FIVE years in the making and now, the first integrated resort (IR), Resorts World Sentosa (RWS), will begin to open next week.
And to say that Singapore has a lot riding on this would be an understatement.
When the IRs were first given the green light back in 2005, job creation and a boost to the economy had been emphasised as key reasons to accord prominent and valuable development sites to what would essentially be a theme park and an exhibition hall with casinos. About 40,000 jobs were expected to be created indirectly by 2015, on top of the 10,000 jobs created at each IR. Within this period, Singapore’s gross domestic product (GDP) was also projected to grow on the back of about $2.7 billion of value-add generated by the IR effect.
Today, apart from a few detractors, all signs seem to point towards the IR effect really working. Already, the construction and real estate sectors have benefited. Leong Wai Ho, an economist at Barclays Capital Research estimated that both IRs at maximum capacity could potentially add up to 1.7 percentage points to GDP in a given year, higher than the government’s most recent estimate of 0.5 to one per cent.
One reason for Mr Leong’s bullishness is that Singapore, which has historically never been a single-stop destination for tourists, could now change its profile. ‘The broader mix of activities could also induce each visitor to stay longer and spend more,’ he added. ‘Outside of construction, there is a wide range of beneficiaries – from food manufacturers, general suppliers, wholesalers, retailers, Mice (meetings, incentives, conventions and exhibitions), entertainment venues, even banks and our capital markets,’ added Mr Leong.
There are challenges ahead though, and for Resorts World, this may come in the form of the neighbouring competition.
Jonathan Galaviz, an independent travel and leisure sector strategist, believed that it is reasonable to expect that by 2020, there will be several more cities in Asia that will offer integrated casino entertainment. ‘I think most cities in Asia would see a theme park being strategically beneficial to their tourism mix, but stand-alone theme parks generally have very low returns on capital, so investors are usually wary. It’s important for Singapore to begin looking at the next ‘wow factor’ that it must develop to be competitive in 2015 and beyond in Asia’s tourism sector,’ he said.
RWS is expected to roll out new attractions at Universal Studios Singapore (USS) regularly. Phase Two, which includes the world’s largest aquarium, will open next year.
But will it be enough to generate buzz?
‘Theme parks are successes or failures based upon the ability to get repeat visitation over a long multi-year period. There will be a lot of first time visitation in the first year of operation, but keeping the theme park exciting after five years of operation to attract repeat visitors is the key to financial success,’ added Mr Galaviz.
In terms of business viability, much will depend on the revenues generated by the casino. In this respect, Genting Singapore – RWS’s owner – may be in a relatively good position to weather a longer ramping-up period as parent Genting Berhad is flushed with cash.
Melvyn Boey, economist at Bank of America Merrill Lynch, added: ‘Debt covenants won’t be a major issue.’
Still, there are three gaming destinations nearby – Macau, Malaysia and Australia – and all would be loath to give up any share in the gaming pie, including Genting, which also owns the casinos in Malaysia.
Dean Macomber, a gaming consultant and president of Macomber International reckoned that the casinos ‘will do phenomenally well’. But with investment capital being so high – US$4.4 billion for RWS – Mr Macomber said: ‘This makes any source of revenue more critical but particularly so if a large category of revenue is placed in jeopardy of being lost, such as junket players and/or Singapore residents.’
Already, the current financial crisis is expected to have impacted bullish financial projections made earlier when the IR bids were first awarded in 2006.
Can the casinos survive without junkets? ‘What we do know is that Asian junket-driven demand is real and is large. All the metrics would indicate that the resident market is real and large,’ said Mr Macomber.
As the junket regulations were only released recently, it is likely that the IR operators would not have factored in the possibility of low junket support. ‘This means they must do the best they can with what they have, while, if necessary, find alternative sources of revenue/profit,’ added Mr Macomber.
RWS already seems to be on it.
All resorts have Mice facilities but those at RWS are proving to be quite substantial, boasting one of South-east Asia’s largest, column-free ballrooms, 26 function rooms and over 20 indoor and outdoor events venues for more than 35,000 delegates at any one time.
Marina Bay Sands (MBS) has said that it can host 45,000 delegates.
Trevor Soh, director of events organiser Pico Art, said that it is looking to stage events at both IRs. ‘Both MBS and RWS have different exciting offerings and attractions serving the needs and requirements of different events, organisers and participants. To event organisers, flexibility and service levels are very important selection criteria besides price, location and facilities,’ said Mr Soh.
Genting is not so well known as a Mice player but it apparently has a finger in this pie too. ‘Genting has a successful track record in operating leisure resorts with Mice facilities in the region. RWS will be able to leverage on the group’s experience and business network in the region,’ said Mr Soh.
Source: Business Times, 16 Jan 2010
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