Can Singapore casinos finally hold their ground against Macau?

The city’s two gambling resorts have been performing strongly, pressuring operators to sustain the upward trend.

Although Singapore’s gaming market has been on a roll with the earnings of the country’s two gambling resorts easily beating expectations, luring high rollers through aggressive credit offerings is still a key priority for operators keen on breaking growth ceilings.

Genting Singapore profit rose 20% YoY to $217.19m in Q1 buoyed by gaming revenue from its Singapore integrated resorts during the bustling Lunar New Year period. Marina Bay Sands also took charge of Las Vegas Sands's stellar growth after earnings surged 48.6% to US$541m.

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The profit surge may embolden operators to be more aggressive with their credit offerings to lure VIPs in the region as Genting has deliberately grown its VIP customer base over the past few quarters allowing its credit allowed per head relatively unchanged and limited its exposure to individual accounts.

“Luck factor aside, earnings growth should be positive as volume under both mass and high rollers likely to climb further,”according to RHB Research, adding that mass market volumes remain robust thanks to local footfall.

Moreover, a recovery in gambling capital Macau’s gaming market brought about by improving economic conditions in the Mainland is set to spill over to other Asian casinos including Singapore.

Unlucky hand
Strict government guidelines on junket operations, however, have long been argued to be stifling the further growth of Singapore’s promising casinos.

In Macau, about 180 licensed junket operators provide credit to casino customers and collect the money they are owed. However, this isn’t the case with Singapore as casinos are usually the ones bearing the heavy brunt of gaming losses usually brought by high rollers from China. In fact, Bloomberg estimating that Genting Singapore is owed but has not collected a whopping $787.5m in 2014 which represents about four times the average at Macau’s six largest casino operators.

“As a result, the casino operators themselves have to bear quite a fair bit of risks especially potential bad debts,” said RHB.

Casinos in the lion city have been flexing legal muscle to compel Chinese gamblers in the red to pay up. In fact, the two casinos filed a combined 49 lawsuits for gaming-related debts in 2014, with Marina Bay Sands going to trial with mainland property developer Lu Shongong over $3.5m in gambling debt just last March.

RHB echoes the sentiment, “The casino operators are working hard to expand its global customer reach. But selecting customers that won’t run away if they lose remains the key.”