casino revenue potential study model by ramachandar siva

rws casino revenue potential study

ramachandar s i va for Deutsche Bank Research

25 april 2010

c a si n o

revenue

potential

cas ino

revenue

potential resorts worl d sentosa c as i no revenue potential c a s i n o revenue

c a si n o

revenue

potential

cas ino

revenue


c a si n o

revenue

potential

cas ino

revenue


c a si n o

revenue

potential

cas ino

revenue


c a si n o

revenue

potential

cas ino

revenue


c a si n o

revenue

potential

cas ino

revenue


Casino Revenue Potent i a l Study – Resor ts Wor ld Sentosa 25.04.2010

ICG School of Casino & Hospitality Management, 200, Turf Club Road #02-03/09, Singapore 287994

tel: (65) 64671890 fax: (65) 64698801 email: [email protected] www.icgtraining.com 1

CONTENT

Section Page 1. Purpose of Study 2 2. Execut ive Summary 3 3. Scope of Study 5

3.1 Overview of RWS casino operations 5 3.2 RWS casino visitor pattern 5 3.3 RWS casino revenue projection 5 3.4 RWS casino table games performance 6

4. Methodology 7 4.1 Estimated Theoretical win model 7 4.2 Setting House Edge % for the study 8 4.3 The Statistical approach 11

i. Casino Operations survey 12 ii. Casino visitor arrival survey 13 iii. Table Games live action survey 13 5. Findings 15

5.1 About RWS Casino Operations 15 5.1.1 General overview of casino 15 5.1.2 Operating hours and pattern 16 5.1.3 Types of Games 18 5.1.4 Physical table count 19 5.1.5 Electronic Gaming Tables & Slot Machines 20 5.1.6 RWS Common Room – operational capacity April 2010 22

5.2 RWS Casino visitor arrival study 24 5.2.1 Casino visitor arrival projection 24 5.2.2 Daily pattern of visitor arrival 26

5.3 RWS casino revenue projection – common gaming 27 5.3.1 Monthly and Annualised statistical theoretical win 27 5.3.2 Revenue contribution by game sector 27 5.3.3 Considerations for projection of annualized casino revenue 28

5.4 RWS Game Performance Study 30 5.4.1 Game efficiency 30 5.4.2 Game Handle ( Turnover ) 32 5.4.3 Game margins and profitability 34

6. Conclusion and Discussion 36 6.1 RWS Casino Operations Review 36 6.2 Casino Visitors 37 6.3 Revenue Performance 38 6.4 Study Limitations 41

7. Suggest ions to enhance the TW Project ion Model 42

End Notes 45

Appendix 1a Gaming Capacity – Game Distribution

Appendix 1b Gaming Capacity – Table Spread

Appendix 2 Casino Visitor Analysis

Appendix 3a RWS Statistical Revenue Projection

Appendix 3b RWS Revenue Projection 2010 & 2Q10-1Q11

Appendix 4 RWS Key Revenue Performance Indicators

Appendix 5 Visitor Survey Plan

Appendix 6 Table games live action survey plan




1. Purpose of Study

Resorts World Sentosa casino, (RWS), opened on the 14th February 2010. In the two months

since, the success and revenue potential of the casino has been open to speculations, as

gaming statistics are not publicly available yet.

The purpose of this study is to project the estimated revenue potential of casino gaming

operations at Resorts World Sentosa (RWS) for the first year of operations. A survey of the

casino operations is undertaken to gather information required to estimate the key performance

indicators, which will be used to tabulate and provide revenue projections. This will form the

basis to evaluate the casino’s revenue potential. This paper includes a preliminary study to

define operational capacity and visitor arrivals to provide a broader perspective of the RWS

casino operations at its infancy.




2. Executive Summary

The Casino Revenue Potential study of Resorts World Sentosa casino was completed in the month of April

2010, approximately 2 months after its opening. Floor survey and live games data collection was

conducted between the 5th and 10th of April. This study is restricted to RWS’s mass gaming operations,

where public access allowed the survey to be conducted. Findings and projections of revenue are solely

reflecting the common gaming capacity of RWS. The following are summary of findings.

1. Overview of RWS casino

The RWS casino offers approximately 365 gaming tables and 1200 gaming machines. The varieties of

games offered are similar to Genting. All the table games and electronic table games in operation are

well received. Study confirms that RWS is running at less than 50% of its full operational capacity in

common gaming division. The lowest table opening count was observed at 69 tables and 197 at the

highest. Observations suggest that demand exceeds supply of gaming at RWS during peak and high-

peak periods. In general, the main games of Baccarat and Roulette are affected by operating hours

offered causing overcrowding and heavy chip action. Improvements to match supply to demand will

be a key concern for RWS over the next 3 months. Overall the casino operations and product is

deemed exceptional and world-class in presentation.

2. Casino Visitors

The study shows that the casino patronage is above average. Visitor rate is estimated at 22,000 for a

typical weekday and 42,000 on Saturday; which translate to approximately 780,000 per month and

10.1 million per annum of visitors. (Factoring of repeat entry of visitor (on survey day) probabilities for a

degree of correction in our analysis provides an estimate of 480,000 per month and 6.2 million per

annum.) These estimates are conservative, as it does not take into account growth of visitor arrivals

and positive fluctuations due to holiday periods. Apart from consideration of an adjustment expected

when Marina Bay Sands opens in late April 2010, it can be concluded that to date the RWS casino

operations in Singapore is successful in attracting both local (45% overall) and foreigners (55% overall).

3. Casino Revenue Projection

The statistical theoretical win projection model, which uses the estimate of handle, offers the best

approximation of revenue potential for an active casino. The propriety method developed for this study

is comprehensive as it takes into consideration a variety of operating factors that impact the handle.

The study concludes that the casino capable of generating a daily win of SGD $ 3 million and with an

annualized revenue potential of SGD $ 1.1 billion for the mass gaming division. Estimate is based on

statistical outcomes of the study for the month of April 2010. The projection does not take into

consideration future positive or negative factors that would impact the revenue of the casino.




4. Game Performance

The study of RWS’s game operations performance provides an insight to the efficiency and related

impact on its present revenue generating capacity. This is an extremely rare independent study of the

nuts and bolts of an active casino where the technical capabilities are examined. The propriety

methodology designed for this study focuses on establishing the statistical values of table games Key

Revenue-Performance Indicators that are crucial game efficiency descriptors.

The findings conclude that RWS casino is at approximately 40-45% of technical efficiency. The key

area of concern is the game pace of major games where overall the operations if at best about 40% of

commonly acceptable Games per Hour expectation. The main issue would be inadequate tables to

cater for players during peak and high peak periods. The game pace suffers due to overcrowding

which increases chip action, further compounded by dealers lacking experience. Other factors that

would require fine-tuning are the table limits, the offers of side bets and game procedures. The

revenue of Baccarat, Roulette and Tai Sai are the most affected by game pace. These games receive

above high-level wagers (Baccarat - $3800 per game and Roulette $2500 per game) thus the game

pace is crucial to increase the handle per hour by increasing the game pace. Tai Sai (wager per game

$3000) and 3 Pictures (wager per game $2100) are the 2 other games affected by the low win

extracting capability caused by low game pace.

Overall, it can be concluded that the RWS casino operation has pent-up potential in terms technical

revenue generating capabilities. Large increments in game efficiency are expected in the short-term as

the casino management fine tunes its operations. There is confidence to suggest that revenue

projections have an upside merely due to significant impact from game operation improvements.

This report provides detailed analysis and discussions on game performance of RWS casino.




3. Scope of Study

The following describes the scope of the study and report which is in 4 parts:

3.1 RWS casino operat ion patte rn study.

To define the operational parameters of the RWS casino.

