Few things were quite so surprising five years ago when Singapore legalized casino gaming. The normally straitlaced city-state/island nation in southern Asia declared that it wanted to increase tourism and that two integrated resorts would do the trick.
After a relatively quick and painless RFP process was followed by a rational selection procedure, two winners were announced: Genting Bhd, from neighboring Malaysia, was chosen to build a family style resort on Sentosa Island, Singapore’s holiday destination; and Las Vegas Sands, the gaming industry expert in the MICE business (meetings, incentives, conventions and exhibitions) for a project in the downtown area of Singapore.
Even though Marina Bay Sands, the LV Sands property located across the bay from the downtown area, did not win the race to open first, it clearly is the more dramatic property of the two. Three 55-story towers are capped by the signature “SkyPark,” a 3.5-acre platform that spans the three buildings and includes pools, restaurants, spas, nightclubs and other amenities that give guests a commanding view of the city and surrounding countries.
An extensive shopping area with 800,000 square feet of retail space featuring multi-level stores, dramatic views of the surrounding waterfront and the ever-present (for an LV Sands retail development) canals and gondolas (and let’s not forget Singapore’s first ice rink-complete with plastic ice).
The 1.25 million square feet of meeting space is designed to make Singapore the Asian capital for meetings, conventions and special events.
The two executives in charge of opening the Singapore property weren’t there at the start, although LVS COO Michael Leven was on the company’s board of directors at the time, before being brought into management by Chairman Sheldon Adelson to replace the departed William Weidner.
Tom Arasi, the president of Marina Bay Sands, was brought in from the hotel industry less than two years ago, and helped put together a team of seasoned gaming executives led by gaming veteran Andrew MacDonald, the senior vice president of gaming for the property.
Even though the opening date for Marina Bay Sands has been pushed back several times (it held a soft opening on April 27), Arasi says it’s still remarkable that such a complicated project was completed in the time it was.
“This has been completed astoundingly fast for a project of this nature,” he says. “When you look at the conception of an idea, design, financing, bidding out the construction, and building something like this, it’s amazingly fast.”
Leven waxes poetic when he envisions the completed facility.
“From the Eiffel Tower, the pyramids, the Taj Mahal, Sydney Opera House… this building is going to be equally iconic,” he says. “The SkyPark alone you can’t find anywhere on the planet. The design that (principal architect) Safdie did on the three towers is breathtaking. And when you add in all the public space, when it’s finally opened and running, when you see it really ‘alive,’ it will be spectacular.”
It hasn’t always been easy, however. Las Vegas Sands had to defeat some formidable opponents during the RFP phase: Harrah’s Entertainment, MGM?Mirage Wynn Resorts, Kerzner International and others. Some of the stipulations insisted upon by the Singapore government have been somewhat onerous. And an undiscovered underwater seawall complicated the foundation process so much that it threw construction behind in some cases by as much as a year. And finally, the global economic meltdown threatened to put the company out of business just a year ago.
Leven says that economic strain had nothing to do with Singapore, however.
“The financial problems of this company were not caused by Singapore,” he insists. “We have good debt there. I think they were more created by what we did in Macau in ’05 and ’06 where we spent $2.6 billion with no financing. If we didn’t do that, no one would have said anything about our financial shape.”
Although a little disappointed in losing the race to open first, Leven says he believes that will not be too advantageous for Genting’s Resorts World Sentosa, which opened on February 14.
“The first mover advantage, if there is one, is focused on the local resident who paid the S$2,000 (annual entry fee of US$70 for Singapore citizens and permanent residents). They’re going to continue to go there because they paid for it.”
Arasi downplays any advantage that might come to Resorts World as a result of opening first.
“We are very comfortable with our position,” he says. “We think it’s going to be a big market and our experience is that you’re only ready when you’re ready. And when we’re ready, we’ll open.
“Resorts World will undoubtedly do a fine job, but we feel that there is plenty of business for everyone. We feel very good about the product offering we have and our ability to differentiate ourselves and get great acceptance both in the VIP and mass market segments. The reality is if we had opened up a couple of months before them it wouldn’t have been a big advantage, but long term, no one will remember who opened first.”
