G2E Asia 2010
00:00 Frank Fahrenkopf: Ladies and gentlemen, I’m Frank Fahrenkopf, President and CEO of the American Gaming Association and I’m delighted to welcome you this morning to our Global Markets Forum and the first day, actually, this is the first conference/session of our annual conference here. And so welcome to G2E Asia 2010. Today’s programming is made possible by generous sponsorship from Spectrum Gaming Group and we thank those folks at Spectrum for their continued support of G2E Asia as well as G2E in the States where they have been with us for many, many years. Before we begin and we’re trying to do this in every session, I’m going to hold up this device and ask you to put it on silent running or turn it off or vibrate, whatever it is, so that we won’t interrupt our great panelists today and speakers with someone’s familiar ring to them but not to anyone else. Today’s Global Markets Forum sessions all day long are going to examine the issues and opportunities affecting both current and emerging gaming markets within the Pan-Asian region. As the global economy begins its recovery and the gaming industry in Asia continues to expand and mature, now is the time for gaming industry professionals to cultivate a very, very strong understanding of the forces presently at work within Asian gaming markets and to polish the skills and insights that they’re going to need to capitalize upon as opportunities present themselves. And so we’ve designed this conference and this portion of the conference to meet those demands. Our expert speakers today are going to hopefully provide you with unique insights in a wide range of topics pertinent to your business. And I encourage you to take advantage of the wealth of information these speakers will provide on the forces that are presently at work in these diverse markets including the challenges and opportunities you will face as you look to grow and increase the success of your gaming operations. Our first session of the morning will take a fresh look at the Singapore market which recently saw the tremendously successful opening of two spectacular integrated resorts. So far performances exceeded all expectations for the market and with additional segments of those resorts set to open later this year we’re just at the beginning of this latest Asian gaming success story. And our experts will review the bidding, construction and regulatory processes integral to the opening of these massive tourist attractions, discuss what is to be learned in the short time that they’ve been open and how these lessons can be applied in other international jurisdictions. Later today you’ll hear from experts about the potential from gaming in countries as diverse as Japan, Taiwan, Korea, Vietnam, Thailand and India and we’ll also take a look at the prospects for established jurisdictions including the Philippines, Cambodia and Malaysia. These sessions will provide you with unique insights into what the future holds for all of these markets. Insights hopefully you’ll be able to utilize as you navigate the course for your own business. We have a full day ahead of us so without further delay let’s begin. I’m very happy to introduce my good friend Adam Rosenberg, managing director and global head of the gaming for Goldman Sachs who will moderate our first session this morning. Adam provides strategic and financial advice to Goldman Sachs’ casino operators, gaming technology and equipment manufacturing clients including such companies as Las Vegas Sands, Kerzner International, IGT, Bally Technologies, among many, many others. He is incredibly knowledgeable about the market forces driving Asian gaming. So without further ado, please join me in welcoming Adam Rosenberg. Adam, the floor is yours.
04:36 Adam Rosenberg: Thank you very much, Frank, and thank you all for being here. It’s always hardest to do the first session in the first morning of the conference but we will do our best and we’ve got an outstanding panel some of them are here for you today. Frank gave you a little bit of my background but to share a little bit more of the perspective that I have, I’ve spent quite a bit of time here in this market in Macau, I’ve spent quite a bit of time in the Singapore market over the 12 years that I’ve been at Goldman Sachs primarily through the work that my firm has done through Las Vegas Sands which is a very big and important client of our firm as you’ve heard me say before in this forum and in others. But as a result of the time that I have spent in this market and more recently in the Singapore market, it’s opened my eyes to the broader opportunities that exist around Asia more broadly and those are opportunities that folks in the west like myself are sort of late in understanding and are still trying to understand. But it’s incredibly exciting to have the perspective of what’s going on in this part of the world in the context of our global practice and as Frank said our practice is global and it’s become increasingly so. I’m very honored to have four panelists with us today, it looks like three but they are really four. We’re waiting for the fourth, he should be here any moment. And so we’ll start with him since he’s not in the room so we could say what we like about him. Tom Arasi who is the president and CEO of Marina Bay Sands which is you all know is one of the two integrated resorts to have recently opened in the Singapore marketplace so he’ll be joining us up on the panel. Jonathan Galaviz who is most immediately to my right on the left side of the panel is an independent travel and leisure strategist. Jonathan is one of the folks that I know who was earliest in this market from the Las Vegas field and so somebody who brings the perspective of what’s been going on in Las Vegas over the last few decades overlaying that onto what he saw might happen here in this market and as you’ll hear was instrumental in the thought and literally the white paper process behind the Singapore government’s approach in formulating their strategy and [00:06:52] that strategy and opening and operating the IRs in Singapore. To Jonathan’s right is Mr. Ben Lee who is the managing partner of IGamiX Management & Consulting, among other things I consider him my guru in the region. He’s helped me understand a lot of what’s going on and what is still to come in the region. And so Ben has a tremendous perspective not just on how these markets evolve and you’ll hear from his experience how he has moved through several of these markets throughout his career, about how they operate and how the operations changed, his market has grown mature. And finally at the end of the day, Mr. Gary Pinge who is the senior vice president and regional head of consumer and gaming research at Macquarie Securities. And so Gary will help bring some perspective on how the capital markets in the investment community and the analyst community view what’s going on here in Singapore and soon in other markets as well. The format today will be a little bit different from the panels that you’ve seen me run in the past, right. Generally, we’ll ask a question or two of each panelist and then jump around and try and stay thematic across points of view. Instead what I’d like to do is stay on topic for a little bit longer than I normally would within a particular panelist area of expertise so we could really drill down and have some follow-up questions. And at the end of each panelists — sorry, I’m just trying to turn this off, at the end of each panelists series of questions, we will then open it up to audience Q&A. We want to make sure that we have time for you all to participate in this so raise your hand if you’ve got a question at any time but the design is to let us get through one panelist’s theme first and then at the end if you think of something that relates to the earlier panelist we can come back to it. I think that is all the housekeeping. So with that, I will sit down and I will turn things over to Jonathan Galaviz who will start with a slide to give you an orientation of how the Singapore process began and evolved and then I’ll have some specific questions for Jonathan. I should also point out that as I ask each panelist questions I will invite the other panelists to jump in with whatever thoughts that they’ve got so we can have a real discussion as we move forward here this morning. So without further ado, Jonathan, why don’t I turn it over you?
