26 June 2009

Update on Resorts World Sentosa construction

Highlights of a recent update by Resorts World Sentosa include:
  • Construction of Marina Life Park is part of the second and final phase which will start early next year, and is expected to be completed in two years. It will also include two new hotels and a spa. Tenders have not been called for this phase.
  • Two-thirds of its attractions and hotels to be completed by the first quarter of 2010.
  • Visitor arrivals forecast as been lowered from 15 million in the first year. One report said this was cut to 13 million, another reported the figure as 12 million. The focus is on the Asia market, within the seven-hour flight radius, such as China and India.
  • The projected internal rate of return for the integrated resort has been reduced from 15% to 13%.

Resorts World at Sentosa cuts expected visitor arrivals
Valarie Tan, Channel NewsAsia 25 Jun 09;
SINGAPORE: Resorts World at Sentosa has cut its visitor arrivals forecast to 13 million visitors during its first year of operations, down from an earlier estimate of 15 million, due to the global financial meltdown.

The operator is also projecting a lowered 13 per cent internal rate of return for the integrated resort.

The resort is still very much a work in progress, but Resorts World at Sentosa said it expects two-thirds of its attractions and hotels to be completed by the first quarter of 2010.

These include the casino, which will be located at basement one, near the luxury Maxims Hotel.

Fittings will start in August for rides and shows at Universal Studios Singapore, including the 3,500-seater Waterworld and the world's tallest duelling roller coasters.

Despite cutting back on expected visitors for the first year, Resorts World is confident of attracting the crowd as the economy improves.

Michael Chin, executive vice-president of projects at the Resorts World at Sentosa, said: "We take a bit of precaution at reviewing our numbers. But as the economy picks up, things turn up, I'm sure the numbers will look better for us."

"Our focus is on the Asia market, within the seven-hour flight radius. We're looking at markets like China and India."

To complement the neighbouring shopping centre, Vivocity, Resorts World is in talks for niche tenants for its 500-metre stretch of retail, food and beverage outlets - also expected to be ready in early 2010.

So far, it has secured Malaysia's luxury goods retailer Valiram, which owns the Jimmy Choo brand.

Construction for the second and final phase of Resorts World will start early next year, and is expected to be completed in two years. It will include two new hotels, a spa and a Marina Life Park.

Tenders have not been called, but Resorts World said it will keep construction costs within the overall S$6.6 billion budget.
60% of Sentosa IR will be ready when it opens
Casino and theme park to open in first quarter; fewer visitors expected due to tough economy
Lim Wei Chean, Straits Times 26 Jun 09;
THE Sentosa integrated resort (IR) is all set to throw open its doors in the first quarter of next year - but visitors will not get to see the finished product.

When the resort opens, just 60 per cent of it will be ready: four hotels, the casino, the Universal Studios theme park, the theatre and the retail and dining area.

Construction of the other attractions at the 49ha resort - including the world's largest oceanarium, a marine museum and two more hotels - will begin next year and is slated for completion by 2012.

Giving an update on the progress of the IR yesterday, Resorts World at Sentosa (RWS) executive vice-president of projects Michael Chin said some 80 per cent of construction for the first phase of the resort has been completed.

What remain to be done are exterior works and outfitting the rides for the theme park.

This should be completed by August.

After that, the resort will be testing the rides and other amenities, and getting staff up to speed on operations.

Asked about prices for the rides, the resort's head of communications Krist Boo declined to give details. But she said that charges would be kept 'affordable' and that they would be competitive when compared with other theme parks.

She added that prices would be comparable and likely cheaper, dollar-for-dollar, than those at Universal Studios' other parks in Orlando and Osaka, where day passes go for US$70 (S$100) and 6,000 yen (S$90), respectively.

Ms Boo acknowledged that there are some clouds on the horizon for the IR.

Because of the tough economic times, the resort would have to slash its visitor forecast for the first year from 15 million to 12 million, she said.