Unlike Macau, where the VIP market dominates by producing more than 70 percent of the gaming revenue, Singapore seems to be attracting more of the mass market. The first two months of operations at Resorts World have anecdotally demonstrated the strength of the mass market.
“Let’s talk about the mass market and the slot play,” says Leven, “which everyone agrees has been spectacular so far. If we do what Genting is allegedly doing, we could make our numbers on slot machines alone.”
Arasi believes that the “locals” market-which includes Singapore, Malaysia and Indonesia-will be strong.
“We think there are different geographies that allow us to draw a locals market,” he says. “There’s great play in this part of the world and we think we’re going to be in a great position, with a great city, to be able to attract players from around the region.
“We’ve done this in other areas and we’re confident we’ll do it here.”
But slot play is only the icing on the cake when compared to the dominance of tables in Asia. Questions about how the VIP market would be handled were cleared up late last year when Singapore issued regulations that require the VIP operators that are active in Macau to be licensed-a situation not very likely.
Marina Bay Sands was prepared for this outcome, and has built a solid in-house international marketing department under the leadership of casino marketing veteran Steve Karoul.
“We are not targeting the VIP operators at all,” Arasi says. “We are making a direct appeal to the VIPs and we don’t plan to use any outside operators in our business model.”
Leven says the VIP operators are not crucial to the success of the property.
“We don’t expect the individuals we work with in Macau, and Genting works with in Malaysia, will choose to go through the licensing process,” he says. “Some may, and we’ll do business with them when they get licensed. We have no plans, however, to urge the government in Singapore to change that process. We’re already working with VIPs individually.”
When asked to speculate on how big the VIP market will be versus the mass market, Leven claims to be as much in the dark as anyone.
“What will the mix be between the VIPs and mass market?” he asks. “We don’t know. Will it be 50-50? No way of telling at this point. I think there will be a very strong mass market component with Malaysia and Indonesia, and we’ll have VIPs from China and Hong Kong, but the extent that happens, the amount they play and what falls down to the bottom line, we’re still guessing.”
While both Arasi and Leven claim that the market will be big enough to make both Marina Bay Sands and Resorts World successful, Leven says he believes Marina Bay Sands has an edge in the VIP market.
“I think we have a better chance of capturing the VIP market considering the aura of our property versus theirs,” he says. “But it’s going to be a while before we know.”
Building Excitement
It is the facility that will set Marina Bay Sands apart from Resorts World. While Resorts World has more of a leisure feel-four different hotel styles, a Universal Theme Park and a world-class aquarium-Marina Bay Sands is set adjacent to Singapore’s business district, which will be linked with the hotel by a two-kilometer pedestrian walk rimming Marina Bay. The dynamics of the property combine business, entertainment, shopping and bringing the outdoors inside.
Arasi says the building is incorporated into a city accustomed to spectacular buildings.
“Singapore already has an identity and some spectacular architecture,” he says. “It’s got iconic projects. It’s got the new and the old. But everyone acknowledges this is very special and will be unique to Singapore and every other place in the world. It really stands out in what we believe will be the new postcard for Singapore.”
As impressive as the exterior is, however, Arasi believes the property ramps up the promise upon entering.
“It is even more impactful when you see the inside of it,” he says. “It’s extraordinary in architecture, design and appointment inside as well as outside. Everything is articulated and detailed. Everything has an atmosphere that will be very memorable and special.
“When you look up it’s like a fabulous movie. You can see that movie 10 or 20 times and each time be amazed at how many new details you pick up and how fresh it stays. This facility is like a brand new great old movie. You’ll see it in the casino, the restaurant, the MICE facility, the theaters and the museum. Right now there is a lot of construction going on, but when it’s done, if you imagine a stage and a stage set, Marina Bay Sands is front and center. The financial district of Singapore is the audience, and you look out across the bay and we have the spotlight on us. We think it becomes the new anchor of Singapore. We are going to be the pedestrian epicenter of Singapore. Festival, street art, people watching… We are the center destination point for the pedestrian walk around Marina Bay.”