Design and deploy a survey.

Organise information from the survey to present the following:

i. Description for the common gaming facility - floor separation and allocation of

gaming tables and machines by area.

ii. Casino operations demographic – statistics of game types and available tables

and gaming machines.

iii. Define the current operations capacity against the possible full operating capacity

in terms of total operation hours of gaming offered per day by game type.

iv. Define tables operating pattern employed by the casino to match fluctuating

demand throughout an operational day of 24 hours differentiated by weekday and

weekend pattern.

3.2 RWS casino visitor pattern study.

To estimate daily visitor volume for weekday and weekend.

Design and deploy a survey, data collection and analysis method.

To analyse data, tabulate and present estimates of:

i. Daily visitor arrival pattern for weekday and weekend.

ii. The variance between local and international visitors.

iii. Projection of weekly, monthly and annual visitors to the casino.

3.3 RWS casino revenue project ion.

To project the common gaming revenue generating capability of the RWS casino in

terms of theoretical win derived from estimated handle.

Design a statistical model to project RWS casino’s common gaming revenue.

Design and deploy a sampling and data collection method. Data collected from live

gaming activity include game pace (hands/hour), total wager per game, number of

players per game and table limits.




To analyse data, estimate the key variables and tabulate the following:

i. Total Operating hours for each periods (low-peak) of operation for each game type

by weekday, Friday, Saturday and Sunday.

ii. Order the data collected for games per hour, wager per game and players per

game by game type and calculate the average values for 6 low-peak periods within

24 hours for weekday, Friday, Saturday and Sunday.

iii. Use the averages for the variables of operating hours, hands per hour and wager

per game to tabulate the Theoretical Win for each game type for 6 periods of each

varying operational pattern days defined as Weekdays, Friday, Saturday and

Sunday.

iv. Complete projection of the casino’s common gaming total revenue capacity

(weekly, monthly and yearly) based on theoretical wins tabulated of each period of

the operational pattern days.

3.4 RWS casino table games performance study.

Provide a basis for Comparative Performance Analysis of table games

Isolate tabulated values into averages of all periods and days (weekly) and define the

following:

i. Games per hour comparison by game type – to describe efficiency.

ii. Average Wager (Handle) per hour by game type – to describe sales volume.

iii. Average Wager per player per game by game type – to describe purchasing power

or gambling intensity.

iv. Theoretical win per game by game type – to describe comparative revenue margin

between games.

v. Theoretical win per hour by game type – to describe profitability between games.




4. Methodology

4.1 Est imated Theoret ica l Win Model

The usual methods to project potential casino revenue are based on the application of detailed

“gravity models” that relate actual (and, for proposed facilities, potential) gaming-facility revenues

to the demographics of the areas surrounding them. These models are based upon a well-

established principle of economics known as “Reilly’s Law,” which describes how consumers

tend to visit alternative retail centers (roughly) in direction proportion to the size of each center

(such as casino square footage, or number of slot machines) and inversely proportional to the

square of the distance to each -- hence the parallel with Newton’s law of gravitation. This

method is usually used for studies undertaken before a decision to open the casino is made or if

there are plans to redevelop or add casinos to a locality.

In the case of an active casino, this study employs an unusual method of estimating the revenue

potential of the casino. A statistical model is designed to estimate the weekly handle (total

wagers) of the major table games. The total handle is a variable in the tabulation of Theoretical

Win. The following formula forms the basis of the statistical model used in this study:

Theoretical Win = Handle x House Edge %

where,

Handle = Average Wager per Game x Average Games/Hour x Total Operating Hour

Thus the statistical model requires measurement of the variables at live table games. Survey is

conducted on randomly selected live table games and data is collected for wager per game and

games per hour. Total tables opened throughout the day are tracked and recorded to tabulate

the Total Operating Hours for each game studied.

The table games surveyed are:

• Roulette ( RL)

• Baccarat (non-commission and commission) (BB or MB )

• Blackjack and Pontoon (not differentiated) (BJ and PO)

• Progressive Caribbean Stud Poker (CSP)

• Progressive Texas Hold ‘Em (TX)

• 3 Card Poker (CP)

• 3 Pictures (TP)

• Tai Sai (TS)




4.2 Sett ing the House Edge % for purpose of study

House Edge (HE%) is the mathematical advantage the casino has over players for each of its

games. Casino games are based on prediction of the outcome of a random event and wagering

on the success of the predicted outcome. Based on the success probability of an outcome, the

‘True Odds’ are defined. By setting the ‘Payout Odds’ lower than the ‘True Odds’, the casino

creates for itself a mathematical advantage for all the possible outcomes in a game of chance.

House Edge is a statistic value that has a corresponding parameter in all casino games. The

calculation and the stating of HE% for games can be as straight forward (as in Roulette) or

extremely complicated (as in Texas Hold ‘Em Poker). The variety of game rules and side bets

offered by casinos further create complications in establishing the Empirical House Edge (EHE).

In certain games with multiple betting options, the probabilities differ for each bet type thus a

game shall have varying house edge percentages. In such cases the industry uses Blended

House Edge (BHE) figures or settles for the house edge value of the most common or probable

wager or wagers, i.e. in Tai Sai, the commonly accepted practice is to use the HE% of Big or

Small bets which attract the bulk of wagers, as the various other bet options attract far lesser

bet volume relatively.

For the purpose of this study the House Edge % values described in Table 4.1 are used to

tabulate the theoretical win.




Table 4.1: House Edge % standards for RWS games in the study.

Game House Edge % Descript ion

Roulette 2.703% Empirical value for single zero roulette.

Baccarat 1.265% Blended house edge, based on resolved decisions (Tie not included) for game of eight-decks. Banker +1.17% Player +1.36% “These are known as the relative win rates” Aggregate House Edge = (1 .17+1.36)/2 = +1.265% The RWS Baccarat HE would also be affected by offer of side bets such as “Pair”, “Super Six’, “Insurance” and variation for No Commission games. The ‘‘Pair”(+10.7% HE) and ‘Super Six’, side bets increases the overall house edge to a certain degree but little evidence is available if the “Insurance” side bet improves or decreases the house edge. The No Commission Baccarat is quoted to have House Edge of +1.46%. These elements are left out of the HE% assumption for the purpose of the study.

Blackjack & Pontoon 1.10% Blackjack/Pontoon house edge is subject to number of decks, rules applied by the casino and player skill. RWS game rules and assumption that players use optimal strategy (basic strategy) will provide: Blackjack +0.513 % Pontoon +0.490% The HE on consideration of players using non-optimal strategy or no strategy which will give HE varying from +1% to +14%. Although a good estimate would be +3.00%, in this study HE of +1.10% mimics the standard HE adopted by major regional casinos.

continue …




Table 4.1 continued:

Game House Edge % Descript ion

Texas Hold’Em

Progressive

1.47% RWS Texas Hold ‘Em is the Progressive with Bonus Bet variety. Ante wins with straights or better. ‘Progressive Gaming’ the license holder states that the HE on Ante is +5.5935% or an average of +1.4743% per wager. (TX Hold ‘Em has multiple wagers per hand). ‘Bonus’ bet has a stand-alone house edge of +8.5406%. For the purpose of study the impact of ‘Bonus’ bet is not included.

3 Card Poker

Progressive

3.37% RWS 3 Card Poker is the No-Commission Pair Plus side bet with Progressive variety. Based on RWS pay tables, identified as TCP-07 version of Shuffle Master’s 3 Card Poker Progressive, the HE is +3.37%. The computation of the element of risk and progressive payout including the Envy Bonus is not included.