She added that it had also lowered the expected growth rate of returns on investment for the $6.59 billion project by one to two percentage points from the previously projected 15 per cent.

Spending by visitors is also expected to be less, she said, but did not elaborate.

Also, there are no takers for some of the retail space at the resort.

'To be honest, the retail landscape is a little challenging now,' she said.

Despite these concerns, however, the Sentosa IR is still confident of pulling in large crowds.

'For visitors in this region, they don't have to travel too far to enjoy a world-class attraction,' she noted.

The resort's main target will be visitors from countries within a seven-hour flight range of Singapore.

The exact date of the IR's opening is expected to be firmed up by the end of the year.

Singapore's other IR, the Marina Bay Sands, is also scheduled to open in stages, with the first opening expected at the end of this year.

RWS structural works ending
Arthur Sim, Business Times 26 Jun 09;
RESORTS World at Sentosa (RWS) will complete all structural buildings by next month - 27 months after it broke ground in April, 2007.

Michael Chin, RWS executive vice-president, said yesterday that the Ministry of Manpower (MOM) has approved the company's request to increase the quota of foreign workers on site.

MOM is also understood to have approved an increase in the foreign worker quota at Marina Bay Sands (MBS) resort.

Mr Chin said that there are about 6,500 workers on the RWS site and this will increase to 8,000-9,000. 'All effort is being made to open as early as we can.'

The first-mover advantage will be important, especially as both RWS and MBS have casinos and are likely to open around the same time. Mr Chin would not discount opening during the lucrative Chinese New Year period in February 2010 when gambling is a popular activity.

With about 80 per cent of the main construction work already completed, all that is left is to fit out the buildings. This will include Universal Studios Singapore, four hotels and the casino. Mr Chin said that by August, most of the rides and shows at USS will be ready for testing.

RWS is confident that its resort will attract 12-13 million visitors in the first year. But spokeswoman Krist Boo said that visitor spending may be affected by the global downturn. As a result, RWS has reduced its investor rate of return (IRR) by one to 2 percentage points. Ms Boo would not reveal the IRR on its $6.6 billion investment, but it is likely to be in the region of 15 per cent. She said that more than half of RWS's revenue is likely to be generated by the casino.

USS will also be a revenue generator, but Ms Boo said that RWS is aware that 'USS will have to be affordable'. Entry prices will be lower than those at other Universal Studios theme parks in Japan and the US, she said. A check with the Universal Studios websites shows a one-day pass costs 5,800 yen (S$88) at Universal Studios Japan and US$75 (S$109) at Universal Studios Orlando.
Gaming important part of IR revenues
It will make up big chunk of Sentosa's revenue, Marina Sands' Ebitda: CLSA
Arthur Sim, Business Times 26 Jun 09;
(SINGAPORE) The casinos may be a small component of Singapore's integrated resorts (IRs) but both operators will be counting on gaming revenue for significant support.

A report by CLSA reveals that for Marina Bay Sands (MBS), gaming Ebitda for 2011-2012 is estimated at US$700-800 million - about 75 per cent of total Ebitda.

For Resorts World at Sentosa (RWS), gaming revenue is expected to contribute about 70 per cent of overall revenue. While no value figure was given, CLSA said that up to 40 per cent of this will come from locals.

Andrew Hartley, Singapore country head at CLSA, said: 'People assume the local market will be very quiet, which I think is wrong. Just look at the huge daily turnover in locally listed small-caps to see there are a lot of bored retirees out there just waiting for a chance to go and punt their pensions. Or go to Tanah Merah to see the families lined up to board the boats for a day of gaming on the high seas.'

How effective the $100 daily entry fee will be at deterring locals is unknown. However, CLSA believes - but cannot confirm - that the $2,000 annual entrance fee may allow unlimited access to both casinos.

'We believe the strength of the local market will surprise,' Mr Hartley said.

