Sunday, August 29, 2010

Casinos wipe out a big chunk of club earnings

Aug 28, 2010

By Ng Kai Ling

JACKPOT machines, a long-time revenue-spinner for clubs in Singapore, are slowly falling silent as patrons who used to spend hours playing on the one-armed bandits migrate to the two casinos here.

Faced with takings that have fallen by as much as 50 per cent, the clubs are now anxiously looking at their bottom lines and new ways of raising revenue, including pulling some privileges from members.

About 100 outfits in Singapore - from exclusive ones like the Singapore Recreation Club (SRC) to heartland hangouts like S-League clubhouses - have permits to operate the so-called 'fruit machines'.

All of those which responded to queries about their takings said they have felt the impact of the casinos.

At the Seletar Country Club, for example, jackpot takings have fallen by between 25 and 30 per cent, said its general manager, Mr Wun Khai Ping.

Neighbourhood clubs visited by The Straits Times yesterday, such as Sengkang Punggol Football Club, said revenue has fallen by about 20 per cent.

Bigger establishments, such as the Singapore Island Country Club and Chinese Swimming Club, refused to say how much business has dropped since the casinos at the Resorts World Sentosa (RWS) and Marina Bay Sands (MBS) integrated resorts opened earlier this year.

The integrated resorts have been doing well, with RWS making $861 million in revenue in the second quarter and MBS booking pre-tax profits of US$94 million (S$128 million) in its first 65 days of operation.

If a recent letter from the SRC to its members is anything to go by, the drop in clubs' earnings could be startling.

In it, SRC president Dr Johnny Goh wrote: 'Despite having created a new revenue stream from the club's 26 guest rooms, we have seen a sizeable drop in takings from fruit machines. All clubs with fruit machines have seen their takings dip as much as 50 per cent.'

It is not just gaming revenues that have taken a hit. Food and beverage receipts are also down, as gamblers who used to spend all day in the clubhouses head for the bright lights of the casinos.

Industry analysts say the clubs are facing a serious plight as they are unable to compete with the casinos in terms of bigger payouts and variety of slot machines.

Said Bank of America Merrill Lynch analyst Melvyn Boey: 'I expect the decline to continue. It may not drop by more than what they are seeing now, but it will never recover to pre-IR days.'

This could mean big trouble for places like the Gombak United Football Club (GFC) clubhouse, where 17 jackpot machines are its cash cows and make up 80 per cent of revenue.

It is now looking to add a karaoke room to draw the crowds.

At bigger clubs such as the SRC, the situation is not so dire, but clawing back some of what has been lost is still the order of the day.

The 127-year-old club, one of Singapore's oldest, is looking for ways to make up the shortfall.

From next month, it will withdraw the rebates that it has been giving members since 1992, raising monthly subscriptions as a result. A member of 15 years, for example, will have to pay $14 to $15 more.

In his letter to members, Dr Goh said the move is being taken 'in order to enable the club to operate on an even keel'.

At Seletar Country Club, Mr Wun said he is counting on other revenue streams like restaurants and bars, golfing fees and banquets to keep it in the black.

But fruit machines have not been removed from the revenue equation.

'We are looking at improving our product offering, but it involves a sizeable amount of money to update or buy new machines,' said Mr Wun.

He said that having newer machines with different modes of play might do the trick and lure some customers back.

At the clubs which The Straits Times visited yesterday, only a handful of patrons were working the machines. Employees said that in the past, there were many more players.

Still, clubs like GFC are optimistic that players will return once the sheen of the new casinos wears off.

'We hope our takings will recover,' said Ms Selva Balli, finance manager at GFC clubhouse. 'They can't be going to the casinos every day, right?'

Additional reporting by Alexandra Jen Wong

[If Casino goers decide to pay the $2000 annual pass, they can treat that as their membership to the Casinos instead of the club membership they have been paying. If gambling is their main activity, and sports facilities are just for show, then it means that gambling have been subsidising sports for the longest time even in clubs.

Clubs will have to review their business model. Unless the shine wears off from the casinos, the clubs will have to reinvent themselves in terms of their revenue streams. When jackpot machines make up 80% of their revenue, it is not a healthy business model.]

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