3 Pictures Non-

Commission

2.41% RWS version is a variation of 3 Card Baccarat of Macau. House Edge is based on player bet only. Wagering on Tie bet (HE=+20.8%) and Three Pictures (Dealer) side bet (HE=+83%) are relatively insignificant and not included for the purpose of this study.

Tai Sai 2.78% RWS version is similar to Sic-Bo. HE is based on even money pay-offs ( Big-Small, Even-Odd) only, as generally accepted.

Ramachandar Siva © 2010




4.3 The Stat ist ical Approach

The basic theory of casino games allows the prediction of potential revenue subject to availability

of key information such as game types, operating hours, game pace and value of wagers.

Theoretical Win can be calculated by estimating the handle for the various types of games.

A statistical revenue projection model is designed to tabulate the theoretical win based on

estimates of game Operating Hours (OHD), Game Pace (GPH) and Average Wager per Game

(AWG.)

Information gathered is used to define values for Key Revenue-Performance Indicators (KRI)

such as Games/Hour, Average Wager/Game, Theoretical Win/Game and Theoretical Win per

Hour for each game type offered by RWS. These values, once defined, will allow comparative

study to describe productivity and efficiency levels between the games.

KRI can be used as basis for performance comparison between two casinos.

Key Revenue Performance Indicators – definitions:

OHD - Operating Hours per Day, the total active duration of a gaming table in a 24-hour

casino day.

AWG - Average Wager per Game, the sum of wagers placed by punters in a valid

game.

GPH - Games per Hour, the total number of games conducted in one hour at a table

game. Generally known as the game pace.

PPG - Players per Game, the number of punters participating in a game by placing

wager.

WPP - Wager per Player, the average wager placed by a player for a game.

TWG – Theoretical Win per Game, the statistical theoretical win estimate for a game

conducted.

TWH – Theoretical Win per Hour, the statistical theoretical win estimate for every one

hour of games run.





The following describes stages of survey, data collection, tabulation and analysis method.

i . Casino Operat ions Survey

1. Survey is conducted for types of games offered by RWS in the common gaming

area.

2. Survey is conducted to count the number of table games, electronic game stations

and slot machines.

The operational areas of the casino are identified and allocation of tables

surveyed.

A count for physical tables available and actual tables in operations.

3. Survey is conducted to record table opening patterns.

Table opening pattern impacts the operating hours, a key component of the

revenue projection model.

A casino-day (24 hours) is divided into 6 periods that define the ‘low-peak’

operation system employed by casinos. Number of tables opened for each

period is recorded by game type, table limit and location (sub-section within the

common gaming area)). This captures the fluctuation of operational capacity to

match changing demand throughout the day.

A 7-day week operation is divided to Weekday and Weekend operating pattern.

Starting Friday evening (period 4, 2000-2400 hrs) the casino is expected to

increase its capacity for each day period running through Saturday and Sunday

evening. This is to cater for the weekend visitor demand caused by additional

arrivals and extended stay of players.

To capture the fluctuation of periodic table opening pattern, table count data is

collected on a Weekday day (Wednesday and Thursday) and a Weekend day

(Saturday). The pattern for Friday and Sunday are derived by estimating

demand and manpower capacity of the casino that dictate table opening. The

manpower capacity by shift is predicted from data and observation completed

on a Weekday and Saturday. Hence survey was not conducted on Friday and

Sunday.




i i . Casino Visitor Arrival Survey

1. Daily visitor study provides an estimate of demand and patterns of arrivals.

Periodical (monthly or quarterly) tracking will provide an indication of growth of

customer base and success of casino marketing. Visitors are classified as Local and

International. This allows an understanding of volume and visit patterns of

Singaporeans and foreigners.

2. Data is collected for Weekday (Wednesday/Thursday) and Weekend (Saturday) for

both Local and International visitor.

RWS has one entrance with separate entry points for locals and foreigners.

Visitor headcount for local and international is recorded for 15 minutes at

intervals of approximately 2 hours throughout the 24-hour day.

Weekday visitor count is assumed for Monday-Friday.

Weekend visitor count assumed for Saturday and Sunday.

To take into count the effect of repeat entry of visitors, weightage of 1/1.5

(Weekday) and 1/1.8 (Weekend) is factored for acceptable head count

estimate.

Refer Appendix 5 – Visitor Survey Plan

i i i . Table Games Live Act ion Survey

1. This survey provides the required information for projection of revenue and

analysis of table games performance factors.

2. Survey of casino floor completed for 1 Weekday and 1 Weekend.

An operational day of 24 hours is divided into 6 periods of 4 hours to reflect the

casino’s ‘low-peak’ table opening plan, which in turn matches the patronage

fluctuation between the low-peak periods.

A set of data is collected for the defined periods on a Weekday and Weekend.

In total 12 data sets representing all periods are recorded for all the games

selected for the study.

Sample size was set at 5% of the total tables for each game type or a minimum

of 2 tables. Sample tables are selected using simple method of selecting the

nth odd numbered table and the even numbered table next to it for each

observation.

Each observation is fixed at 15 minutes. All games falling (starting) within the

observation period are included in the data collection.




3. Data collected – Table limit, Estimated wager per game, Number of Players and

Number of games conducted.

4. The major games surveyed are Roulette, Baccarat, Blackjack and Pontoon. The

data collection and eventual classification assumes Blackjack and Pontoon as same

samples due to technical similarities.

5. Fun games included in the study are those deemed to have significant contribution

to bottom-line. These would be Tai Sai, Caribbean Stud Poker, 3 Pictures, 3 Card

Poker and Texas Hold ‘Em. From the set of games available at RWS, Craps, Mini

Dice, Pai Gow Tiles and Money Wheel are not included in the survey.

6. Experienced casino games supervisors were used to survey the tables. The average

related experience of a surveyor is 15 years. The accuracy of wagers per game

estimation depends much on the skills and experience of the surveyor.

Refer Appendix 6 – Table Games Live Action Survey Plan




5. Findings

5.1 About RWS Casino Operat ions.

5.1.1 General Overview of Casino

RWS casino is a Large Destination Casino (LDC) similar to the Genting Group’s flag-ship

casino in Genting Highlands, Malaysia. The approved casino floor space is 15,000 sq

metres.

The casino operates on 2 floors, the ground floor, which is the Common Gaming area

and the mezzanine floor where the Maxim’s Club and Crockford’s gaming rooms are

located. Maxim’s caters to RWS’s club players holding at least a Silver membership

card.

The clubrooms that cater to the medium and high value players are kept out of view and

have controlled access located within the main gaming floor.

The common gaming floor is subdivided to the Main Gaming Hall (non-smoking)

(COMNS), Singapore Citizen & Permanent Resident Room (COMSIN) and the Smoking

Section (COMS).

The exclusive Singaporean room has controlled access. Smoking is permitted in this

room and a small area is demarked as non-smoking section.

The casino has one entry point for all visitors. Entry is restricted to persons of 21 years

and above of age. Local visitors who are required to pay a levy of $100 a day use

dedicated entry and exit points. Foreign visitors are required to produce their passports

for verification when entering and exiting the casino.




5.1.2 Operat ing Hours and Pattern

The casino is open for 24 hours a day, 7 days a week.

Total tables and game types vary throughout a day of operations. The casino employs a

‘low-peak’ manning and operating system to match demands of patronage and

availability staff to man the tables.

For purpose of the study, considerations were given to track the increase and decrease

of table numbers for every period identified as per table 5.1.

Summary of Operation Pattern;

Lowest – Weekday, Periods 1 & 4 (less the 20% tables open)

Highest – Saturday, Periods 4, 5 & 6 (more than 50% tables open)

Chart 5.1 presents the operating capacity by period for typical weekday and weekend.