09:19 Jonathan Galaviz: Okay. Great. Thanks so much, Adam. They’re going to put up the slide and basically what I did was I created a slide, just one slide, that would basically provide just historical context to the Singapore government’s approach to the casino gaming legalization issue in the context of integrated resorts, and to give you just a bit of my background. I’ve been in this industry for about eight years now, I came from traditional management consulting non-gaming and it was an interesting transition when that occurred and at the same time when I made that transition into the gaming industry Asia was just getting started as it relates to the liberalization in Macau and also the potential legalization in Singapore. What I wanted to do was and perhaps that could be put up on a [00:10:14] but essentially what happened in Singapore was a very interesting process and it’s important to look at the history of it and to understand the dynamics of the history because we understand the history and the context that makes the future more easy to understand and it also provides a potential framework and understanding as it relates to legalization and other jurisdictions potentially in Asia as well. But in the context of Singapore, Singapore really did almost everything that a management or strategy consultant like myself would want them to do. They played the game perfectly as it relates to maximizing the capital investment for the country. And so in 2004 or about there and probably just a little bit before that, there was a very strong debate in Singapore about tourism, about what can Singapore do to increase tourism. And economically in Asia, tourism is the one industry or the one sect that provides almost a maximum economic multiplier. And for the non-economist it’s basically the descend of consumers or tourists in the country amplifies in the economy to a greater degree than say other sectors such as biotechnology, for example. In so there’s a really strong desire for Singapore within the government and also within the country overall to figure out what would tourism in the future for Singapore look like? And there is a lot of things put out there, you know, should they build a huge theme park, should they build a big Ferris wheel, should they build a big mountain, you know, there are all sorts of different things. And the issue or the topic of casinos came up slowly in that process, in the strategic planning and what Singapore was looking at from a tourism perspective. And again, tourism is the key and it’s one of the things that the gaming industry really in a context of Asia needs to integrate itself more with the concept of tourism strategy. And so basically a debate or a potential of casino gaming being used as a tourism strategy began bubbling up and the idea of which model of casino gaming was starting to be talked about. So it’s really should this be the Macau model, the Korea model, the Las Vegas model, the U.K. model? And it was really a big debate about whether Singapore wanted to have basically a small casino in a box or whether this would be something bigger and better and more in the context of a tourism ecosystem play. So that ultimately led to the idea of holding a debate or a public forum on the topic of whether Singapore should actually legalize casino gaming and one of the only really strong free and open public forums that was allowed on the topic in respect to the sensitivities related to the issue and there’s a wide diverse view and there’s a wide diverse opinion and this was in 2004. And the government was in a position of trying to figure out whether this was something to do in the context of significant tourism generation. And so what the government did was in 2004 and 2005 time period decided, well, let’s not legalize casino gaming outright without knowing what could potentially happen in the future. And so what they did was it was called request for concepts. And basically what they started adopting was almost a very department of defense procurement process where there’s full and ethical transparency to the interaction between government and industry, documentation, standards, processes. And so the request for concept document was really one of the most important strategic moves that the Singapore government made. What it allowed them to do was actually interact with industry and say, industry we want your concept, we want your general context and business ideas as what you would do here if we legalize casino gaming. So without legalizing we want you to tell us industry what you will give us. And so there was a tremendous response that the government received through the request for concept process and literally as a, you know, pretty significant document that was issued to industry and the industry issued their concepts and their conceptual investments, right, non-legally binding. And what that did was that basically create a situation that the government receive the responses from the industry and they said, wow. Basically, if we do the Las Vegas model of integrated resort development in Singapore, we’re going to receive multi-billion dollar investment that can act as a tourism catalyst for the country. And what that did when they received those responses is it gave them the leverage and it gave them the capability to say to the population and to the citizens, look, if we legalize casino gaming we’re going to be able to have multi-billion dollar tourism investment that is very significant and very robust and this is going to create jobs for Singapore citizens, this is going to create economic activity for the country overall and more importantly on a very macro scale it’s going to ensure that Singapore is highly competitive in the Asian tourism market. And so that gave the Prime Minister in 2005 the leverage to basically legalize casino gaming in the context of integrated resort development. And at that point the government issued an RFP, request for proposals. Now, the request for proposals is different than the request for concept stage that went on in 2005. The request for proposals stage was basically saying to industry, this is our formal requirement, this is what we’re going to tell you formally we’re going to do and what we’re going to give you and you need to propose to us a legally binding proposal that commits you legally and financially to developing an integrated resort in Singapore. And that occurred in 2005. The RFP process, again, is a really, really important process to understand historically because Singapore played this exactly how a management strategy consultant like myself would advocate. Very transparent, very ethical and open discussion between industry and the government leading up to the process of eventual awards of the casino licenses which were really awards of integrated resort development where a casino was just a piece of the overall equation. And so there was also an evaluation committee that was formally set up which was publicly known and publicly understood to be the case and that was made up of ministers in Singapore. And then ultimately the proposals came in, various proposals came in from both Marina Bay’s project and also Sentosa. And ultimately, that led to the award of the concessions to Las Vegas Sands and also Genting International for Marina Bay Sands and Resorts World, Sentosa respectively. The government clearly won no matter how the integrated resorts performed moving forward, the government and the country has already won. They won the bat or the gamble so to speak. It’s generated multi-billion dollar capital investment, the amount of jobs and the amount of activity is there and robust, it’s a part of the Singapore skyline now. And this historical context I hope provides some conceptual ideas as it relates to how Singapore ultimately got to where it is today and how it will be moving forward in the future. Very strategic, very ethical, very transparent, very, very smart and savvy. So Adam, I’ll give it back to you now that I’ve given that overview.
18:40 Adam Rosenberg: That’s great, Jon, and thank you. I think that’s a great framework as a road map for what I think will be now a series of questions. You’ve been around the Asian markets in general but the Singapore market for a long time now and you touched a little bit in this framework on the Singapore government’s objectives in establishing the IRs and they were very specific in some of their objectives. For example, one objective was to double visitor arrivals by 2015 to 17 million people and triple tourism spending over the same period to 30 billion Singapore dollars. Are those goals achievable and how did the IRs help the government in its strategy of achieving those goals?
19:26 Jonathan Galaviz: The integrated resorts as it relates to tourism strategy have been developed to what’s called induced visitation. In other words, if it wasn’t for the integrated resorts, certain tourists would not come to Singapore. And so designating or creating that differentiation between the natural tourism that Singapore already had pre-integrated resorts compared to the tourism visitation that it has or will have post-integrated resorts. And so as I stated earlier in the context and the history, literally going back six years now, this was always intended to be tourism play for Singapore and you have to understand Singapore’s context in tourism. Singapore really has no natural resources, it doesn’t have anything really naturally to say we have beautiful beaches or we have something that would drive you to visit us. So the question is what could Singapore create that would allow for tourism to excel in the country and the government’s focus on tourism is literally just as important as the financial sector as biotechnology as many information technology. It is placed at a very high priority in the Singapore economic ecosystem. And so the goal was basically to get to 17 million visitors by 2015. I believe that goal is achievable and I believe that the integrated resorts are going to be a big component of that increase. Right now, the tourism-base in Singapore is about 11 million and I project there will be about 11 million this year. But I think between now and 2015, the integrated resorts will be able to boost it up to 17 million or very close to that number as long as the macroeconomic conditions in Asia remain stable and as long as things like Singapore’s aviation sector remains as a robust hub within Asia and Southeast Asia. But I think the integrated resorts from a country policy government perspective are going to be very, very successful. Like I said the country has already won. The integrated resorts are going to be there no matter whether they have great success for the operators or great failure or somewhere in between. And so going from 11 million to 17 million by 2015 I believe easily half of that increase will be achievable to the integrated resorts and obviously the integrated resorts themselves are going to be spending millions of dollars over the next couple of years in marketing the integrated resorts and creating packages and strategic partnerships in the market that will ultimately lead to visitation into Singapore as well.
22:18 Adam Rosenberg: We’re going to talk a lot about some of those mechanisms when we talk about the operations, et cetera, in Ben’s component. But just sticking with the government’s objectives for a moment, now that the resorts are open how would you expect your objectives to start to change now? What will become more important, what will become less important and over what period of time might we see the government’s willingness to open up the market to additional operators?
22:46 Jonathan Galaviz: Right. Okay. So the latter half of your question is a loaded question.
22:50 Adam Rosenberg: Thank you.
