Success of integrated resorts in Southeast Asia and lessons for Sri Lanka

Friday, 16 August 2013 00:06 - - {{hitsCtrl.values.hits}}

Candor Equities Ltd. has come out with research on the success of East Asia’s integrated resort industry and valuable lessons for Sri Lanka as the country embraces a new economic value stream. Candor opines that integrated resort model is beneficial and is ideal for Sri Lanka to attract visitors to the country and increase tourism receipts. The research also briefly analyses premier blue chip John Keells Holdings (JKH) announced integrated resort project. The integrated resort concept has become quite popular in Macau, Malaysia and Singapore in the past decade. Candor thinks it’s worthwhile to have an understanding of these markets, especially as Sri Lanka has taken steps to promote integrated resorts in the country. Malaysia Malaysia is a popular tourist destination and received 25.03 million tourists in 2012. Receipts from tourism for 2012 were US$ 19.8 billion. At

end-2012, Malaysia had 195,445 hotel rooms and an average occupancy rate of 62.4%. Resort World Genting, situated in the middle of a 130 million year old rainforest and at 6,118 feet above sea level, is the only mixed-used resort that offers gaming facilities in Malaysia. Resorts World Genting Resort World Genting is an integrated resort offering leisure and entertainment facilities and received over 20 million visitors annually in the last two years. The resort has six hotels with 8,000 rooms, convention facilities, 200 dining and retail outlets and gaming and entertainment facilities including a casino and a theme park. Operated by Genting Malaysia Berhad, Casino de Genting is the only legal land based casino in Malaysia. Genting Malaysia also has gaming operations in Singapore, the UK and the US. Singapore Singapore has two integrated resorts, namely Resorts World Sentosa which is part of Genting Malaysia, and Marina Bay Sands owned by Las Vegas Sands. Singapore received 13.2 million and 14.4 million international visitors in 2011 and 2012 respectively. Tourism income for 2012 is estimated to have been US$ 23 billion while gaming revenue amounted to US$ 5.85 billion. Entrance to casinos is free for foreigners while Singaporeans have to pay and entry fee of S$ 100. Resorts World Sentosa Resort World Sentosa is Singapore’s first integrated resort that commenced operations in 2010. The S$ 6.59 billion resort spans 49 hectares and

brings together a Universal Studio theme park, the world’s largest oceanarium, six hotels, the Resorts World Casino, a convention centre, retail outlets and world class restaurants. It is interesting to note that Marina Bay Sands derived over 75% of its revenue from gaming activities in 2011 and 2012. Macao Macao has some of the largest integrated resorts in the world and is also the largest gaming market in the world. Macao attracted over 28 million visitors in 2012 and also earned US$ 38.2 billion in gaming revenue for the year. At end-2012, Macao had a total of 35 casinos with 23 of them located in the Macao Peninsula and the other 12 in Taipa Island. Proposed integrated resorts in Sri Lanka The Government of Sri Lanka has identified the importance of tourism to the economic growth and is taking various measures to increase the attractiveness of the country for tourists. Approving integrated resorts and supporting these developments through tax concessions and other numerous benefits for owners is one such step. Apart from the JKH integrated resort mentioned earlier, the Sri Lankan Government has granted approval for another integrated resort to be constructed in the heart of Colombo. The project is a joint venture between Rank Holdings and Australia’s Crown Group. The Crown project is planned as a 36-storey entertainment complex with a 400-room hotel, a casino and other amenities and is expected to cost US$ 350 million. The two parties are yet to announce further details of the project. Lessons for Sri Lanka

Candor believes that Singapore is the best comparable market for Sri Lanka and that Sri Lanka can learn valuable lessons from Singapore’s experience. Singapore’s integrated resorts achieved record revenues in their first years of operations and high occupancy levels at hotels. During 2012, Singapore earned US$ 5.85 billion in gaming revenue. However, the revenue growth is slightly tapering off with the loss novelty as well as global economic downturn. The imposition of stringent rules for locals has also added to the slowing growth. The reasons for Singapore’s success can be attributed to the following:

Proximity to major cities in Asia and its unrivalled transportation infrastructure

Major source markets for tourism in Singapore are China and Indonesia. Furthermore, Singapore is one of the best connected countries with over 110 airlines operating from Changi Airport flying to more than 240 cities in 60 countries.

Singapore’s positioning as one of the best financial hubs in Asia

Singapore not only attracts the leisure traveller but the business traveller too by offering convention and exhibition facilities. According to the International Congress and Convention Associations’ (ICAA) rankings, Singapore is the only Asian city among the top 10 convention cities in the world. During 2012, Singapore hosted 150 ICAA events.

Availability of many tourist attractions

Singapore offers world class leisure and entertainment facilities, international shopping malls and many other attractions for tourists. New and upcoming attractions include the Singapore Sports Hub that will house a 55,000 capacity National Stadium with a retractable roof and the National Art Gallery. Candor believes that Sri Lanka has to take a quantum leap in improving the infrastructure and attractiveness of the country as an entertainment/tourist destination in order to compete with the likes of Singapore, Malaysia and Macao. Proximity to major markets a definite plus for Sri Lanka Sri Lanka benefits from being just a one-hour flight away from India. India is already a major source market of visitors for Sri Lanka and Candor believes that integrated resorts would attract more Indians to Sri Lanka, as India’s gaming industry is limited to a few small players in the provinces of Sikkim and Goa. Post-war Sri Lanka is also witnessing rapid growth in tourist arrivals from China and the Middle East. Candor believes that these two markets too would contribute significantly to the integrated resort market in Sri Lanka.