Table 5.1: RWS Operat ion Pattern – Low-Peak Per iods

Mon – Thursday (Typical Weekday)

08-1200 12-1600 16-2000 20-2400 00-0400 04-0800 Low Mid Mid Peak Peak Low

Friday 08-1200 12-1600 16-2000 20-2400 00-0400 04-0800

Low Mid Peak High-Peak Peak Mid-Low Saturday

08-10 10-1200 12-1600 16-2000 20-2400 00-0400 04-0800 Low-Mid Mid Peak High-Peak High-Peak High-Peak Mid-Low

Sunday 08-10 10-1200 12-1600 16-2000 20-2400 00-0400 04-0800

Low-Mid Peak High-Peak High-Peak Peak Mid Low Ramachandar Siva © 2010




Chart 5.1: Operat ing Capacity by Period – Weekday vs Weekend





5.1.3 Types of Games

The major games in the casino based on physical count are,

Baccarat (24%),

Roulette (21%),

Blackjack (8.5%) and

Pontoon (9.6%).

The Casino Regulatory Authority (CRA) website lists 19 variations of games approved for

RWS casino. There are six variations for Baccarat based on commission or non-

commission with or without Super Six or Insurance side bets.

For the purpose of study, table count for Baccarat specifies only commission or non-

commission count. For the estimation of revenue, the variations are not specified.

Craps is not included in the list of approved Game Rules by the (CRA). A physical Craps

table was seen in the common gaming area but not in operation.

Refer Table 5.2a for list of CRA approved games.

Refer Table 5.2b for breakdown of tables by game type as per survey.

Table 5.2a: Approved Game Type – RWS Common Gaming Sector (listed as approved game rules on CRA Website)

1 Blackjack (with Over and Under 13) 2 Caribbean Stud Poker 3 Casino War 4 Mini Dice 5 Money Wheel 6 Pai Gow 7 Pontoon 8 Progressive Texas Hold 'Em 9 Roulette 10 Tai Sai 11 Three Card Poker 12 Non-Commission Three Pictures 13 Poker 14 Commission Baccarat 15 Commission Baccarat with Insurance 16 Commission Baccarat with Super Six 17 Non-Commission Baccarat 18 Non-Commission Baccarat with Insurance 19 Non-Commission Baccarat with Super Six




5.1.4 Physical Tab le Count (Common Gaming)

The casino offers typical casino table games (as approved by CRA) that are popular in

the Asia-Pacific region.

In total 365 phys ical tables were found on the common gaming floor as of 2nd week

April 2010.

The tables are distributed across sections as following:

Main Hall (Non-smoking) 57 %

Singapore /PR Room 6%

Smoking Area 27%

Table 5.2b: Breakdown of Physical Table Count by Game Type (April 2010) (Baccarat games are clustered as Commission or Non-Commission only)

RWS Physical Table Sector GAME Sector Total % Roulette 76 20.8% Commission Baccarat 86 23.6% Non-Commission Baccarat 26 7.1% Blackjack 31 8.5% Pontoon 35 9.6% Caribbean Stud Poker 18 4.9% Progressive 3 Cards Poker 12 3.3% 3 Pictures 18 4.9% Progressive Texas Hold' Em 19 5.2% Pai Gow Tiles 10 2.7% Tai Sai 16 4.4% Mini Dice 6 1.6% Money Wheel 3 0.8% Casino War 8 2.2% Craps 1 0.3% Total Tables 365 100.0%




Chart 5.2: RWS Common Gaming Table Games – Distribution (April 2010)


5.1.5 Elect ronic Gaming Tables (EGT ) & Slot Machines

The casino also offers electronic betting station based games of Touch Bet Roulette

(168 stations) and Rapid Baccarat (152 stations).

It is to be noted that the electronic gaming tables (EGT) (for roulette and baccarat) are

approved under the Slots Machines licensing scheme. Each betting station is counted

as 1 machine.

As of April 2010, the casino has approximately 900 slot machines. Of the 900 machines

positioned in the common gaming area, approximately 280 machines were only

commissioned and opened for operation on the 11th of April 2010. The planned VIP Slot

Club room is yet to be opened.




Table 5.3: RWS Common Gaming – Table Games & Gaming Machines Distribution by floor sections (April 2010)

RWS Physical Table TOTAL Game Type

GAME TYPE MAIN HALL

SMOKING AREA

CITIZEN/PR ROOM

COMMON GAMING %

Roulette 47 22 7 76 20.82%

Baccarat 44 26 16 86 23.56%

Mini Baccarat (No Tax) 16 10 0 26 7.12%

Blackjack 20 8 3 31 8.49%

Pontoon 24 8 3 35 9.59%

Caribbean Stud Poker 10 4 4 18 4.93%

3 Card Poker 8 4 0 12 3.29%

3 Picture 8 4 6 18 4.93%

Texas Hold'Em 8 5 6 19 5.21%

Pai Gow 4 0 6 10 2.74%

Tai Sai 11 2 3 16 4.38%

Mini Dice 3 3 0 6 1.64%

Money Wheel 1 1 1 3 0.82%

Casino War 3 3 2 8 2.19%

Craps 1 0 0 1 0.27%

Total Tables 208 100 57 365 100.00%

Area Table % 57 % 27 % 16 %

Slot Machines 791 109 900 Rapid Roulette 66 102 168

Rapid Baccarat 60 60 32 152

Gaming Machines Total 1220 Ramachandar Siva © 2010




5.1.6 RWS Common Gaming - Operat iona l Capacity as of Apri l 2010

With 365 physical gaming tables accounted for as of 2nd week of April 2010, technically

the casino is able to offer 8,760 operat ing hours per day.

Operating Hours per table is defined as total hours a gaming table is technically open

and available for business operations. Based on the ‘low-peak’ operations system

described earlier, the casino does not open all its tables on full 24 hours.

For purpose of comparative study, the Full Capacity of the casino’s table games

operations is assumed as the 24 hours opening total of all physically available tables.

The survey of actual tables opened throughout various periods of operations shows that

the Common Gaming division is operating at average operating capacities of 34% on

Weekdays and 42 % on Weekends.

At the lowest operating period (weekday 0400-1200) 69 tables are opened or

approximately 19% of full capacity. The casino achieves highest weekday capacity of

168 tables or 46% at peak periods between 2000-0400 hours.

On weekend (Saturday), the lowest operation period offers 82 tables or 22% of

capacity, while the peak periods offer 197 tables or 54% capacity.

Table 5.4: Actual Act ive Tables – Weekday vs Weekend (Apri l 2010)


Overall observation shows demand far exceeding supply of gaming tables throughout

the mid, peak and high-peak periods. Almost all games are oversubscribed by 2-3

times in the peak and high-peak periods.

Fact-finding shows that RWS’s ability to increase its operational capacity is curtailed by

shortage of dealers.

RWS Tables Spread

Period 0800-1000 1200-1600 1600-2000 2000-2400 0000-0400 0400-0800 69 138 142 168 168 69 Weekday

19% 38% 39% 46% 46% 19%

82 171 181 185 197 114 Saturday

22% 47% 50% 51% 54% 31%




It can be further assumed that RWS may be holding back on employing additional staff

as the demand may see a drop when Marina Bay Sands opens late April. A wait-and

see-approach is likely, to observe changes in demand before committing to employ

additional dealers.

The manpower situation is expected to improve gradually over the next 3 months.