22:51 Jonathan Galaviz: So I’ll spend more time thinking about that while I’m talking about the first part. As a strategy consultant the number one thing that I would advise to CEOs or to the general managers operating in Singapore is that they need to understand that the context of what Singapore’s government is doing from a policy perspective is really creating a tourism ecosystem that will ultimately have integrated resorts as one piece of that ecosystem. And the other parts of the ecosystem are things like their nature of visitation if you’d call it that, like their night safari and general family leisure activities, their being an international hub or seen as a global city is also an important objective. And so the integrated resort portion of the tourism strategy is a key portion because it touches on various aspects, it makes the total whole of Singapore that much greater to visit than if there were just to be only integrated resorts or only a natural visitation or only business traveller visitation. And so in this respect I think the integrated resorts are going to have to be strategically savvy in the market, I would definitely expect them to develop as many strategic partnerships as they could in mainland China and also India. India, for Singapore, is a very, very important market and so we’re in Macau and Macau and mainland China are seen as the two kind of throughput zones for commerce as it relates to this industry. The really, really important opportunity for Singapore is actually its ability to cater to the Indian market and obviously Singapore has management talent in the country that knows the cultural nuances of Indians and I believe that’s both mainland China and India, especially India, will be very, very big opportunities for the integrated resorts to create strategic partners that’s within. They’re going to have to do a lot of marketing, a lot of distribution, a lot of partnerships, create that inbound visitation into Singapore. On the lighter part of your question, Adam, I think that it’s a very interesting question because when the Singapore government created the RFP process, they basically said in the RFP that when the government will basically issue you an exclusivity period, so the winners of the concessions in Singapore will basically have a ten-year exclusivity, I believe it’s ten years from the time of award. And this exclusivity period basically limits Singapore to having only two integrated resorts until that time period elapses. So the question is, what happens as that time period comes up? I really do believe that say in 2015, you will have — or 2014 even, just three years from now, you will have interesting discussion as it relates to whether Singapore may allow more integrated resorts in the market. Because if we look at from the government’s perspective, I mean, these are, you know, multi-billion dollar capital investments. I mean, they’re the largest private sector investment that Singapore has ever received in the history of the country. And these are just casinos, but they’re not. They are critical key important pieces of Singapore’s potential future moving forward. And so I think that the question of legalization of more integrated resorts in Singapore is a very, very important one and I think that it is one that will take place. I don’t know if how it would come out, I don’t know the outcome of it. Singapore does not want to become a casino hub, it doesn’t want to become a casino destination. But in the same respect as the country grows and as the population grows and as Asia’s economy continues to grow, travel, leisure tourism is going to be really, really important to Singapore. I definitely expect that in 2014, just really, you know, three to four years from now, the issue to come up in public debate at some point.
27:06 Adam Rosenberg: Okay. Let’s shift a little bit to the hotel and inventory and one of the things that always struck me about Singapore as a potential and now an actual location for integrated resort casino projects is the existing room base and meeting and convention infrastructure that already existed in Singapore before the integrated resorts were built. So with that as a backdrop, the IRs are adding about 4,300 rooms upon completion but will dramatically increase the MICE capacity by a square footage measure by any other measure. Is that ratio appropriate or could MICE demand overwhelm the room supply? And how do you see that playing out throughout Singapore in terms of room rates which are already high by some measures certainly in the greater Asian region.
28:01 Jonathan Galaviz: You know I’m a part-time adjunct professor at University of Nevada, Las Vegas in the Singapore campus so I teach on a part-time basis and I was asked, you know, for the last year, a couple of years, you know, Jonathan, you know, from the students, they’d be asking me this question in class and most of them were in the hotel industry none of them were yet working for the integrated resorts and none of them had any affiliation with the integrated resorts, and so they were worried about their jobs. They’re saying, you know, Jonathan if these integrated resorts come in and fill the Singapore market with hotel rooms, you know, am I going to lose my job, is my hotel going to go bankrupt and am I going to lose everything and should I be looking, you know, for another type of career. And so basically what I did and conceptualize as much as possible but I did the math for them on a white board and showed them the number of hotel rooms at the integrated resorts we’re going to bring on to market, how many room nights that actually was calculated into and the projections for the increase in Singapore tourism over the next, you know, seven years. And basically that calculation showed that there was a huge gap between the number of hotel rooms available in the Singapore market and the expected increases in tourism. And so rather than actually be hotels, just pure hotels and not even integrated resorts, just your standard Ritz Carlton or your Intercontinental Hotel in Singapore, those hotels rather than actually being hurt by the thousands of hotel rooms being brought into the Singapore market, in a certain respect if the tourism projections hold, these hotels are actually going to be doing better than they ever have been. And since the integrated resorts have opened, obviously they haven’t opened 100% yet, but even when they do, I believe that the hotel room rates will stay firm, they will probably increase and I do believe that if, just based on simple math, that if the tourism projection figures hold up for Singapore over the next five years, Singapore could be an undersupplied market for hotel room product. Of course, owners of hotels and owners of integrated resorts are going to want as little supply as possible perhaps in some cases. But generally speaking the hotel and as the owners in Singapore are going to be doing very well as long as the macro economy of Asia remains stable and strong.
30:26 Adam Rosenberg: I’ll ask you one more question, Jonathan, and then we can move on from here. Now that Singapore is finished with the IR process, what do you think the key lessons are that have been learned, that may be applicable to other Asian jurisdictions that are considering their own gaming initiatives, some that may be considering initiating gaming for the first time like Japan or others that may be considering a more global or more international approach to build bigger and better, perhaps cater to their own residents when they have in the past? What do you think that means for the region?
31:01 Jonathan Galaviz: Here’s what I think Singapore means and how it will affect other parts of the region. Singapore’s approach is really the best, in my opinion, the best case study as to how a government should actually proceed down this process of casino gaming legalization and regulation. Obviously, they’re still modifying things a little bit here and there, they’re still working out some of the issues. But generally speaking the historical context which is basically on the slide there, is really I believe the best case study. It really shows ethics, transparency, commitment to the country and to the tourism sector. It places that in the context of the country’s future how the citizens actually benefit rather than just casino gaming. There are thousands of hotel jobs, thousands of convention center-related jobs, thousands of construction jobs that were created through the process. And so I believe that the Singapore process really creates a framework and a process in which other governments in Asia should look to. I don’t believe that all of them will but I believe they should look to it as a model and approach to interacting with the industry. And the industry it makes the decision-making process and the interaction with the potential jurisdiction that much easier, better to plan for and the assessment of whether to invest in the marketing and business development process in a specific country a lot easier to handle. I think this is where organizations like the American Gaming Association and other globally-oriented organizations that understand the importance of frameworks, strategies and understanding on a formal process the importance of ethics and transparency in this industry and interaction with industry. So I think moving forward in Asia, I would be a strong advocate of other governments looking to Singapore as a model. I think Singapore has created their own model now. And so while the debate in 2004 was going on about the Macau model, Singapore has now created its own model and I think that it’s an excellent vehicle to take a look at as it relates to where Asia could be going to in the future.
33:24 Adam Rosenberg: Excellent. Thank you. Well, the themes that Jonathan touched on really all relate to how we got here, we being Singapore. And before we turn to Tom and the context becomes, well, what is it that we have, what have we built, let me pause down and see if there are any comments from the panel or any questions from the audience on Jonathan’s portion of this and then we can move on. Okay.
33:52 Jonathan Galaviz: Strategy consultant’s best scenario.
33:55 Adam Rosenberg: Excellent. Tom, you made a dramatic entrance.
34:00 Tom Arasi: Sorry.
34:03 Adam Rosenberg: Shifting gears a little bit, well, Marina Bay Sands is finally open which is extremely exciting. And we’re going to talk a little bit about the phase opening in a moment and what that means, but maybe you could start by just describing the project to us at the highest level. What is MBS, what are its components, how do they fit together?
