Wednesday, December 23, 2009

Being first may not matter

NO ONE at the ChildAid concert over the weekend could have missed a huge mural in the lobby of the Festive Grand Theatre at Resorts World Sentosa (RWS): it touted itself as Singapore’s ‘1st Integrated Resort’.

Staff members were out in force to make sure the resort’s first public function went without a hitch – in the auditorium, carpark and the restrooms.

From chief executive officer Tan Hee Teck down, they were clearly excited at the prospect of finally showing off the goods, so to speak. And yes, people gawked.

RWS has overcome a six-month handicap to beat Marina Bay Sands (MBS) with a soft opening for concert ticket-holders, and has declared that it will be throwing its doors open to all in early January.

On the other hand, MBS has been battling speculation and reports that it is in trouble – money-wise and management-wise. Its initial intention to open all its offerings by the end of the year had to be taken back. It will now open some parts by April, said its flamboyant chairman, Mr Sheldon Adelson. He insists the delays are ‘no big deal’.

Is he right?

The fact is, the sooner it can open for business, the faster it will generate income. This is critical because both projects have busted their budgets not once, but twice.

MBS’ estimated cost went from US$3.6billion (S$5billion) to US$4.5billion to US$5.4billion. Resorts World saw its cost rise from $5.2billion to $6billion to $6.59billion.

Analysts said RWS’ rush to be first to open could be an attempt to cash in on the ‘first-mover’ advantage and lock in resident patrons.

By law, Singapore citizens and permanent residents have to pay an entrance fee of $100 per day or $2,000 per year to patronise a casino. And the annual pass is exclusive to one casino only.

There is a small speed hump which few know about. The casino that opens first has to pay $15million a year for a licence. The fee is reduced to $12.5million when another casino opens up. When this happens, CasinoA is refunded a pro-rated amount.

This sum, however, is small beer compared to the billions that resorts are sinking into their projects.

MBS has blamed the price of sand, the cost of construction and even the rain for the delays. A critical building structure, the SkyPark linking the three hotel towers, will be hauled into place by the end of the year. That section will open for business only in June.

Mr Adelson has already put a figure on how much his resort will earn annually: US$1billion. Putting things in place properly, he said, will make up for not being able to generate revenue sooner. RWS won’t get a ‘gold star’ for being the first to open, he snorted.

‘Let them open first and we’ll see what mistakes they make and we will correct them so we’ll make fewer mistakes.’

Mr Felix Ling, a senior partner of Platform Asia, a Singapore-based casino consultancy firm, concurs.

He said: ‘An early opening is a double-edged sword. It could work to your advantage, but could also expose your soft underbelly.’

For example, the competitor can suss out its rival’s weaknesses and strengths, he said. So any minor improvement on the part of the latecomer would be appreciated by customers more.

Key business processes need to be in place in the casino and theme park for things to run smoothly, service quality has to be top notch, the attractions have to give people a sense of excitement. Otherwise, both resorts could turn out like Hong Kong Disneyland, he said.

The park, which opened in 2005, was plagued with problems from the start – including hour-long waits for rides, inadequate parking and food shortages.

Early signing of annual levy pass holders, Mr Ling added, may not be that big an advantage as the competitor can always lure customers through creative marketing programmes, superior trip incentives, and better customer loyalty programmes.

Agreeing, CIMB-GK regional economist Song Seng Wun said: ‘Being first to open will get you only bragging rights.’ Ultimately, the proof of the pudding will be in the eating.

Both are worthy players. MBS’ parent company, Las Vegas Sands (LVS), knows the meetings and business travel market well – the trump cards that won it the bid in the first place. LVS was credited for bringing Mice – industry parlance for meetings, incentives, conventions and exhibitions – to Vegas. When it went to Macau, its Sands Macao recouped its investment capital within a year.

More recently, it has battled potential bankruptcy and has brought back stalled Macau projects after selling shares in the Hong Kong stock market. It has also fired up to 11,000 construction workers in Macau and has put work on a project there on hold, to focus its resources on its Singapore project, which it has described as the company’s No.1 priority.

On the other hand, RWS’ parent, Genting Group, has had years of experience of operating in Asia, running the casino resort in Genting Highlands and Star Cruises.

Also, working with a world-class partner like Universal Studios has given RWS more cachet than it ever had running its own theme parks.

Expectations of RWS are high precisely because it will be the first to open. Flaws in facilities or service would not be kindly tolerated. Nor would hitches in its theme parks, including its roller coasters and other mechanical devices. In fact, if anything untoward were to happen, the speed that is now praised as efficiency would be regarded as unnecessary haste.

By all accounts, its first public function went smoothly. One thing the staff did not anticipate: When blue and white balloons were dropped from the auditorium ceiling at the end of the concert, delighting the audience, they wafted out of the door and filled the staircases.

Some stumbling and fumbling ensued as patrons made their way down the steps. Balloons were pricked by women’s stiletto heels.

To be sure, that is too small a thing to burst RWS’ bubble. But you can be sure that its rival was there – watching.

Source: Straits Times, 23 Dec 2009

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