Table 5.5a: RWS Common Gaming –Weekday Actua l Table Spread vs Ful l Capac ity


Table 5.5b: RWS Common Gaming–Weekend Actua l Table Spread vs Ful l Capac ity


Physical Table Actual Actual Physical Physical

GAME TYPE Total 8-1000 12-1600 1600-2000 2000-2400 0000-0400 0400-0800 Ops Hours Sector Capacity Sector Actual vs

4 4 4 4 4 4 % Ops Hours % Capacity

Roulette 76 16 28 28 39 39 16 664 22.0% 1824 20.8% 36%

Bacacarat 86 20 24 28 32 32 20 624 20.7% 2064 23.6% 30%

Mini Bac No Tax 26 0 4 4 4 4 0 64 2.1% 624 7.1% 10%

Blackjack 31 11 15 13 17 17 11 336 11.1% 744 8.5% 45%

Pontoon 35 7 19 21 21 21 7 384 12.7% 840 9.6% 46%

CSP 18 4 8 8 8 8 4 160 5.3% 432 4.9% 37%

3 Card Poker 12 0 4 4 8 8 0 96 3.2% 288 3.3% 33%

3 Picture 18 0 8 8 8 8 0 128 4.2% 432 4.9% 30%

Texas Hold'em 19 4 8 8 8 8 4 160 5.3% 456 5.2% 35%

Pai Gow 10 0 6 6 6 6 0 96 3.2% 240 2.7% 40%

Tai Sai 16 6 13 13 16 16 6 280 9.3% 384 4.4% 73%

Mini Dice 6 0 0 0 0 0 0 0 0.0% 144 1.6% 0%

Money Wheel 3 1 1 1 1 1 1 24 0.8% 72 0.8% 33%

Casino War 8 0 0 0 0 0 0 0 0.0% 192 2.2% 0%

Craps 1 0 0 0 0 0 0 0 0.0% 24 0.3% 0%

Total 365 69 138 142 168 168 69 3016 100.0% 8760 100.0% 34%

Spread % 19% 38% 39% 46% 46% 19%

Rapid Roulette 168

Rapid Baccarat 152

Tables Spread

Physical Table Actual Actual Physical Physical

GAME TYPE Total 8-1000 12-1600 1600-2000 2000-2400 0000-0400 0400-0800 Ops Hours Sector Capacity Sector Actual vs

4 4 4 4 4 4 % Ops Hours % Capacity

Roulette 76 24 40 46 46 46 37 956 25.7% 1824 20.8% 52%

Bacacarat 86 24 36 36 36 40 30 808 21.7% 2064 23.6% 39%

Mini Bac No Tax 26 0 4 4 4 4 0 64 1.7% 624 7.1% 10%

Blackjack 31 7 15 16 16 20 13 348 9.4% 744 8.5% 47%

Pontoon 35 11 24 24 24 28 15 504 13.5% 840 9.6% 60%

CSP 18 4 8 8 12 12 8 208 5.6% 432 4.9% 48%

3 Card Poker 12 0 8 8 8 8 0 128 3.4% 288 3.3% 44%

3 Picture 18 0 8 8 8 8 0 128 3.4% 432 4.9% 30%

Texas Hold'em 19 4 8 8 8 8 4 160 4.3% 456 5.2% 35%

Pai Gow 10 0 6 6 6 6 0 96 2.6% 240 2.7% 40%

Tai Sai 16 8 13 16 16 16 7 304 8.2% 384 4.4% 79%

Mini Dice 6 0 0 0 0 0 0 0 0.0% 144 1.6% 0%

Money Wheel 3 0 1 1 1 1 0 16 0.4% 72 0.8% 22%

Casino War 8 0 0 0 0 0 0 0 0.0% 192 2.2% 0%

Craps 1 0 0 0 0 0 0 0 0.0% 24 0.3% 0%

Total 365 82 171 181 185 197 114 3720 100.0% 8760 100.0% 42%

Spread % 22% 47% 50% 51% 54% 31%

Rapid Roulette 168

Rapid Baccarat 152

Tables Spread




5.2 RWS Casino Visitor Ar r iva l Study

5.2.1 Cas ino Visitor Arrival Project ion

Study of visitor arrival provides a good indication of RWS casino’s success. Periodical

tracking of visitors to casino will enable estimation of increasing demand, growth and

success of marketing activities.

This study covers typical Weekday and Weekend visitor patterns only. Various other

visitor patterns that can cause positive fluctuations such as public holidays, school

holidays and special events (such as Singapore Formula One Race week) are not

considered in the estimates.

The following are the key findings of the Casino Visitor Survey:

1.Single Weekday Visitors

Locals 11,400 (51.2 %)

International: 10,800 (48.8 %)

Typical Weekday Total: 22,200

2. Saturday Visitors

Locals: 15,400 (37.1 %)

International: 26,200 (62.9 %)

Typical Weekend Day Total: 41,600

3. Estimated Weekly Visitor arrivals: 194,000

4. Estimated Monthly Visitor arrivals: 776,000

5. Annualised Visitor Arrival Estimate: 10.1 mil l ion

* Estimates are not adjusted for repeat visitor (on days of study) and Visitor estimates are exclusively

for casino only and do not reflect the RWS overall resort-hotel visitor arrival.

On Weekday, Local visitors slightly lead Foreigners 51.2% against 48.8 %.

On Saturday, Foreigners take an overwhelming lead of 63 %.

Overall the casino can expect 55 % of its total patronage to be foreigners.

As the survey does not include various other positive fluctuation periods, the estimates

are deemed very conservative.




Table 5.5: RWS Casino – V isitor Project ion Local, Foreigners and Al l Visitors (including Repeat Visit Factored figures for comparison)

Repeat Visit Not

Factored Repeat Visit

Factored i. Local Visitor Project ion Total Weighted Total Daily -Weekday estimate 11,300 7,600 Daily -Weekend estimate 15,400 8,600 Weekly projection 87,600 55,000 Monthly projection 350,000 220,000 Quarterly Projection 1,138,000 715,000 Annual Projection 4,553,000 2,857,000 i i . Internat ional Visitor Project ion Total Weighted Total Daily - Weekday estimate 10,800 7,200 Daily - Weekend estimate 26,200 14,600 Weekly projection 106,000 65,000 Monthly projection 425,000 260,000 Quarterly Projection 1,382,000 846,000 Annual Projection 5,530,000 3,383,000 i i i . Al l Vis itor Project ion Total Weighted Total Daily - Weekday estimate 22,100 14,800 Daily Weekend estimate 41,600 23,100 Weekly projection 194,000 120,000 Monthly projection 776,000 480,000 Quarterly Projection 2,521,000 1,560,000 Annual Projection 10,083,000 6,240,000





5.2.2 Dai ly Visitor Arrival Pattern

Visitor arrival pattern is typical of any land-based casino.

Arrivals are low in the early morning, before picking-up mid-day to simmer down during

dinner between 5.00 pm to 7.00 pm.

A second surge of visitors is seen after dinner period starting 8.00 pm to midnight

before gradually declining between 2.00 to 6.00 am.

The busiest period for RWS casino is between 8.00 pm to midnight on a Weekday,

while on Saturday the highest Peak is between midnight to 4.00 am.

Chart 5.3 shows the low-peak visitor arrival pattern at RWS casino over a typical

Weekday and Weekend (Saturday).

Chart 5.3: RWS Casino– Dai ly V isitor Arrival Pat tern Weekday vs Weekend





5.3 RWS Casino Revenue Pro jection – Common Gaming

5.3.1 Monthly and Annual ised Stat ist ical Theore t ical Win

Based on its present capacity of operations, game efficiency, pricing and turnover

(handle), the RWS casino is expected to achieve the following revenue estimates:

Sector Monthly ( TW) 12 Months ( TW) Sector %

Table Games $61,100,000 $794,300,000 75.7%

Touch Bet Roulette* $10,900,000 $84,000,000 8.0%

Rapid Baccarat* $2,600,000 $29,000,000 2.8% Slot Machines* $9,350,000 $141,000,000 13.5%

Annual Revenue Projection (TW) SGD $1.05 Billion Ramachandar Siva © 2010

* Estimates for gaming machines are based on survey of machine count, minimum bet limits,

observation of occupancy and wagering by observation only. Relevant variables are based on

industry historical data and empirical values where applicable.