34:26 Tom Arasi: Before talking about the phasing, Marina Bay Sands is integrated resort which consists of 2,561 hotel keys and these are gross figures, 1.2 million square feet of convention and expo space or MICE space, whatever you prefer to call it about 1 million square feet gross of retail, 161,000 square feet casino that’s defined allowable gaming area, two theaters with 4,000 seats combined, a museum, a sky park which is 2.5 hectares, 340 meters long about 1/5 of a mile long up 600 feet in the air and it has two promenades. This is all that’s full build out. It will have in excess of 50 food and beverage venues or experiences. We have in excess of $50 million [00:35:27] of architectural-art installed art that was part of our gross floor area allowable calculations and every time I recite this I seem to miss something so we have a lot. In terms of why it fits together, you know, you’ve heard probably enough of that integrated resort model but, you know, from our perspective what we have is first of all it works because it’s architecture in a statement that is one-of-a-kind. It’s really in my estimation a once-in-a-lifetime ambition. It’s an architectural jewel box, if you will. When you look at it between the three towers and the three tortoise-shaped domes of the three platforms, the MICE, the casino and the theaters you caption all of that with the sky park up in the air and you have what we believe is the new symbol of Singapore and we’re hoping and we think one of the most recognized properties across the world and that’s with some pretty good competition with places like Dubai and others, Shanghai. The property is, you know, if we achieve what we want to do the property will not just function it will entice people, it will be an exciting experience, it will be a destination unto itself. We will have succeeded if a meeting planner or a gamer or a corporate booking decision-maker who wants to think about a meeting or a fun place to go or something different to experience for leisure or business, we would love if when they wake up in the morning they think of Marina Bay Sands almost in a transcendent sense that this is a great place to go and by the way it’s also in a great city, Singapore. So if we can take on that quality we will be very successful in our marketplace revenue-wise. The concept is to have everything under one roof and I say that with a little trepidation because every time you try and be something to everyone you’re setting yourself up for some issues, but I firmly believe that one of the few times certainly in my life where someone, Mr. Adelson, our founder and our chairman has tried to do that and I think has succeeded in doing that of course here with Sands China Limited we’ve done that and we think we’re going to be doing it in Singapore as well. We think it works, we somewhat immodestly say to ourselves and to you all if you’ll listen that our goal is to be the world’s best place for business and for leisure. To have a venue where you can combine both where it works would be really terrific thing. For the leisure customer what do we have? Well, we have sightseeing right on site, we’ve got art, we’ve got theater, we’ve got museum, we’ve got a nice little casino, we’ve got a walking around experience and we’ve got what we think is going to be the best retail experience in Asia as well. For the corporate traveller, we had a fabulous location that is quickly becoming the epicenter and the stage of Singapore, Marina Bay. We’ve got great services, we’ve got meeting rooms, we’ve got business centers, business amenities, we can cater and provide great service to business people as well so we think we can check that box. For group meeting planners and organizers, we think that we have an absolutely killer formula. You know, if you’re a professional meeting planner most of the time, not always but almost all the time, you’re grappling with something that you can check. If you have your meeting rooms a lot of times all the convention centers on the other side of town and if you have those together, well, the restaurants and the fun places at night they’re always on another part of town and, by the way, there’s no casino. So what we have walking distance where you eliminate all those logistics and transportation issues. We’ve got that together under one roof. So in terms of how it works and why we’re unique, we think that those things buttoned up will allow us to deliver. By the way, I haven’t mentioned the Banyan Tree spa, I have mentioned the seven celebrity chef restaurants that we have. Ku De Ta at Bali will be up on our roof, will have a 150-meter infinity edge pool that again will be something that I think people will just want to come and see and will have an observation deck observatory. So when you add all that up I guess if you want to put it in another parlance we’re horizontal, we’re vertical, we’re definitely high-end. Those of you who have seen it I hope would agree and those of you that haven’t I’m sure you’ll agree that when you walk around there is nothing pedestrian about Marina Bay Sands, everything is incredibly articulated and you experience it as you go through it. If you walk through on a Friday or Saturday night, all of Singapore is walking through our three-tower 22-story glass atrium just walking and gazing and we think that’s going to have direct revenue benefits as well. So that’s the overall concept of it.
40:45 Adam Rosenberg: That’s terrific. Thank you. Jonathan talked about the Singapore government strategy in the IR process. I want to shift a little bit to Las Vegas Sands strategy. You touched on this somewhat in describing the project but maybe you could talk about the overall corporate strategy for Singapore and how that compares to the overall corporate strategy for Macau for this market, you know, in one vein which is to think about MICE and non-gaming amenities and how important those are to the integrated resorts. Of course they are both important but given the differences in those two marketplaces, how does the corporate strategy differ between the two markets, if at all.
41:25 Tom Arasi: Well, the first thing I’m going to say is a caveat that I can barely keep up with what’s going on in Singapore Marina Bay Sands to try and address the strategy in Macau and in fact my colleague in the room Steve Jacobs who is CEO of Sands China Limited would do a heck of a lot better job than me on that. But focusing on Singapore, we think that we’re in just an incredible market to do what we’re trying to do. We’re going after, of course, group meetings, we’re going after corporate FIT individual business, we’re going after leisure business both the individual traveller and group leisure sales and of course hopefully a very substantial casino component. We’re really lucky, Singapore is one of the few world cities that actually is deep in your three big areas. You know, every city wants to have a robust and bona fide leisure business which Singapore does, maybe it needs a little rounding out but it does. It wants a group meeting and convention business and it wants a corporate base. There are very few cities in the world that actually are wide and deep in those segments, Singapore is, so we’re going to be very balanced in those areas and, oh by the way, we’ll the casino segment as well which will help Singapore and certainly help us. Our goal over time is to have a really relatively good balance between all of those three using Singapore’s bona fide credentials in those areas and how we can embellish as Jonathan said. There’s a phase strategy for development that is somewhat linked to the phase opening of our assets. Early on we’re probably going to be a little bit more casino centric in terms of the business that we try and attract simply because there a lot of other signature amenities of marina bay sands that are going to be opening later in 2010 and finalizing in the first quarter of ’11. So we’re going to be after casino and some level of group sales where, you know, people are basically looking to getting that to Singapore pretty quickly and maybe do some shopping but they want to stay at us because we’re a landmark. That’s 2010 and we’ll pick up some small group business along the way. As we get into later 2010 and to 2011 that needs to broaden out as we add our signature components, our celeb chefs, the sky park is fully open and all that, what will happen is we’ll start checking the boxes for people who say, well I can’t book there until you have a pool, our pool will be open in three weeks. So as 2010 evolves we’ll be able to go after more leisure segments, be able to get more of the tour operators, the wholesalers and the online travel agents and start picking up more and more small group meetings. Longer-term as we build our business and as we balance our business between the four segments, we think we’re going to do great and have a lot of inroads into the extended MICE market, that’s the really big groups with a lot of citywide, with multi-thousand room nights that will fill not only our hotel but other hotels in Singapore. These ten have a longer lead time so it’s a little bit patchy for us to pick that up in our first year but as we start getting up to 2011 and beyond we think that we’ll be an extremely strong competitor for that business. So that’s the plan, you know, segment by segment. Also 2011 allows us to truly get into the corporate RFP season in Singapore which we weren’t quite able to slip in time-wise in 2010.
45:14 Adam Rosenberg: Okay. So just staying on the phasing of the opening, just in large buckets maybe you could talk by quarter. So at this point the casino is open and most of the casino in one tower and what happens, you know, through the rest of this year into the next year to get the whole property open.
45:28 Tom Arasi: On April 27th, we opened 963 rooms about 65% of the casino, about 40 out of 325 retail shops and we opened about 50% or 60% of the MICE, that was about it. End of this month, we will open our sky park with the observation deck and the pool, not the food and beverage outlets. We’ll open about another 40 shops, we will open our grand ballroom, Asia’s biggest we believe, at about 90,000 square feet on the fifth floor of our MICE building and the rest of the casino including our ruby room, our place to cash areas and the rest of our tables that were on the mass casino floor. Through the end of 2010 really backloaded to third and fourth quarter we’ll be opening a lot more of our restaurants including the rest for celebrity chef restaurants, we’ll be opening our two theaters and we’ll be opening our museum and we’ll have online our light and water show that will light up every evening Marina Bay for Singapore and our customers. And in the first quarter of 2011, we’ll finish out our two crystal pavilions which are out in the water which one will be Louis Vuitton’s biggest store globally as well as our crystal pavilion out in the water which will have Avalon and Pangaea, two high-end nightclub venues.
