Singapore close to announcing details of first casino projects

Linus Chua

Tuesday, Sept. 20, 2005 | 9:42 a.m.

Singapore will unveil details of the nation's first casino projects as early as next week to bidders, including Harrah's Entertainment Inc. and MGM Mirage, as part of a plan to boost tourism and create up to 35,000 jobs.

A request for formal proposals may be issued before the end of the month, the tourism bureau said in an e-mailed response to questions, setting out guidelines on how much space should be provided for gaming, convention centers, hotel rooms, museums and other features of the two projects.

Harrah's, MGM and Kerzner International Ltd. are among about a dozen companies competing for the right for two casino-resort licenses to be issued by the Singapore government. The casino operators are seeking to tap into a market that's within a six-hour flight of 2.5 billion people in Asia, and to replicate the success of new casinos in the Chinese city of Macau.

"Asia, economically, is offering amazing opportunities for growth in terms of disposable income and new customers," said Sean Monaghan, an analyst at Merrill Lynch & Co. in Singapore. "Companies that don't have exposure to Macau are going to be very interested in Singapore. It will be the largest, the most skilled, best-capitalized casino companies that will likely be awarded the licenses."

Singapore Prime Minister Lee Hsien Loong, who took office in August last year, lifted a four-decade ban on casinos to add "buzz" to the city-state after its share of Asia's tourism market fell. The decision was opposed by some groups, such as Focus on the Family in Singapore, which said it could exacerbate social problems such as loan-sharking and prostitution.

"It's a change of generation," said Hugh Young, managing director for Aberdeen Asset Management Plc, which overseas $18 billion in Asian stocks. "The older generation here said, 'Over my dead body.' Now it's coming in with the young generation."

Lee Kuan Yew, the prime minister's father and the city- state's founding father when it became independent four decades ago, had opposed a casino in Singapore. In April, after the ban was lifted, he supported the integrated resort because of the boost to tourism, adding that Singapore faces more competition from other cities that have redeveloped to draw visitors.

"We have to change our mindset. We have to accept a certain international flavor to Singapore. We must become cosmopolitan," Lee, who is now Singapore's minister mentor, said in an interview on Sept. 2. "We have to change the way we treat customers, the way we treat tourists, and make them feel comfortable."

Merrill Lynch estimates the casino operators will invest $5 billion in the two sites. The Singapore government received 19 proposals when it first sought expressions of interest from developers and casino operators, and 14 were placed on a shortlist. With two bidders having dropped out, a dozen investment groups are expected to receive a formal "request for proposals."

Details of the bidding process will be announced "soon," Singapore Tourism Board spokesman Rostam Umar said, declining to elaborate.

Among companies that expressed interest, Harrah's hired Daniel Libeskind, master planner of the Freedom Tower at Ground Zero in New York City, as the architect for one of its Singapore proposals. Kerzner, operator of the Atlantis Resort in the Bahamas, has promised an "iconic" design, while Las Vegas Sands, the world's biggest casino-hotel operator by value, said it will build an 832-room hotel, a convention center and an arena if it wins the right to operate a casino in the city-state.

The two casino resorts "would invigorate the market," said Robert Hecker, Singapore-based managing director at Horwath Asia Pacific, a hotel consulting company. "You're adding a huge demand-generator to generate new business for Singapore."

Asian cities are seeking more investment from gaming and entertainment companies. Walt Disney Co., the world's biggest theme-park operator, last week opened a $3.5 billion Disneyland in Hong Kong, the second in Asia. The Burbank, Calif.-based company also said it may open a theme park in Shanghai after 2010.

In Macau, a former Portuguese colony that reverted to Chinese rule in 1999, new entrants to the casino market, including Las Vegas Sands and Wynn Resorts, plan to spend a total of $12 billion on new gaming venues for the mass market.

"Destinations are now very competitive, whether that's for tourism, for conferences, for all kinds of people that are looking for opportunities, even just transiting aircraft," said Tony Davis, chief executive of Tiger Airways Pte, a budget carrier owned by Singapore Airlines Ltd. "The decision of Singapore to develop integrated resorts is a positive step forward in pushing Singapore's tourism potential."

Singapore is also proposing to set the gaming tax for so- called high-rollers, or those who bring in more than $60,000 to gamble, at 5 percent, the lowest worldwide. The city-state is proposing a 15 percent tax rate for other gamblers.

Singapore officials "aren't looking for tax revenue, they're looking for tourism," Terry Lanni, chief executive of MGM Mirage, said in an interview on Sept. 13.

Singapore is counting on its casino-resort projects to create as many as 35,000 jobs and revive a tourism industry whose share of Asia Pacific's travel market fell to 6 percent in 2002 from 8 percent in 1998.

"Several key issues raised are complex and involve different government agencies," the tourism board said in an e- mail. "Singapore Tourism Board and the relevant agencies are closely examining them with a view to adequately address these concerns by the time the request for proposals is launched."

For Singapore, which relies on tourism for about 5 percent of its $107 billion economy, the casinos may ensure that visitors stay longer. Tourists now stay an average of three days, from four days in 1991, Prime Minister Lee said in April. That's compared with four days in Hong Kong, five days in London and almost a week in New York.

"Tourism as a percentage of GDP has been declining and the two projects would not only draw more tourists, but extend the length of their stays," said Ian Douglas, Kerzner's executive development director in Singapore. "A big attraction is what's missing and the integrated resort is an opportunity to do it."

Singapore expects to more than double its tourist arrivals to 17 million and triple tourism revenue to S$30 billion ($18 billion) in the next 10 years, the Singapore Tourism Board said earlier this year.

"For the first time, it's a very multi-agency effort with the private and public sectors coming together, getting the big projects like the integrated resorts, the wow things that people will hear around the world," said Jennie Chua, chief executive of Raffles Holdings Ltd., owner of the 118-year-old Raffles Hotel in Singapore.