. There has even been speculation that Wynn Resorts will move its headquarters from Las Vegas to Macau because the prospects for growth there look so good.

Singapore regards Macau’s strength not as a competitive threat but rather as proof of concept. Although Singapore is being fussy about who gets into its casinos, it is unlikely to be as capricious as China is being about what goes on inside them: the Chinese authorities are reported to be considering imposing further restrictions on Macau’s tables. Sheldon Adelson, the boss of Las Vegas Sands, is also convinced that Asia is still far from saturated with casinos, even after Singapore’s two openings—he thinks it could still have room for the equivalent of five Las Vegases.

The new resorts have learned from Las Vegas to offer the punters far more than just gambling

For Singapore, the immediate opportunity is to give the many business people who visit a reason to stay for the weekend rather than leave as soon as their work is done. Hitherto there has been little fun to be had other than hitting Orchard Road’s glitzy shopping malls. The new resorts have certainly learned from Las Vegas to offer the punters far more than just gambling. Marina Bay Sands will host international entertainers and celebrity chefs. Its SkyPark, convention facilities, art installations and so on are all set in a visually striking modern complex approached via the “world’s first curved double-helix bridge”.

Thanks to rising Asian wealth, the region’s tourism industry has excellent growth prospects. And Thailand’s warring political factions, slugging it out in Bangkok’s tourist district, are doing their best to highlight the attractions of stable, safe and clean Singapore. Because leisure businesses are so labour-intensive, however, Singapore will need to import large numbers of foreign workers as it expands its tourism trade. Immigration is already a touchy issue among Singaporeans: having increased the population substantially in recent years, the government is now planning on boosting it further, from 4.5m to 6m. To assuage public fears about being swamped, it is seeking to attract mainly high-earners while turning away low-wage immigrants. But its tourist attractions and hotels will need lots of cleaners and waiters, and there aren’t enough Singaporeans to fill such jobs.

Mr Adelson has no doubts that Singapore’s new industrial strategy will succeed. Although Marina Bay Sands opened late, and is the costliest casino resort ever built, at $5.7 billion (more than $2 billion over budget), he expects to make his money back within five years. If so, Singapore’s government will have another industrial-policy triumph to boast about—assuming, that is, that it can overcome its official distaste for saying anything positive about gambling.