The casino is expected to achieve a dai ly average win of SGD $2.87 mil l ion from

the common gaming division.

5.3.2 Revenue Cont ribut ion by Game Sector

Table games main revenue contribution is expected from the 3 major games:

Baccarat 24 %

Roulette 19 %

Blackjack/Pontoon 13 %

Gaming Machines sector projections show significant contribution from Touchbet

Roulette EGT with an estimated 8 % contribution to overall casino revenue. Slots

Machines are estimated to contribute 13.5 % based on observations and active

machine count as of April 2010. The Slots revenue is expected to grow in tandem with

growth of tourist and exceed the contributions of EGTs.

Refer to Table 5.6 for revenue projection by game sector.




Table 5.6: RWS Common Gaming Stat ist ical Theoret ica l Win (Month & Annual )

Sector Monthly T. Win Annual T. Win Sector Casino Total Casino Total %

Roulette $15,600,000 $202,800,000 19% Baccarat $19,300,000 $250,600,000 24% Blackjack/Pontoon $10,350,000 $134,500,000 13% Caribbean Stud $2,600,000 $33,400,000 3% Texas Hold Em $1,450,000 $18,900,000 2% 3 Card Poker $936,000 $12,000,000 1% 3 Pictures $3,800,000 $49,000,000 5% Tai Sai $7,100,000 $92,600,000 9%

Total Table Games TW $61,099,000 $794,300,000 71.9% ETG Roulette $6,440,000 $83,723,000 8.0% ETG Baccarat $2,260,000 $29,300,000 2.8% Slot Machines $10,880,000 $141,400,000 13.5%

Total Annual Revenue (TW) SGD $1,048,800,000 100%

Casino Theoretical Win Average Per Day $2,873,000 Ramachandar Siva 2010

5.3.3 Considerat ions For Project ion of Annual ised Casino Revenue

Generally the statistical revenue projection stated above does not take into

consideration various factors that will have impact on RWS’s common gaming revenue

over the next 12 months.

The following factors are to be considered for approximation of Annual Revenue

projection based on results of this study:

The casino operations will increase its operating hours capacity over the next 3

months and may achieve optimum capacity 9-12 months from now. This will

provide direct increase in Operating Hours thus increasing games and handle.

The opening of Marina Bay Sands (MBS) will have a significant impact on

patronage for a period that is uncertain. Reduced patronage would affect the

handle per game, which in turn will directly affect the Theoretical Win.

Apart from cannibalization of patronage, if the MBS casino is a superior

product, RWS may also see an impact on quality of players. The Average

Wager per Player may be reduced if MBS succeeds in attracting and keeping

the higher value players.

On the positive side, overall the RWS table games operation is yet to achieve

typical productivity levels expected in large Asian casinos. The Games per Hour

or game pace is just at 40% at best against expected levels. The experienced

casino management team at RWS is expected to ramp-up the productivity to

optimum levels successfully over the next 6 months.




Table 5.7 provides comparison RWS game pace against typica l Asian

casino expectations .

Impact of general marketing initiatives – The grind market is sensitive to the

success of general marketing initiatives, specifically the tourist distribution

channel. RWS being a resort-casino, it can be assumed that extensive

marketing plans are in place with results kicking-in in monthly increments of

visitors on an on-going basis. Upon adjustment for lost of patronage to the 2nd

casino in May 2010, fresh visitor arrival is expected from the tourist class.

Though such growth is expected, the net value of players from this class is

expected to be low. Low cost and efficient volume management will be a key

success factor for RWS.




5.4 RWS Game Per formance Study

5.4.1 Game Eff ic iency

The aggregate Games per Hour (game pace) of tables surveyed are used to describe

the efficiency of RWS table games operations.

Table 5.7 is the summary of game pace findings at RWS casino.

The aggregate Games per Hour (GPH) is significantly lower than typical game pace

expectations of established large Asian casinos. Expectations of the Genting casino and

Star Cruises casinos are selected for comparison due to similarity of operations and

player locality.

Typical of new casinos the overall game pace is below expectations largely due to

Lower Dealer experience level and under-developed skills.

Inadequate supply of gaming tables at peak and high-peak periods.

Operational Procedures that place emphasis on security.

The efficiency is expected to improve gradually week by week over the next 3 to 6

months. Specifically the dealer skills development and increased table opening is

expected to improve the game pace.

The game pace is expected to improve at least by 15-20 % over the next 3 months

(May to July).

Even slightest increase in games (i.e. 1 additional game per hour) will create significant

impact in revenue for the casino.

Table 5 .7: RWS Statist ical Games Per Hour Vs Typical Industry Game Pace

(Apri l 2010)

Game Sector RWS Weekday

RWS Friday

RWS Saturday

RWS Sunday

RWS Aggregate

Asian Casino Typical

Roulette 13 11 10 11 11 25-30

Baccarat (Face Down) 20 18 19 20 19 30-45

Blackjack/Pontoon 31 29 27 29 29 60-70

Caribbean Stud 20 21 19 18 19 30-35

Texas Hold Em 17 22 23 20 20 25-30

3 Card Poker 12 9 9 10 10 25-30

3 Pictures 14 18 18 16 17 30-35

Tai Sai 11 12 13 12 12 30-45 Ramachandar Siva © 2010




Chart 5.4: RWS Games per Hour – Common Gaming Apr i l 2010





5.4.2 Game Handle (Turnover )

We can assume the handle to represent the turnover or sales volume. (For lack of

information the casinos prefer the Drop as the indicator of sales volume.)

Average Wager (Handle) per hour by game – to describe sales volume for comparative

performance purposes.

The wager per game indicates the players’ wagering power.

There are no industry standards for wager per game or handle to make comparisons.

Observations alone indicate that the casino is receiving above average wagering.

Typically the game of Baccarat attracts the highest volume of wager per hour ($74,000)

and wager per game ($3,800).

The 3 Card Poker has the lowest wagering at $10,500 per hour and $720 per game.

If the casino patronage is affected by opening of the second casino, the handle per

game is expected to drop creating a significant impact on revenue.

Table 5.8: RWS Casino Stat ist ical Wager/Game and Handle/Hour

(Apri l 2010)

SECTOR Wager/game Handle/hour/table

Roulette $2,548 $27,173

Baccarat $3,818 $74,272

Blackjack/Pontoon $1,732 $48,515

Caribbean Stud $1,027 $19,689

Texas Hold Em $1,240 $26,100

3 Card Poker $720 $10,493

3 Pictures $2,098 $53,232

Tai Sai $2,974 $34,636 Ramachandar Siva © 2010




Chart 5.5: RWS Average Wager per Game – Common Gaming Apri l 2010





5.4.3 Game Margins and Profitab i l i t y

The statistical Theoretical Win per Game estimates the profit margin between the types

of table games at RWS.

The statistical Theoretical Win per Hour estimates the revenue potential in correlation to

the Operating Hours.

The tabulated figures allow classification and assessment of the games in terms of

profitability.

Tai Sai has the highest TW per Game at $82. This is due to above average demand and

an operating pattern where the dealers tend to accept wagers longer than usual.

The profit performance of 3 Pictures is extraordinary with the highest TW per hour at

$1,300. This reflects the high demand for the game where the Handle per Hour is

recorded to be consistently higher than other games. 3 Pictures tables are about 3.4%

of tables in operations, thus the overall revenue contribution is a low 4%.