Like all LV Sands properties, the food-and-beverage offerings at Marina Bay Sands (see sidebar, left) are truly special, accented by offerings from some of the finest chefs in the world. In a city already revered by people who appreciate fine cuisine, the Marina Bay Sands offerings simply widen the choices.
“We think we link in well with what is already here in Singapore. We also think that these names really put us on the radar screen of the ‘foodies’ and the ‘winies’ from all over the globe. We’ll be recognized by people who scour cities for unique dining experiences,” he says.
For the shopper, Marina Bay Sands also extends the retail choices offered in Singapore. The world-renowned Orchard Road shopping district is nearby, but Leven and Arasi are confident that the Marina Bay Sands retail offerings will do well.
“I have seen studies that if you look at Singapore’s retail inventory compared to its population, as well as some metric of retail spend, Singapore is not one of the more developed retail markets,” Arasi explains. “It might seem that way because it is largely concentrated on Orchard Road and it seems like a lot more than it is. I think there is still substantial opportunity if you have a different and unique offering. We do. We have the only critical mass of retail that is connected to a wide range of other experiential components. It’s attached to our hotel, casino and meeting facilities with tens of thousands of trade show delegates. It’s attached to our 55 restaurants, bars and related food-and-beverage outlets. It’s attached to the theater and that traffic. It’s attached to the new pedestrian walkway around Marina Bay. Furthermore, our space, without question, is going to be most dramatic and interesting retail space in Singapore. The soaring atriums, the glass walls, world-class architecture with views of the Singapore skyline and Marina Bay. And the best part, unlike Orchard Road, you get to walk around in air-conditioned space.”
The LV Sands model for retail is strong, and Leven says it should work in Singapore to the benefit of the company.
“We expect that Singapore tourism is going to go up by 30 percent,” he says. “It’s inconceivable to me that tourists will not visit Marina Bay Sands, and then they’ll be visiting the retail as well. As the economy gets better in that part of the world, it’s bound to do well. But at the end of the day, if it does great, that’s great but if it does OK, that’s OK. It’s not critical to the success of the property.”
At the same time, the sale of the mall to a third party is a distinct possibility, since that occurred in Las Vegas and has been floated in Macau.
“Sheldon’s model of the attraction of the mall I think will work,” says Leven. “After a three-year period, we have the right to sell that mall, but our expectation is that we’ll pay off all of our debt with that.”
Meeting Priorities
One business that Las Vegas Sands knows intimately is the convention business. The company was born in Las Vegas on the premise that meetings and conventions will fill hotel rooms and the casino on the less-busy midweek days. The company is counting on Singapore to do the same, but it has been slow to ramp up, according to Leven.
“Honestly, I would have liked to see more business on the books than we have right now,” he says. “I think the nature of the facility being built over three to four years has caused meeting planners to delay making any commitments. But over the past few months, bookings have really picked up. Eventually, we’ll own the MICE business in this town. Once the publicity starts and people begin to realize what we have here, I think we’ll have plenty of business. I told my sales staff that they’re going to have an easy job, so let’s make sure we have the right people in place. The phones will be ringing off the hook.”
Singapore has long been a MICE destination in Asia with the Suntec Convention and Exhibition Center, and Arasi says Marina Bay Sands makes it the premier city to host meetings.
“While I believe we are very complementary to the public meeting space, we are truly the ideal space in Singapore,” he says. “We have 2,000 rooms and suites connected to the meeting space. When your meetings are done, you don’t need to travel to the entertainment district. It’s self-contained at the Marina Bay Sands. We’ve got the exhibit space, ballrooms and meeting facility all under one roof. We can house citywide-size events under one roof. We will give an excitement, a buzz and an experience that you can’t find anywhere else in Singapore.”
Market Forces
Since the aspiration of the Singapore government was to increase tourism to the city via more family entertainment and MICE business, it’s clear that the two casinos must work together to achieve that goal.
Leven says the market is strong and vibrant, so that neither casino has to fear competitive pressures from the other.
“The market is so big and vibrant. There’s plenty of business for both casinos,” he says. “It’s a duopoly for 10 years, so I don’t think we’ll have any problems with the market during the period. There’s plenty of room in the market for both of us.”
