Marina Bay Sands is the World’s Most Profitable Casino
Singapore’s Marina Bay Sands was named the world’s most profitable casino recently, but Motley Fool’s Travis Hoium predicted the Las Vegas Sands casino’s best days might be behind it. Hoium claimed business is starting to slow down at Marina Bay, which opened in 2010 and cost $8 billion to develop.
Las Vegas Sands derives a third of its earnings ($1.5b) before interest, tax, depreciation and amortization (EBITDA) from Marina Bay Sands. That might be a bad sign for LVS, because Marina Bay’s EBITDA has stagnated in recent years — and even regressed in some cases.
The reason is increased competition in the Asian casino market. Cambodia is now home to nearly 150 casinos. While most are still relatively small operations, one city on the coast of the Southeast Asian country is now known as the Cambodian Macau.
Vietnam liberalized its casino industry and is in the midst of a resort-building boom. Casinos have appeared on the border between India and Nepal. China is considering opening Hainan Island to casino gaming. Meanwhile, the Philippines continues to build new casinos and Japan is on the brink of approving threat mega-resorts.
Marina Bay Sands Tops in 2018
With growing competition, it is hard to see Marina Bay Sands continuing to grow. Much of the astounding profits from Singapore’s two casinos — Resorts World Sentosa and Marina Bay Sands — came from the relative lack of competition.
Travis Hoium of The Fool wrote, “In every quarter in 2018 we see VIP play on the decline, and in three of four quarters mass market play fell versus a year ago. The drop in play isn’t reflected in the EBITDA numbers…because 2018 has been an unusually lucky year for Marina Bay Sands.”
“The first quarter in particular saw the casino win almost 50 percent more than normal luck would expect. Without that lucky quarter, results would likely show a decline in EBITDA shaping up.”
2020’s Less Promising for Marina Bay
In short, 2018 is unlikely to be reproduced. The Fool pointed out that VIP numbers are going down throughout the region. As China’s economy slows, Chinese high rollers appear to be spending less on their gaming excursions. VIPs continue to visit Asian, Oceanian, and Australian casinos, but they simply do not splurge like they once did.
China’s economy is so large these days, its slowdown is likely to have a regional effect. Many of Asian economies — including Singapore’s — are so tied to Chinese prosperity that any major decline would have a ripple effect. Where once it was the United States which produced recessions for the world, the day might be approaching when China can produce the same.
Singapore: Two-Saloon Town
Marina Bay Sands is unlikely to have new competition in Singapore anytime soon. The sheer cost of building a rival is too much for most competitors. The $8 billion cost made Marina Bay Sands “one of the world’s most challenging construction projects and certainly the most expensive stand-alone integrated resort property ever built.”
When the casino opened, it had 500,000 visitors in the first six months alone. Hoium described LVS’s integrated resort as “likely the most profitable resort and casino in the history of the gaming industry.”
Only Genting Group, the owners of Resorts World Sentosa, could compete on such a grand scale.
Sheldon Adelson’s Cancer Battle
Las Vegas Sands is facing a serious issue of an entirely different nature: CEO Sheldon Adelson is battling non-Hodgkin Lymphoma. A cancer battle is never a good thing, but it is particularly problematic for a 85-year old who has shown signs of declining health in recent years.
Sheldon Adelson was supposed to give testimony during a Las Vegas lawsuit this week, but his lawyer said he could not attend due to lingering effects of cancer treatments. It led to a wave of speculation that Adelson had not handling duties for Las Vegas Sands in two-and-a-half months, which itself required a press release by LVS to contradict those rumors.
Some speculated Adelson’s ailments were played up for the Nevada judge, so the octogenarian did not have to testify in court. Those rumors were belied by the fact LVS issued a statement that its CEO and founder was well enough to handle day-to-day business. Those reports were further undermined when Las Vegas Sands came to a settlement with Richard Suen after 15 long years of court battles. Terms of the settlement were not released, but an SEC filing showed the deal was complete.