46:54 Adam Rosenberg: Okay. Let’s go back to the beginning for a second, at least your beginning with MBS. You came to project already under construction, a very massive project at that. At that time as you saw it what were the biggest challenges, how were they resolved and what challenges remained not just for your project but for the Singapore market as it moves through this opening process.
47:17 Tom Arasi: Well, of course, those of you that have built things you can look at it and take a good guess that it’s a pretty tough, pretty complicated construction job. One week out from our April 27th opening we were still having 16,000 construction workers a day on site. So the transportation and the people in logistics and all that with huge challenge, a lot of that heavy stuff is gone, they’re still some ongoing construction finishing that out while we’re also operating of course is never easy. From an operational perspective, the biggest challenge is hiring. We have a need for 8,500 team members by the end of 2010, we’ve got about 85% of them on board now, big challenge. By the way, those figures do not include the retail which is you’ve got another 3,000 or 4,000 meaning you’ve got about 11,000, 12,000 people a day will be showing up to work at Marina Bay Sands. Hiring, it was a challenge there because there are some very strict government quotas for the kind of talent that we need in our team members. In Singapore there is not a depth of available candidate pool in certain areas so there’s the delicate waltz of going beyond Singapore for certain types of jobs. And, of course, one of the biggest challenges is in, you know, hiring 3,600, 3,700 people for the casino operation dealers, cage, surveillance, et cetera where gaming did not exist so to a large degree you’re starting from scratch. Certainly at your entry-level there’s a certain amount of import from places like Macau and the Philippines, other parts of Southeast Asia and even Las Vegas have the supervisory level but not a lot. So I would say those were, you know, historical/ongoing challenges. I would say the biggest one to look from a completely different perspective is awareness and understanding. Again, modestly we think that were fairly unique in the world, getting people to understand, you know, people don’t wake up every day and naturally understand what an integrated resort is, if you ask five taxi drivers in Singapore you’ll get five different answers, most of them will start with casino and of course casino is stupendously important but it’s less than 3% of our total built-up space so everything else has to work too. Getting people to understand what it is that we offer and the breadth of these amenities and services and the fact that we’re trying to be world-class is a challenge, it’s an awareness and it’s an understanding challenge and I’m quite certain that people aren’t entirely clear about it Singapore, they’re probably not entirely clear about it in Malaysian, Indonesia and go out in the concentric circle. So there’s a big awareness and the understanding opportunity force that I think over time as we succeed will produce benefits.
50:29 Adam Rosenberg: Okay. Let’s talk about length of stay for a second but not in the context that most people usually discuss it which is in terms of how many people are coming to the facility, but in terms of the proximity to the facility of the people who are coming. I’ll tell you what I mean. When Las Vegas Sands entered Macau, the average length of stay was about a day and the challenge and the goal was to try and move that higher to about two times a day were it’s just about getting to now, I believe, at least certain periods of year. But the nature of the customer and how close they are is certainly relevant to how much time they’re spending, the flipside of that is what’s there, what’s there to keep them there once they arrive. So I guess my question for you is, how will the story of length of stay play out in Singapore given that it’s already relatively high and, on the other hand, the patrons are not as close to their destination here as they are, [00:51:32] here and there backwards because I’m thinking we’re in Singapore but they’re not as close to destination in Singapore as they are here in this market in Macau. So how do you think about length of stay as it relates to the proximity of the people that you’re trying to bring into your facility?
51:45 Tom Arasi: Well, you know, I checked before I got there and I was actually surprised how long both of them were, the Singapore tourism board’s website says that the average length of stay in Singapore is 3.8 days that sounds pretty darn good to me. Since we’ve opened which has been a grand total of about six weeks, our average length of stay is 4.5 days which I’m pretty pleased about considering the fact that a lot of our signature amenities aren’t yet open, those are both pretty long. You know, the average length of stay ultimately is going to be influenced by what’s the purpose of the person’s trip, how far away they are and how attractive is it for them to decide to stay as opposed to return home or go somewhere else. We think we have the arrows and are [00:52:32] to influence factor one and factor three, the purpose as well as the attractiveness to stay. As Jonathan was saying, there is, you know, of course there’s a great deal of shopping, there are actually a lot more things that you can do within Singapore than you might suspect. There is a little bit of a perception deficiency on the other things to do in Singapore. We think we’re really going to add to that, we think Resorts World is going to add to that by offering more theater, things like the Lion King a terrific museum by offering the casino. We have an art path with our $50 million of art that we’ve installed. When you add all these things up we think we’re going to be in a position to influence factors one and three. In particular over time, you know, as we get more MICE business, some of these big, big ones not only are longer stay but they have a big check in process we’re going to be hosting at least the communication center of the youth Olympics in Singapore, you know, which is the press and everything else, we’re not the guest room host facility but we’re for the communications and the epicenter of it. That’s in August. We had our first check-ins last week for people coming in to prep. So if we get several of those kinds of things a year we could really be in business. Again the leisure customers I mentioned having this variety of things to do and again I think that the complementary nature and creation of Resorts World with us I think can really move the needle with Singapore.
54:06 Adam Rosenberg: Terrific. Well, the next movement is away from what it is to how it works or more operations overview from Ben’s perspective. But before we do that again, I’ll offer the opportunity for questions of Tom and Tom’s topic or any comments from the panel before we move on. Yes, sir? Wait one second I think there’s a microphone coming your way. Thank you.
54:36 Male 1: Oh, thanks. You referred to the architectural jewel box, I’d like to understand a bit about your financial jewel box which is the casino. What kind of play are you currently getting in terms of mass sources and premium and how do you expect that to evolve over the next two or three years?
54:59 Tom Arasi: I’m not going to specific figures or anything like that which probably wouldn’t stun you but we’re starting out with a pretty good balance between mass and VIP. It’s early on, it’s playing out that it’s most intense from, you know, Singapore, Malaysia and Indonesia, the immediately surrounding countries. The possibility that we would pull from, you know, places that you go out in concentric circles, if you will, places like Thailand, Vietnam, Cambodia, parts of China, you know, it looks like it’s going to be on the radar screen and it’s going to work out well over time. And I would suspect over time that we’re going to look to be pretty balanced again between those two segments, you know, we’re going more in the direct VIP model as opposed to, you know, Singapore at this point is not full of a lot of independent wrapper junket business, whether it does or doesn’t, you know, only time will tell. So what we’re doing is we’ve got a great opportunity in the direct of the VIP model. But, of course, it takes a little bit more time to build that business because it’s a direct sell, it’s very heavily connected to the extension of credit and getting that kind of mechanism in operation going. So it’s something that we think we’ll build over time, we’re off to a good start.
56:37 Adam Rosenberg: Great. Thank You.
56:39 Male 2: Can I have just a small follow-up? So competitively, how do you position yourself against Genting as far as the high-end is concerned?
56:46 Tom Arasi: I’m sorry, could you say that again?
56:47 Male 2: I said competitively how would you position yourself against Genting as far as the high-end is concerned because in the press we read all kinds of stories and we don’t know which one to believe.
56:55 Adam Rosenberg: How are you positioning yourself against Genting with respect to the high-end business?