CLSA noted that in 2008, Las Vegas Sands (LVS), which owns MBS, provided guidance for MBS 2012 Ebitda (earnings before interest, tax, depreciation and amortisation) of US$1.2 billion. 'Understandably, the company is no longer maintaining that guidance, as the world is in a different place than where we were previously,' CLSA said.

However, MBS is still likely to generate the highest Ebitda of any LVS casino globally, with MBS contributing 40 per cent of LVS's group Ebitda.

For LVS, in particular, profit targets will need to be met. CLSA said: 'We understand that the debt covenants kick in after the first full four quarters. When opened, (LVS's) credit facility will not be completely drawn down with payments made in 2010 and MBS will be still paying out for capex until Q2 2011 - around US$500 million in 2011. By that point, management should be generating at least S$800 million in Ebitda or there may be some debt covenants issues.'

The report said that LVS management expects gaming revenue to be biased towards VIPs rather than the mass market, with around a 60-40 split.

RWS, which is owned by Genting Singapore, will also target VIP and mass market players. About 30 per cent of the gaming tables are expected to be reserved for KJ (key junket) VIP players. To this end, RWS has recruited high-roller marketing veteran Mabel Lee, formerly with casino operator Wynn, to drum up business.

There is likely be a core of 20 KJ operators used by RWS, with a strong focus to solicit patrons from Indonesia, China and India, CLSA said.

Junket operators are important to the gaming industry. In Macau, one of the primary roles of junkets is facilitation, as there are limits on the amount of renminbi that can be brought into Macau - 20,000 renminbi (S$4,300) and US$5,000 per visit, which is less than the average bet in a VIP room.

To qualify as a VIP player, players need to register and have a minimum buy-in of S$100,000.

RWS will also have Universal Studios Singapore as a revenue generator. CLSA said that the overall building cost of about S$1.5 billion for USS is considerably cheaper than that of the estimated US$2 billion Universal Studios in Japan. This is largely due to cheaper construction materials, it said. As such, the estimated entry price of S$80 per adult will be cheaper than that at Universal Studios Japan, Orlando and Hollywood.

CLSA also said that RWS 'is taking the meetings, incentives, conventions and exhibitions (Mice) business more seriously than we expected'. 'We understand management have booked 38 events with more than 500 people.'

Over at MBS, CLSA said that the first Mice event has been booked for April 1, 2010.

CLSA expects both IRs to open in early 2010.
On target for 2010
Teo Xuanwei, Today Online 26 Jun 09;
IN THE words of Resorts World at Sentosa's (RWS) Michael Chin, the "guts" are almost all in place, now for the final touches of "cosmetics".

With all its structural buildings to be topped out by next month, 27 months after ground was broken on the works, final preparations for the integrated resort's opening party early next year are going on at a frenetic pace.

Taking the media on a tour of the near-completed site yesterday, Mr Chin, RWS' executive vice-president of projects, said keeping to the construction timeline has been the greatest challenge so far. But he noted that they are "over the hump and in the final leg" now. "All efforts will be made to open as early as we can," he said, adding that firm dates may be announced in the last quarter.

The cladding of building facades, installing of theme park attractions and retrofitting of interiors has begun and RWS' Universal Studios theme park - which is Asia's first and will feature 18 unique-to-Singapore rides and attractions - will soon teem with action.

From the middle of next month, performers of its various shows will begin training and rehearsing on-site. The various rides in the mega playground will also undergo stringent three-month-long, round-the-clock testing, in anticipation of the more than 12 million visitors RWS expects to welcome in its maiden year.

Prices have not been fixed but the IR stressed that it is "cognizant that it has to be affordable" for the masses.

Universal Studios theme parks in other parts of the world, such as Osaka for example, charge around $60.

By next March, the theme park, casino, a show theatre and four out of six hotels - representing roughly 60 per cent of the 49-hectare integrated resort - in the $6.6-billion property will open its doors.

The rest - the Marine Life Park and the Maritime Xperiential Museum, the ESPA spa resort and the remaining two hotels - will open progressively over the next two years.

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