Arasi says there have already been discussions on cooperation between the
casinos.
“We will work with not only Resorts World, but the other hotels and attractions and the Singapore tourism authorities,” he says. “This is to a very large degree about selling Singapore and how we can participate in things that are good for Singapore. If we’re effective, we’ll all get our fair share. Within that context, we think we can do very well.”
Another Singapore stipulation is an aggressive problem gambling effort. Arasi says this was an easy piece for LV Sands to comply with because the corporation had an in-house program that is a success in its other properties.
“We have an industry-leading model,” he says. “We’ve done everything from the original research to the treatment. We’ve extended responsible gaming training to everyone at Marina Bay Sands, and that training will be ongoing as we continue to evolve and understand the problem more completely.”
And the minimization of social problems is also an area where LV Sands will work hard to shine.
“We have a very specific set of targets to shoot for, because the way Singapore has laid out the model,” he says, “you’ll have all the social safeguards which are strictly controlled. It’s quite a transparent process that we’ll be able to build our program around.”
Corporate Impact
While the Las Vegas and Macau developments of Las Vegas Sands are impressive and successful, Leven says it is Singapore that will tell the tale. He’s confident that the property will live up to expectations and truly become a transformative moment for the company.
The goal of increasing non-gaming spend may take a while to move into place, but even so, Leven believes the gaming revenues will be enough to achieve success.
“Based on the numbers we’re seeing at Resorts World and what we expect to see at Marina Bay Sands, I think it’s going to take a couple of years to reach the 65-45 mix that we have anticipated,” Leven explains. “The casino business in the early going is going to dramatically exceed the MICE business and the room business. First of all, they’re all not going to be ready immediately, and then there’s a booking cycle that takes a while to kick in. So I think it’s going to be well into 2012 before that starts to level off. You can’t sustain these kinds of buildings without the gaming revenue. I’ve been in the hotel business long enough to know something about that income. The casino business is likely to be 75 percent to 80 percent of the EBIDTA revenues, certainly for the first seven months, and likely for the first full year as well.”
The monetary return on the project is just one benefit it will bring Las Vegas Sands, according to Leven.
“You can’t underestimate what this project does for the company,” he says. “This project will lead us to opportunities that may have never come to this company before-Japan and other countries that are considering gaming. They look at this and they are going to say, ‘This is what I want. I don’t want a casino just for locals. I want to drive tourism.’ Countries that restrict local players like Korea will see a place like this and understand that you can include local players and that the rest of the business that is driven in will create jobs, taxes and other benefits. That will give us the opportunity to go forward.
“Sheldon and I have already visited Japan twice. We’ve talked to various potential partners over there. One of those meetings came from someone who had actually visited the property in Singapore. We’ve had calls from Vietnam, which has a bit of a drawback because they don’t want their citizens to gamble. We’ve talked to Korea, and then there’s also some European talk. There will be more once Singapore is open. India is a possibility. We’ve had discussions about the Mumbai area.”
While Adelson has described Las Vegas Sands now as an “Asian company,” that doesn’t mean that he’s given up hopes of developing integrated resorts in the United States.
“A facility like this in Florida-in the Dade/Broward County area-would be a lot better for the state than that deal they just made with the Seminoles,” says Leven. “That will put some money in the state budget coffers for a few years, but it won’t have a long-range significance. And an integrated resort in Florida
wouldn’t cost us as much as the Singapore project did or one in Japan would.”
And even though Adelson and Leven are Boston natives, Leven doesn’t believe there is opportunity for the company in the Bay State.
“Massachusetts has some problems,” he says. “You need to be in a location that is favorable and there are weather problems nine months of the year. We’ve had those conversations. If you’re not contiguous to Boston and that infrastructure, you can’t expect to drive enormous midweek convention business.”
For the immediate future, however, the attention of LV Sands will be devoted to Singapore (and to Macau; see sidebar on page 28). Leven believes that the phased openings will allow the company to develop a feel for the different elements of the property.
“By the winter of ’11, all aspects of the property will be up and running,” he says, “with the possible exception of a few MICE elements still to open. But by a year from the opening-by June of ’11-we should have a full building operating at peak efficiency.”
