The chips are down: Local casinos struggle as foreign gamers vanish

The strong SGD is driving Asian tourists away.

Are Singapore’s glitzy casinos losing their glam? The local gaming segment is struggling with the recent decline in tourist arrivals, as gamers move away from the steadily stronger SGD.

According to a report by Macquarie Research, the strong SGD is driving away tourists from China, Indonesia, and Malaysia, who make up 40-45% of Singapore’s 15-16bn annual arrivals and are the key drivers of the SG VIP and mass market gaming segment.

The decline can also be blamed on the deteriorating macroeconomic environment in Southeast Asia in China.

“While the SGD has held up quite strongly against the USD over the years since the casinos opened, the SGD has gained particularly significantly against the MYR and IDR – 2 countries whose tourists make up 28% of SG’s total tourist arrivals and who we think are the key drivers of SG gaming’s mass market revenues,” noted the report.

The report also noted that Chinese tourist arrivals doubled in 3 years from 2010 to 2013 at a compound annual growth rate of 25%, which can be attributed to the opening of casinos in Singapore.

“However, in the first 7 months of 2014, Chinese tourist arrivals are down significantly by 29% YoY leading to decline in VIP volumes (-10% in 1H14). After three strong years (CAGR of 10%), tourist arrivals in Singapore are under pressure. YTD data suggests that tourist arrivals are down 3% YoY in the first seven months of 2014,” the report stated.