Both are revising costs upwards for 2nd time
SINGAPORE'S two integrated resorts (IRs) are getting increasingly expensive, with both developers revising their cost estimates upwards for a second time.
An additional $590 million will need to be pumped into the kitty for the Sentosa project, while the price tag for the Marina Bay Sands development has gone up by US$900 million.
Resorts World at Sentosa yesterday revised the cost for the 49ha resort in its earnings call, bringing it up to $6.59 billion. This is the second time the budget has been revised: It was bumped up from $5.2 billion to $6 billion in November 2007.
Marina Bay Sands will cost more as well. At last week's earnings call, Las Vegas Sands Corp announced its Singapore IR is estimated to cost US$5.4 billion, an upward revision from previous estimates of US$3.6 billion and US$4.5 billion.
No explanations were given by Sands for the increase in cost, but it raised US$2.1 billion last November in a rights issue to cover its projects, including the one in Singapore.
Resorts World at Sentosa chief executive officer Tan Hee Teck said yesterday that additional funding would come from operating cash flows when the casino resort opens next year.
The extra money was needed for improvements to the design of the casino project, he said. Areas which were tweaked included pedestrian flow, the monorail stop at the resort and adjustments to the 24 attractions.
He said: 'We want to make sure each and every attraction is up to standard. We found we needed more money to bring the attractions up to a superlative level.' Moreover, construction costs had risen sharply in the last few years, he added. Steel, for example, rose from $800 per tonne in 2007 to $1,800 last year.
CIMB-GK Song Seng Wun said it was simply bad timing that the IR projects were awarded at the peak of the construction boom, which led to costs spiralling upwards.
Construction projects awarded earlier do not benefit from prices softening since the global financial meltdown, as they had locked in materials at a higher rate, Resorts World's Mr Tan said.
Despite the revision in budget and the ongoing global recession, Mr Justin Tan, managing director of parent company Genting International, said he is 'still as confident' in the success of the project.
As travellers trim their budget to take in short-haul travel, visitors from China and India who may have splurged on trips to Las Vegas or Europe would head to Singapore instead, he added.
Resorts World at Sentosa is slated to open on schedule by March next year.
One section of the resort is due for completion next week when its first 11-storey hotel, the Maxims Tower, is topped off. It will be the first development to be completed at either of the IRs.
Marina Bay Sands is expected to open in the fourth quarter of this year. However, it is uncertain which parts of the resort will be ready as Las Vegas Corp said only 'certain features' are targeted to be ready by December.
The resort has applied to the Government for a staggered opening, but has yet to receive official approval.
Source: Straits Times, 20 Feb 2009