Note: It was observed that 3 Pictures and Tai Sai are popular among PRC nationals.

Having the 3 Pictures game pit beside the Tai Sai pit attracts additional wagers from

players waiting for the next game at Tai Sai. The 4 tables are inadequate to cater for the

demand, and the potential of higher contribution is obvious if tables are increased.

Otherwise as expected Baccarat is the most profitable game for RWS while Roulette

has the highest potential to improve.

Table 5.9: RWS Casino Stat ist ical TW/Game and TW/Hour Apri l 2010

SECTOR TW/game TW/Hour

Roulette $69 $734

Baccarat $51 $997

Blackjack/Pontoon $19 $536

Caribbean Stud $26 $502

Texas Hold Em $19 $392

3 Card Poker $24 $343

3 Pictures $51 $1,301

Tai Sai $82 $959 Ramachandar Siva © 2010




Chart 5.6: RWS Theoret ical Win per Game – Common Gaming Apri l 2010


Chart 5.7: RWS Theoret ical Win per Hour – Common Gaming Apri l 2010





6. Conclusions and Discussion The core purpose of this report is to provide an evaluation of the RWS casino operations in

terms of operational capacity, patronage levels and to estimate the revenue potential.

6.1 RWS Casino Operat ions Review

Conclusion

On the average less than 50% of the 365 physical tables are opened in the common

gaming area. Tables provided are inadequate to meet demand on peak to high peak

periods. The congestion is affecting revenue efficiency of the games. The variety of

games offered for a new casino is exceptional, 14 distinct table games were seen on

the floor (including Mini Dice and Craps which are yet to be opened). The major games

are Baccarat, Roulette and Pontoon. Heavy action is seen in the Singapore /PR room

on all games during mid to peak periods. Overall RWS must overcome its manpower

woes to increase its operating capacity as soon as possible to capture the revenue

opportunities.

Points of Discussion

The RWS casino is yet to achieve its optimum operating capability.

Demand in the early morning of weekdays is very thin.

Peak periods show demand to be higher than available gaming tables. Players

are seen 2-3 layers deep around the gaming tables.

Immediate increase in table opening is required for peak and high-peak periods

to capitalize on present demand.

Electronic Gaming Tables are extremely popular and have very high take-up

rates.

Slot Operations is average in terms of take-up but is expected to pick-up with

the development of the Slots Players club and increase in tourist class visitors

over the next 3-6 months.

Dealers lack skills to handle heavy action and do not demonstrate game pace

management. Similarly floor supervisors are not seen to be prompting for game

pace.

Operational policies such as using $5 wheel checks for $10 minimum Roulette

tables are self-defeating as the $10 min tables have very high chip action to

literally bring down the game to a standstill.




The nine-box baccarat (Bean Table) operating face-down game and having

various side bets such as Insurance, Pairs and Super Six is inefficient for the

common gaming crowd. Among slowest common gaming baccarat ever seen

in any casino.

Various operational improvements are required to get the casino into optimum

revenue generating capacity in the common gaming area where technical

efficiency is key to maximizing revenue.

6.2 Casino Visitors

Conclusion

The casino is well received by both local and foreigners. Assumption that Singaporean

players will leave early on weekdays (before midnight) is unfounded. The casino is seen to

have peak periods between 8.00 pm to 4.00 am on weekdays. Singaporeans are seen to be

streaming into the casino as late as 11.00 pm on weekdays. As expected foreign visitor

numbers are significantly higher on weekend. An adjustment is expected when Marina Bay

Sands opens on the 27th of April 2010.

Points of Discussion

There is equal support from locals and foreigners on weekdays.

On weekends as expected the numbers increase and foreigners overtake the locals

by almost 2 times. It is to be noted that RWS is a city casino comparable with

casinos in Melbourne and Sydney for time being before it develops the tourist

market and fulfill its positioning as an international resort-casino. Thus the foreign

visitor patronage is expected to outnumber local support by a large degree.

Current patronage is within expectations and is expected to grow week by week if

not for the opening of the 2nd casino. The adjustment is to be seen in May 2010.

Foreigners are made of Indonesians, Main-land Chinese, Malaysians, Thais and

Vietnamese.

Indian and European visitors are insignificant.

Main-land Chinese players are major punters at Baccarat, Tai Sai and 3 Pictures in

the Main Gaming Hall. Heavy action was observed at these games.

The local, Singaporean, support is significant and is higher than expected. There

are indications that RWS sets higher table limits in the SIN/PR Room and action is

heavy. Observations made in this study show that the Average Wager per game is

significantly higher in the exclusive Singaporean gaming room.

This suggests the support from Singaporeans, key to the casino’s short-term

stability, is well secured. It will be imperative for RWS to focus on the Singaporean

market with increased efforts to sustain when the 2nd casino opens.




6.3 Revenue performance

Conclusion:

It’s a likely case of demand exceeding supply in the case of RWS. The weekday crowds

are manageable, but from Friday evening to late Sunday, the operation is clearly

overwhelmed. Games come down to snail’s pace at Roulette and Tai Sai where chip

action is heavy and dealers are inexperienced to pace the games. Generally the action

in the Singapore/PR area is higher and intense, suggesting the grind locals are high

value players. Although an adjustment is expected when Marina Bay Sands opens,

RWS is expected to pick-up with efficiency improvements and efforts of marketing

kicking-in to bring the tourist class visitors. Information gathered, confirms that the VIP

gaming division is also enjoying a bumper crowd as the premium program commissions

are higher than regional casinos. For time being ( 3-6 months from date of report), RWS

is expected to hold its own against MBS. The two months earlier opening is a big

advantage in terms of stabilization of the operations and services and will keep ahead of

MBS in retaining a larger share of Grind and VIP players.

Points of Discussion:

The annualized revenue projection of SGD $1.05 billion in the common gaming

division is deemed conservative.

The projected SGD $ 2.9 million per day in the common gaming division is

considerable for a new casino and is expected to increase with improvement in

efficiency.

Based on Handle estimates, it can be said RWS casino is enjoying above

average sales.

It can be concluded that a casino based in Singapore receives significantly

higher wager per player in the common gaming sector (or non-commission

play) compared to Malaysia, Macau or Australia. Probably the highest in the

world.

The grind gaming shows very high quality punters (it may be having the highest

wager per game of any casino in the world).




The RWS casino is well positioned to be the most profitable casino in the world.

The following expansion of assumptions places the numbers to this statement:

Observations and findings from the study suggest that the non-grind or mid to

high level (classified here as Premium) gaming revenue would be higher than

initial 70:30 proportioning. It can be as high as 40:60 (GRIND: PREMIUM).

Premium is deemed as players qualified to patronize Maxim’s and Crockfords,

regardless of participation in a casino program.

The 40:60 revenue rat io places the RWS’s overal l casino revenue

between SGD $7 to 7.5 mil l ion per day or an annual ized revenue

capabi l i t y of SGD $ 2.5 to 3.0 bi l l ion.

This proportioning is differentiated from ‘Non-Commission : Commission’

revenue ratio which is expected at 60:40.

As stated earlier the revenue generating capacity of the casino is far from optimum and

has great potential to improve fast.

The following are highlights of game performance shortcomings by game:

Roulette – Dealer skills are below average. Payment procedures are tedious.

Pricing (Table Minimum) is low for Peak Period demand. $25 minimum tables

can be absorbed by the demand and wagering during peak periods. Usage of

$5 chips on $10 minimum table increases chip action. Dealers and Supervisors

need to be trained on game pace management.

