Genting revamp seen boosting visitor numbers

Published in: Latest Intelligence Genting Bhd, Malaysia’s only casino operator, is likely to see a drop in visitor numbers this year as the company spends RM5 billion ($1.6 billion) to revamp its 49-year-old Resorts World Genting.
The Genting Integrated Tourism Plan Phase 1 will force the temporary closure of many of its key facilities, such as its theme park. However, analysts predict a spike in visitor arrivals from 2015 thanks to the opening of 1,300 new rooms, 3,000 new car park bays, and a theme park in partnership with US-based studio Twentieth Century Fox.
Genting Malaysia raised the budget on its integrated tourism master plan last year, upping the total investment to RM5 billion in December from the RM3 billion announced in July. The company, whose facilities are seen as ageing, is gearing up to meet increasing competition from regional neighbours with newer attractions and facilities.
Although Genting has the monopoly in Malaysia, some prominent local businessmen have also recently expressed an interest in seeking a casino license. Billionaire Vincent Tan said he would invest 3 billion ringgit ($933 million) in the Berjaya Hills complex, neighbouring RWG, should he get a permit.
Maybank Investment Bank Research forecasts total visitor arrivals to RWG will dip seven percent year-on-year this year due to the closure of its outdoor theme park since September 2013, the concert hall Arena of Stars from May-September 2014 and major sections of the First World Indoor Theme Park throughout 2014 for construction work.
"We conservatively assume nil theme park visitors over 2014-2016," said analyst Samuel Yin in a report.
However, the arrivals will see a strong uptick from next year onwards, "easily growing" by a seven percent compounded annual growth rate (CAGR), he said.
This will mainly be fueled by the new 1,300 room three-star hotel.
"When we visited the construction site of the new hotel in June, it appears that the construction has reached more than 20 floors high. The adjoining First World Hotel has 28 floors each block. We opine that topping off of the new hotel should commence soon.
"As we also noted that cladding works have commenced, we see no reason why the new hotel should not be opened by the second half of 2015 as scheduled. In fact, we understand that the hotel may be ready by mid-2015," Yin said.
Assuming a 90 percent occupancy rate and an average of two visitors per room, this new hotel is able to take in around 850,000 visitors per year, he added.
According to Hong Leong Investment Bank analyst Grace Chew, RWG's hotel occupancy rate during the first quarter of this year was lower at 87 percent versus 92 percent in the corresponding period last year.
Hotel revenue fell nine percent on the back of a 14 percent decline in foreign guest arrivals, she said. The decline mainly came from Singaporeans and Indonesians, showing a fall of 23 percent and 10 per cent, year-on-year, respectively.
However, the declines were partially offset by the higher tourist arrival from Hong Kong, China and Vietnam, Chew said.
In the first quarter of this year, Genting reported an increase of just 1 percent in its Malaysian leisure and hospitality business to RM1.36 billion, compared with a 29 percent jump at its newer Resorts World Sentosa property in Singapore.
Historically, efforts to increase capacity have provided a boost to revenue. RWG first raised its room count from 3,470 to 6,770 during 1999-2002, with the construction of First World Hotel Phase 1. Both revenue and visitor arrivals grew at an eight percent CAGR.
Between 2003 and 2006, RWG again upped its room count from 6,770 to 9,770, with First World Hotel Phase 2. This boosted revenue by 13 percent, and visitor arrivals by six percent.
Another contributor set to accelerate visitor numbers for the next two years is the 3,000 new car park bays at mid-hill, analysts said.
"Assuming there is one vehicle in one car park bay per day and average two visitors per vehicle, the new car park bays should accommodate around 2.2 million visitors per annum," Maybank Investment Bank said.
Day trippers will invariably be the largest users of the new car park bays, it added.
The new hotel and car park bays will collectively usher in three million visitors a year but after deducting a 10 percent overlap, Maybank's forecast for 2016 visitor arrivals is 20.9 million, which it said is a conservative end compared to the management's guidance of 24-25 million.
The new Twentieth Century Fox theme park, on the other hand, is expected to contribute to higher visitor numbers in late 2016 or 2017, analysts said.
Touted as the studio's first theme park project, it will feature rides designed from its titles such as Rio, Ice Age, Night at the Museum and Alien vs Predator.
"The Twentieth Century Fox theme park is slated to open by the first quarter of 2016. We believe that this target is rather aggressive. Universal Studios Singapore in Resorts World Sentosa took almost two years to construct," Maybank's Yin said, adding it may delay opening to early 2017.
While revamping its Malaysian property, which along with Singapore accounted for about three quarters of group gaming and leisure revenue in the first quarter, Genting is also pursuing ambitious overseas expansion plans, with two bids in for casino licenses in New York State, a new casino in Las Vegas and plans to compete for a license in Japan.
 

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