57:02 Tom Arasi: Well, you know, we’re really just focusing on getting the clients that we think we can get in the track, I don’t know that we’re really juxtaposing ourselves in terms of a specific strategy. We have very different products in terms of what we offer, that’s the customer’s decision. You know, Genting is a very strong, very knowledgeable, very capable operator in this part of the world, they’ve been doing it for 40 years. They’re going to do just fine, we think we’re going to do just fine as well. We do enjoy this duopoly situation and unlike Jonathan I don’t think it would be interesting in several years from now to have a robust conversation about other casinos, well, maybe it would be, maybe the critical mass helps but it’s not personal. So the most important thing is for the market to be there for there to be, you know, a well-sized market and if we both get a decent share it’s going to be good for both of us.
58:08 Adam Rosenberg: Okay. Thank you. Ben, let’s turn to you and talk about how it all works with a little bit of an operation’s focus.
58:17 Male 3: Just one question. I would just like to comment a little bit on the government levy, the casino levy on the locals. Sorry, this is a bit operational. I understand that the local market forms about 50% of the patronage of the casinos both at the Resorts World as well as MBS. Given this scenario with the casinos then we think it’s a strategy to focus a little bit more on the locals. Thanks
58:46 Adam Rosenberg: I think the heart of the question is given that the local customers proven to be very important part of customer base, what does that mean for your strategy?
58:55 Tom Arasi: Yeah. First of all, I think you said that it was about half-and-half between local and foreigners. For us it’s not quite been that much, we have less than half of our business coming from Singaporeans which we think is a very big opportunity for us. We think both markets are going to grow, we’re very encouraged at the level of foreigner play and as we really dial up some of our local programs and some of our more mass-market initiatives we think the best is going to come up and balance out as well. I can’t really speak for what Resorts World is doing.
59:33 Adam Rosenberg: Okay. We’ll have more opportunity for questions at the end. So if you don’t mind let’s move on so we can give the other panelists their due share of the timeslot as well. Ben, let’s talk about operations a little bit. As customer experience is at the heart of what makes the gaming industry successful or not, what are some early lessons from your perspective that have been learned so far in Singapore about customer service and the integrated resorts, what’s been working right and what still needs some work?
1:00:01 Ben Lee: Okay. I’ll quickly relay my own personal experience in visiting the Resorts World in Sentosa. I went in by monorail, got off the station, tried to find my way to the casino and there were signs pointing this way to the casino, that way to the casino, that way to the casino. After two wrong turns and [01:00:19] two wrong turns, we finally found that the way to casino was downstairs. So the signage wasn’t too good and once we got in it was an interesting scene, it was surely — it was during a [01:00:33] period, but on the fourth or fifth day so after the initial rush has died down. The tables were busy but not all the tables were open so that’s the second issue. Third issue in terms of pure customer service, I saw that there were no — very, very few waitresses, service people going around serving customers at the table. What they had was open tresses like this along one side of the casino wall with boxes, cartons of bottles of water on the table but most of the cartons were empty. Customers were going ripping through the cartons trying to find bottles of water and they couldn’t find them. So, you know, that’s issue number three. There was very, very little service. Now, you can go back a little bit and look at the background of Singapore. Singapore for those of you who are familiar with Singapore culture, they call it the Kiasu culture. It’s a Fujian dialect which literally translates to fear of losing or losing out or, you know, losing face. And when the Resorts World opened with a level of service that I would compare to — they are home based, Genting Malaysia where, you know, [01:01:50] customer service not really necessary because, you know, we’re the only one in the market. So, you know, you relocate service [01:02:01] from Malaysia to Singapore and you have a dichotomy you never get in terms of expectation and actual delivery. Then you have the problems with the theme rides as well since then I believe one of the main rides Battlestar Gallactica hasn’t opened. Now fast forward it to MBS, you know, they had their teething problems as well in the early opening. It’s not what the Singapore population expects, it’s not what they used to, the Singapore government is probably one of the most efficient in this region if not in the world, they’re very, very aggressive. I’ve met a lot of the engineers when they do a project, when they do something, it’s finished on time, everything looks very well. You just got to look at the airport, you know, the Changi Airport. So in terms of the experience that I think both IRs delivered to the market and what the market expected, there’s a little bit of a gap but that can be fixed over time as the management get down to, you know, fixing the nitty-gritty. The actual gaming experience, a few of my sources are here, there was some teething glitches which I must admit I’m very surprised at because, you know, given the delays on both projects, they had plenty of time to train their operational people, their dealers. Yet, I still hear reports of very slow rates in terms of hands per hour on the tables. I still hear of, you know, some tables not being open even during peak hours. So to me that’s unforgivable, again given the amount of money that’s been invested, the planning that’s gone on, the amount of time they had to prepare and that yet we saw some of that. So, you know, in terms of the gaming experience I think there’s still a little bit of work left for them to achieve the peak efficiency that’s required.
1:04:00 Adam Rosenberg: So some growing pains for sure.
1:04:01 Ben Lee: That’s right.
1:04:02 Adam Rosenberg: You mentioned the theme park rides, talk a little bit about theme parks in Asia as an idea. Is that something that works in this market, if so what markets are conducive to where it works versus not working?
1:04:17 Ben Lee: I think it’s a comment to me earlier. Theme parks have not such a great history in Asia. Several factors, you know, you could see a lot of them in China, you see a lot of them in other countries, it’s a matter of the intention is there but the follow through is not there in terms of maintenance, customer service experience without expounding on that. But the one thing that, you know, maybe has not been considered is the weather itself. The Singaporeans, Malaysians, the Southeast Asians they love to go to, you know, Disney World in Florida, Disneyland in Anaheim or the theme parks in the Gold Coast of Australia. But you look at those regions and you look at the weather they have beautiful temperate weather where it’s conducive to walking around outside. Now, you bring that back to the target market. If we look specifically at the gaming market, the target market is, to be blunt, ethnic Chinese, you look around Asia or on Asia, every country you look at the ethnic group that controls the wealth in each country in Southeast Asia are the ethnic Chinese. Who do you see walking out with umbrellas in hot sun? You don’t see that in the western environment but you see a lot in Asia. They don’t like the sun, they don’t like the heat, you don’t see them hang out in beaches. You get small groups but by and large the stereotype holds. They don’t like the sun. One of the things I noticed about the Resorts World is that they’ve made quite good use of [01:06:02] sale cloth, that sort of thing. [01:06:05] will their customer still go there because even though the [01:06:08] is not 100% on the shape and you still have a very hot humid weather. The markets that I think will be the natural target market for Singapore and as Tom mentioned the Indonesians I think will be very big as a neighboring country. India very much so as well and to a great extent the people from these countries are not adverse to a little bit of sunlight exposure.
1:06:38 Adam Rosenberg: Okay. Let’s move on to the heart of the casino operations. This points to the gentleman’s question earlier specifically the VIP and junkets. Now, you’ve operated across many different markets with different models for the treatment of junkets. Just yesterday there was some press about how certain Macau junket operators may be looking for ways to get around or help form what happens in Singapore as that market is just beginning to develop its own policy on junkets. What is the Singapore policy on junkets and how do you expect that to change as that market continues to evolve?
1:07:14 Ben Lee: I think either Jonathan or Tom mentioned earlier that, you know, the whole business model for the IRs in Singapore is no gaming, it’s tourism. So to that effect the CRA of Singapore has introduced very, very stringent guidelines on the licensing of junkets and to my knowledge, Jonathan correct me, not a single license has been issued? Is that true?
1:07:39 Jonathan Galaviz: I don’t know the answer to that question at this specific point but I know that it’s a very, very strict regulation to the point that many junkets in Asia are having difficulty even considering approaching the process.