Baccarat – Dealer skills are average. The 9 betting box bean table may not be

the best for common gaming. The large table creates difficulty for dealers to

reach out to collect or make payments. There are just too many bets per game

for the dealer to settle, especially when Banker wins. Players are allowed to

place chips of multiple values instead of limiting to $50s or $100s, thus the

need to prove the bets slows down payment. The demand for side bets such

as Pair and Insurance are low and do not justify the impact on game pace

caused by Dealer pausing to check for such bets. Face-down games in

common gaming unsuitable for lower limits as ten players betting $100 will be

waiting for one player placing $1000 squeezing the cards.




Tai Sai - Dealer skills are average, poor game management. The single-sided

are too small to cater for players backed-up to 3 layers. Players take time to

place bets as they need to squeeze between other players. Frequent dispute

over wagers due to cash chips only for betting causes confusion each time

payments are made. Dealers do not show urgency and tend to wait without

prompting players to bet. Too many separate bets are accepted due to the

waiting. Table minimum limit (price) can be increased during peak periods.

3 Pictures – Dealer skills are average. Just too few tables considering the

demand. No tables opened between 4 am to 12 noon. (Texas Hold ‘Em is

much less profitable but 4 tables available for 24 hours).

3 Cards Poker – Dealer skills are average. Low limits and low profitability. Good

demand but may not justify value per square feet of floor space.

Blackjack and Pontoon – Dealer skills are average. Pontoon wagers are higher

and more players per game. At times BJ/PO show low demand. Possible to

reduce BJ/PO table to open additional 3 Pictures tables during low and mid

periods.

Overall, considering the size of the operations and lack of skilled casino workers in

Singapore, the RWS management has done tremendously well to provide such variety

of games. There is great confidence that the experienced operator will swiftly overcome

the shortcomings and achieve optimal performance to show greater revenue numbers

than projected in this study.

The opening of the 2nd casino would be the point of adjustment of demand thus current

estimates may not apply for at 3-6 months upon opening of the 2nd casino in

Singapore.




6.4 Study l imitat ions

The data analysis can be further improved by testing further for statistical error limits.

The study will achieve greater accuracy if data collection is expanded to cover Friday

and Saturday.

The annual revenue potential has much better prospect than that estimated in the study

as the operating pattern of demand does not include public holidays, school holidays

and special events which usually bring a bonanza to the casino.

The findings of the study allow a basis for comparative analysis, to track growth of RWS

and to compare between two casinos in Singapore.




7. Suggestions to enhance the TW Projection Model The Stat ist ical Theoret ical Win Predict ive Tool

The results of this study describe the casino’s operating conditions for the month of April 2010,

the conditions of operations will change due to varies circumstances as the months come by

and may render the day, week and monthly projections meaningless within a short period.

A separate model to project fiscal revenue can be designed to address the issue of changing

operating factors such as competition, increase in tourist, improvements in operating efficiency

and economic conditions.

The statistical study to project revenue potential of the RWS casino, has enabled the

development of a model to define the following casino Key Revenue-Performance Indicators

(KRI):

Key Revenue-Performance Indicators (KRI):

OHD - Operating Hours per Day, the total active duration of a gaming table in a 24-hour

casino day.

AWG - Average Wager per Game, the sum of wagers placed by punters in a valid

game.

GPH - Games per Hour, the total number of games conducted in one hour at a table

game. Generally known as the game pace.

PPG - Players per Game, the number of punters participating in a game by placing

wager.

WPP - Wager per Player, the average wager placed by a player for a game.

TWG - the statistical theoretical win estimate for a game conducted.

TWH – the statistical theoretical win estimate for every one hour of conducting games. Ramachandar Siva © 2010

Using the data collected from the study, we are able to set the casino’s statistical theoretical win

as of the 2nd week of April 2010. Using that as a benchmark, we can then make assumptions of

degree of changes to KRIs caused by operating conditions. The KRIs can be adjusted month

by month and projection of monthly potential theoretical win will reflect the predicted changes.




For example, when the 2nd casino opens at the very end of April 2010, we can assume the

following for May 2010:

The RWS casino visitor and table patronage will drop by 35 to 50 % at best-case

scenario.

We assume that the existing casino patronage will be shared at various ratios (in a

descending manner from RWS point) by the 2 casinos for a period of 6-9 months. In the

worst case scenario the 2nd casino may take away 45 to 70% of RWS’s patronage if the

2nd casino’s product is much more desirable.

This would leave RWS to ramp-up its marketing and promotion efforts to reverse the

impact. This will take 3-9 months for results to show.

Thus the following assumptions can be used to predict the revenue fluctuation for RWS from the

month of May 2010 to December 2010.

Sample Predictive Model Assumptions: MBS cannibalization impact on RWS May – December

2010

Using the lower of the best-case scenario percentage, we assume RWS casino patronage drops

35% (against April figures) due to the opening of the 2nd casino. RWS’s operational efficiency

and marketing and promotion mitigate the patronage reversal by 5% (against the April figures)

due to new visitors or aggregate mitigation effort outcome over the month of May 2010. Then

RWS would suffer a net loss of 30% in patronage, which in turn we assume the gaming tables in

the common gaming area reflect the same. The impact on the KRIs will be:

Operating hours per day (OHD) – we can assume no changes as RWS was only

operating at about 40% capacity and was overcrowded. The reduction of patronage will

allow optimum player-table ratio (a thin–out) thus we assume the RWS management

sustains the operating hours for next 3 months.

Average Wager per Game (AWG) – the reduction in patronage will reduce the AWG

exponentially.

Player per game (PPG) will be lower by 30%.

Average wager per player (WPP) remains (as the opening of 2nd casino does not

indicate if the quality of players will be lowered – we assume no changes).

Thus we reduce the number of Player per Game MEAN by 30% and calculate

the Handle per game using the MEAN of WPP to derive the adjusted AWG.




Games per hour (GPH), is expected to improve as the PPG is reduced. The mean is

adjusted by a ratio of GPH:PPG increment.

The factor of GPH improvement due to increased Dealer skill is considered after

the benchmark study (April 2010).

The above assumptions are applied on all games for all defined low-peak periods and

the revenue for a typical week is tabulated.

The impact factors on the KRIs can be varied and specified month by month from June

to December to tabulate the year 2010 revenue of RWS.

The propriety “Statistical Theoretical Win Prediction Tool” is designed by Ramachandar Siva

provided with this report for trial by Deutsche Bank Research. The tool is expected to

sharpen future casino revenue potential studies, specifically for comparative studies.




end of report

25th of april 2010

authored by

ramachandar siva

casino management consultant

department of casino & gambling studies

(+65) 93881421 mailto:[email protected]

200 Turf Club Road, #02-03/09 Singapore 287994

tel (65) 6467 1890 fax (65) 64698801

email [email protected]

www.icgtraining.com

disclaimer

This report has been prepared in the author’s capacity as Casino Management Consultant for ICG School of Casino and Hospitality Management (ICG), Singapore. Opinions, estimates and projections in this report constitute the current judgement of the author as of the date of this report. The author is solely responsible for its contents, including any omissions or errors. Author’s analysis and projections are based upon the assumptions described herein. Some of these assumptions will inevitably not materialise, and unanticipated events and circumstances will occur. The actual results will therefore vary from author’s projections, and such variations may be material.

acknowledgement The author would like to thank Aun Ling Chia of Deutsche Bank Research, Malaysia for the appointment and collaboration to set the scope of study and defining the conclusions. The staff of ICG, Ignatius Sharma, Rickie Phua, Bony Efendy and Kelvin Lee in providing casino games survey expertise to complete the data collection exercise, are gratefully acknowledged.

Copyright © 2010 ICG School of Casino & Hospitality Management

casino revenue potential study model by ramachandar siva

Business