Genting Singapore has reported a 47 percent year over year fall in earnings for this quarter, continuing a dramatic downturn that can be attributed to China’s crackdown on corruption, which has cut deeply into the ability of China’s VIPs to travel to Asia’s casinos.
VIP gaming has also declined precipitously in Macau and all over Asia. Rafi Farber of CalvinAyre wrote last week, “The bigger question is whether this is because they’re too afraid to gamble right now due to restrictions but will resume later, or whether the VIP gamblers as a class are shrinking. Either way, the cautionary tale here is that the VIP market is inherently unstable and long term, companies need to focus on mass market and treat VIP like a bonus.”
Genting Singapore’s profits were S$66.9 million for the third quarter compared to S$127 million for the same period last year. According to Farber, Genting’s cost of business is increasing, making it harder to grow. Also factored in is the fact that Genting tied its debt to interest rate derivatives and those contracts are expiring.
Such derivatives allow Genting to receive interest at floating rates but require it to pay interest at fixed rates. This allows the company to borrow at floating rates but repay at fixed rates.
Things that could make the next quarter rosier for Genting include the fact that 17 percent more visitors are coming to the casino compared to the year before and non-gaming revenues are up 10 percent.
Meanwhile the Singapore Tourism Board is doing its best to get business travels to go out on the town and have some fun after they get done conducting business. This is even more important because business travel is contracting as companies tighten their belts. The number of visitors to Singapore peaked in 2013 and tourism profits fell 12 percent this year from 2014.
But Asia as a region is seeing business travel spending increasing several times faster than in North America and currently business travel in the region accounts for 39 percent of the world’s business travel.
Next year Singapore will become the first Southeast Asian city to get a Michelin guide. The city-state is also trying to lure international events. It is also promoting itself as a destination for corporate incentives.
Corporate travelers are prized since they tend to spend twice as much as tourists.
Genting Singapore and the Las Vegas Sands Corp. are the only casinos allowed to operate in the city, but that could change in 2017 and the government is keeping its options open. It has not escaped the government’s notice that the year it allowed the casino resorts to open, in 2010, its economy rose by 15 percent.