1:07:52 Adam Rosenberg: Okay. Thank you. So one thing you’ve got to give to the Chinese particularly [01:07:56], where there’s a will, there’s a way whether there’s a roadblock, they will find a way around it. I mean, look at Macau when one Guangdong introduced visa restrictions for individual travellers. They came in groups. Now, when the men in China prevented the army generals from leaving the country to game in the Philippines, they brought in form betting. So in Singapore what I’ve heard and what I believe is that although not a single junket license has been issued and I’m happy to be corrected on that, the junket operators are already operating in Singapore through a couple of ways. And it comes down to identification of the player and under the premium player programs that both Resorts World and Marina Bay has, they have a premium player program whereby a person comes forward, he is the identified player, the operator will identify that person to CRA. However, that person could be a junket, start a junket runner or the junket operates himself and so many heard anecdotal information that some of our more extreme junket operators in Macau have been to Singapore and so they go down. So in terms of drawing down on the chips so they either come in with cash themselves and they fill all the necessary forms or they have credit markets issued to them via say Genting or via operations here Macau and they draw down on that market and they would collect the gender chips, the NN chips, but they in turn would distribute that to their friends to play with. Now, insofar as I know and I’ve looked at the CRA regulation there is nothing prohibiting an identified player from passing his chips to his friends to play with. I believe, I was talking to several people that the CRA has been aware of it since the beginning, since Resorts World started operating. Certainly, this has occurred since Resorts World opened. They are aware of it but it’s my belief that they’re holding off coming up with the response until both projects have settled down and then they will in turn come up with their formulation now. The Singapore government you’ve got to believe does not operate a lot like Macau. They don’t like vagueness, they don’t like the vacuum. You have to believe that they will formulate a response. So what is going to happen after that, I don’t know. It’s anybody’s guess.
1:10:37 Adam Rosenberg: Okay. Okay. I’ll ask you one more question and I do want to make sure we have enough time for Gary as well. On the topic of the local Singaporeans being permitted to gamble within the IRs that is a relatively unique phenomenon around Asian jurisdictions. Why is that, what is the concern that some countries have around letting their own local customers game.
1:10:58 Ben Lee: The Singapore motto I agree is unique and it’s a great model. Countries like Korea where I’ve been to a lot they have very similar concerns in that the fear that if they would open the doors to the locals there would be a huge incident, huge rise in terms of problem gambling. And in Korea for instance they have only one casino that is open to the public and you’re not [01:11:23] it’s three and a half hours out of Seoul, it’s a long drive, three and a half hours one way and you get there and it’s 3D on a weekday afternoon, it’s 3D. That little casino with just a hotel amenity has an EBITDA of $400 million a year. Now, the local population in Korea and the government certainly heeds the will of the local population, is that if they were to open the other 16 casinos in Korea to the local population, problem gambling would be huge. And certainly there have been quite a few instances of suicides and, you know, marital problems, family breakups because of that one casino in Korea. So the Singapore government for a long time has not permitted gambling nor did they recognize the deaths associated with gambling. So for them to I suppose pave the way for the IRs to be acceptable to the local population they came by with this compromise and it’s a great one and it’s one that I’m trying to sell to my Korean clients as well in that, look you’ve got the concerns of foreign investors, they certainly don’t want to come to market, invest billions of dollars and not have the bread and butter. Alright. They need the grind market in terms of just buy the investment. For the local government, well, look, you know, we’ll come to a compromise, we will let the locals play but we will restrict them. So, you know, it satisfied both sides of the party and as I said, you know, I’ve been trying to get that concept accepted by the Korean bodies.
1:13:05 Adam Rosenberg: Very interesting. Gary, let’s turn to you and thank you for being so patient, you’re last but certainly not least. You’re a market watcher so let’s start a big picture. How are the new IRs doing versus your expectations and the market’s expectations and we look at the addressable market for the Singapore IRs where will the customers come from and what do you see changing in terms of the offerings and amenities at the IRs?
1:13:33 Gary Pinge: Well, from [01:13:34] the performance that the integrated resorts have delivered at a very early stage definitely surpassed our expectations. Initially we were looking for a market size about 2.6 billion U.S. It looks like the market, you know, based on the anecdotal evidence that we’re getting is probably going to be in the order of about 3 billion U.S. and certainly if you take some of the comments that were made by the chairman of Las Vegas Sands a couple of days ago at a conference in the U.S., you know, I think it could be as high as 3.5 to 4 billion U.S. So, you know, I think where people struggled with the Singapore market was to understand exactly what the addressable market was and what the gaming spent could be. If you do some simple regression analysis with just some of the stuff that we’ve done looking at GDP per capita versus gaming revenue per capita across range of jurisdictions, you know, about 3.5 to 4 billion should be where it comes to. And that would be at its early stages, right, because as Tom has been saying and Jonathan has been saying it’s going to take time for the Singaporean product to penetrate the broader Asian, you know, tourism community if you want to call it that. So, you know, I think if this market delivers anywhere around 3.5 billion in its initial stages it will be a phenomenal performance and certainly it will surpass the expectations of the market generally.
1:14:52 Adam Rosenberg: And what about on the customers side, where are the customers coming from as you see it and how will that change as that IRs come online.
1:14:59 Gary Pinge: Yeah, I think again and this is extending on what Jonathan was saying and adding on to it, I think that the Singaporean government has been very deliberate. You’ve got two products in the market that are very different and positioned very differently. You’ve got one which, you know, you could argue its position towards the family-type tourist, you’ve got a theme park there, another one is very much focused towards work/leisure-focused tourist. And so I think each of these guys are not going to cannibalize each other and will in fact grow the market. In its initial stages I think looking at Southeast Asia and certainly the local Singaporean market is where you’ll see a lot of chunk of the play come. Over a longer term basis I think that the lower tax rate gives the IRs significant ammunition to extend credit and to drag players from further away, you know, specifically places like Japan, Korea, even China, and I think that would be a longer term goal for them. And again if you look at — I think the Singaporean government will give them or will give the IRs the right level of infrastructure to kind of build elements, phases. And so for instance if I’m not wrong, Tom, I think Marina Bay signed a strategic partnership with Singapore airlines for instance, you know, very late last year I think it was. And that’s the kind of stuff, right, it’s trying to push that product deeper and deeper into Asia and trying to increase the reason for people to come to Singapore not just for MICE facilities but in fact turn it into a destination type as well.
1:16:29 Adam Rosenberg: One of the ways Singapore is unique is that the two operators in that market have existing operations in markets that are also in Asia. How do you expect or to what extent do you expect the Singapore IRs will cannibalize each operator’s existing operations from Malaysia for the Genting Sentosa project or for Macau from Marina Bay Sands?
1:16:50 Gary Pinge: Yeah, I think this is kind of being a key point of discussion in most analyst community. I mean, my sense generally is that I think that Sands China will be able to use its property to in fact drag more market share to itself over here in Macau. And I think having that kind of regional perspective or regional differentiation allows them to leverage that in Macau quite successfully. You know, more broadly speaking I think the risk of cannibalization specifically between Sands China and Marina Bay or within Macau and Singapore I think is going to be pretty limited in its initial stages. I think VIPs tend to be mobile and I think you will see VIPs move between Macau and Singapore but I think mass market which is certainly a growing proportion of Macau’s business will stay pretty much within Macau and that’s kind of how I see the market.
1:17:46 Adam Rosenberg: Okay. You talked about the relative size of the market in terms of gross revenue both in terms of your expectations and originally where you think it will go now. Talk about a split between gaming and non-gaming. How do you see that today and how do you see that changing as the facilities come online versus a market, for example, like this one, like Macau?
