Why Singapore's casino whales remain at sea

Singaporean IRs' VIP revenue massively dropped 39% since 2014.

In any casino, it’s the slot machines for punters and the VIP gaming rooms for the whales, those VIP gamblers who bring the big money to the table. Unfortunately for Singapore’s IRs, the last two years has seen precipitous drop in VIP revenue, down 39% since 2014, with analysts in Morgan Stanley forecasting a further 10% decline this year. That’s almost $1.4 billion in lost revenue and it's starting to hurt the industry.

Sure part of the problem is the much maligned decline of the chinese gambler, but Singapore has been particularly hard hit whilst chinese are travelling to new gambling destinations like the philippines, which recently opened its fourth major Crown casino, and has seen VIP revenues rise from $650 mn in 2014 to $ 765 mn forecast for 2016.

In fact the Philippines saw a 79% jump in chinese tourists over the first six months of 2016 compared to 55 % for Singapore.

The problem for the casinos is that many of these chinese tourists are not the sort of high roller the IR’s want, as evidenced by the 21% YoY fall in entertainment,gaming and sight-seeing spend reported by the Singapore Tourism Board in 1Q16.

As a result VIP revenues at Singapore's two IR’s were down 26 % to US$322 million over the three months to June this year, which followed an even worse first quarter when revenues were down 42 %.

Grant Govertsen, managing director at Union Gaming Securities Asia, says that it’s important to keep in mind that gamblers are not necessarily ditching Singapore for other jurisdictions. “Sure, some small number are going elsewhere, but a large majority simply aren’t gambling anywhere. This is also true in Macau. The reality is that the VIP pie has gotten smaller rather than cut into different sized pieces. Most of the VIP declines in Macau and Singapore are gone. Period. These are individuals who believe it to be in their best interest to stop gambling – likely a function of the ongoing anti-corruption campaign in China,” he says.

Govertsen adds that the reason that other jurisdictions like the Philippines, Cambodia, and Saipan, are growing is that they started from a very low base, so they “pretty much have nowhere to go but up.”