1:18:09 Gary Pinge: Yeah, so, you know, in a market like Macau you basically got 95% of revenues and 90% of revenues they’re generated from gaming facilities and very little that comes from non-gaming, you know, take that to the other extreme you’ve got a market like Vegas for instance where you’ve got 60/40 split, you’ve got 40% gaming, 60% non-gaming or thereabouts. I think Singapore will probably fall in the middle of that somewhere. I think the casino product will be very important and will definitely be a high-yielding product but, you know, I think the non-gaming facilities will be substantially important for them particularly the retail precinct. I mean, some of the experience that I’ve had over here covering Macau for four and a half years is the fact that most of the consumers that come into the Macanese market or into the Macau gaming market haven’t been exposed to the type of retail outlets that are over here and in fact don’t know that they can get a Samsonite bag if they walk into Macau. Whereas the type of customer you get going to Singapore will be a far more refined customer who will have part of his tourism wallet allocated towards retail spend, towards entertainment. And so I think that that would be a larger proportion of their spend relative to Macau. And I think that LVS and Genting have done the right thing in terms of investing in those products as well because unlike Macau I think that there will be significantly high-yielding products, you know, which hasn’t been experienced in Macau over here.
1:19:32 Adam Rosenberg: Okay. One last question for you, Gary. There’s been a lot of talk about the size of the investments being made in Singapore and they are truly massive these are some of the largest most expensive projects in the world. From the investor’s perspective how big is too big and how do you think about in returns in the context of the Singapore IRs?
1:19:52 Gary Pinge: I think investors generally look at, you know, the return on investment that you make, right? So no investment is too big as long as you can justify the returns that you’re going to make on it. I think if LVS is right in terms of some of its internal projections that it’s seeing in internal performance at this stage, I think they originally went out to the market with an EBITDA expectation of somewhere between $800 million to $1 billion. I mean, certainly at $800 million you would probably be making about 20% return or roughly in terms of the investment that you made and I think that’s kind of where, you know, where the market would be pretty happy with the project and with the product. If you start seeing returns kind of drifting below 15% these investments do start to get a little bit more cagey. So I think that’s kind of something to bear in mind in terms of the fact that I think that you focus on the returns that you’re from the investment rather than the absolute dollar amount that’s being spent on these properties.
1:20:47 Adam Rosenberg: Okay. We have run a little bit long on time and there had been a few questions from the audience but perhaps we have time for just a few and then we’ll go into the next session. Yes, sir?
1:20:58 Muhammad Cohen: Hi. Muhammad Cohen from Macau Business Asia Times. I want to repeat a question that Adam asked to the panel and ask Jonathan. How are you going to measure what the IR’s impact on tourism in Singapore? How is it measurable? What are the metrics we can look for to see this, this is really because of the IRs versus because of the organic growth of tourism in Asia so we can measure the IR’s contribution.
1:21:29 Jonathan Galaviz: Okay. Well, there’s a science to it, there’s an empirical approach to it but it’s not going to be exact. Basically, the government did a good job in coordination with the Singapore tourism board and also the bidders actually when they first bid on the project through the RFP process, basically did a lot of research. All of them hired research firms to understand the current mix of visitors to Singapore and what was driving their visitation from a tourism perspective. And so there was a baseline of research done before the integrated resorts and continued to be done. I’m not sure [01:22:11] but I think there was some pretty robust baseline research done both from the private sector and from the government and that’s a combination of surveys of tourists, what they’re going there for, what’s driving the tourism visit. And of course after the integrated resorts opened up especially when they opened up 100% I would expect there to be a new round of research to find out the incremental increase and the impact that integrated resorts have had in the visibility of Singapore as it relates to its attractiveness, as it relates to its overall presence in the mind of tourists in Asia. And so there will definitely be, if not already consummated a new round of research that will be done as far as surveying visitors to Singapore and understanding the baseline increase. It’s not going to be exact but certainly going to give a pretty good representation as the impact on Singapore’s integrated resorts. I think the tourism numbers are going to be really important and while you may not be able to attribute all of the growth the future tourism in Singapore to the integrated resorts from a qualitative non-empirical perspective it will definitely be the case if the integrated resorts drive significant tourism. And actually the latest round of tourism statistics that have come out of Singapore in the last couple of months have already showed significant percentage year-over-year increases that are almost off the charts so to speak as far as annual percentage gains and I’ll attribute that quite almost one-to-one correlation to the integrated resorts opening during the Chinese new year period and in a little bit after.
1:23:49 Male 3: Just a quick one, Jonathan. If I could ask, I mean, if you look at Hong Kong, Cathay Pacific they have flights, they have passenger load increase over the same consumption, but could you attribute that to the recovery of the global economy?
1:24:05 Jonathan Galaviz: I think, you know, Asia over the last couple of years has been pretty good from a macroeconomic perspective so I think that, you know, there is some dynamics as it relates to the overall Asian economic situation which is generally positive compared to say Europe and United States so there is some benefit for that. But if you look at — tourism visitation increases in all of Asia, it actually increases so if you look at Korea, mainland China, even Japan, Vietnam, they’ve all had increases in tourism visitation. Singapore’s has been even greater than those so there has been some reason for that incremental increase up and above what other countries in Asia have actually experienced.
1:24:46 Adam Rosenberg: That’s a dense point, you really need to go through a complete cycle so you can normalize for the impact of the cycle. But I think the answer is, you know, we’ll have to wait for the data so that we can be a little bit more precise about it but it will never be a perfect numerical measure. We have time for one more question. Yes, sir?
1:25:06 Male 4: So a quick question for Tom. How does MBS propose to distinguish its high-end retail in Singapore from the existing high-end retail base?
1:25:21 Tom Arasi: You know, it’s a good question and I would say that it’s in a few things. Number one, there is a broader experience to be had coming to us, you know, I can’t start out and say, you know, that we have completely different brands that are already existing in Singapore that’s not the case. We have a pretty decent number of new brands or ones that just aren’t everywhere. But the reality is we have brands that are in more than one location already in Singapore. I think without exception we’re going to have the nicest and the best and the most impactful on all them. You know, Louis Vuitton, for example, you come into our B1 level retail, it’s the beginning of their showroom, you go down the grand staircases even more and then you go through an underwater tunnel into the 20,000 square foot crystal pavilion which I think is going to be there global showplace. You can pull up boats, you can sit outside and eat, they’re calling it a life experience beyond even what they’re doing in their established retail practices. We have a lot of great two-story spaces, you know, Chanel, Prada, Hermes and others, so that’s one. Number two, you can walk around in again what we think is the best collection of retail in Singapore in air-conditioned space. Not only is it air-conditioned space but it’s, you know, soaring 80 feet, 100 feet tall barrel glass roofs again in air condition space looking out on the water and it’s very, very interactive with the 50 different restaurants, the casino. So it’s really an entire environment that’s coming in there. So I would say that it is going to be very pedestrian friendly, it’s going to be dramatic one-of-a-kind type of space and the retailers are doing showplaces almost without exception, plus a bunch of new and relatively new and more interesting and less prevalent brands that will be there.
1:27:35 Adam Rosenberg: Excellent. Well, if you’ve seen me conduct these panels before, you know, I always finish with one unscripted question. So this is my chance to put them on the spot, this will be very short and I’ve been looking for a number or a range of numbers and the question is in the year 2012 how much total gaming revenue will the Singapore market achieve between the two integrated resorts. Gary, we’ll start with you because I think you hinted at this number when you spoke earlier.
1:28:01 Gary Pinge: Yeah, I mean, I think you should probably be looking at a number of that, $4 to $4.5 billion, that’s probably where I think it will sit.
1:28:08 Adam Rosenberg: Ben, you care to guess?
1:28:09 Ben Lee: Three.
1:28:10 Adam Rosenberg: Three. Jonathan?
1:28:13 Jonathan Galaviz: I’m conservative by nature so I always fly at the back of airplanes as well, so I’d say, you know, I’m more on the $2.5 billion range, U.S. dollar figure.
1:28:27 Adam Rosenberg: Tom?
1:28:28 Tom Arasi: They are far more learned people to my right, I’ll let their numbers stand.
1:28:32 Adam Rosenberg: Fair enough. Okay. Please join me in thanking this panel for their time and their insights.