The House Always Win: Analysis of the Sentosa IR Bid

In about a week’s time, the results will be announced for the bid on the Sentosa Integrated Resort (IR). For the past few weeks, the three bidders are on the public relations (PR) offensive to demonstrate that they are the right one to set up shop here. This article looks at the strengths and weaknesses in each bid and also do an autopsy with recent newspaper article to speculate who may be the eventual winners.

Disclaimer: This analysis is based on public news and information on the Sentosa IR and is strictly of personal opinion. For more information, refer to the ChannelNewsAsia site for latest development. An archive of the press clippings can be found here.

When Las Vegas Sands won the last bid for the Marina Bay IR (or the first casino), the entire community was taken by surprise. For the first time, the Singapore government [1] gave the bid to a group which did not partner with any local government linked companies. That created the signal that they judged all the bids on the basis of merit. On top of that, the casino was not the main focus in their choice, rather it is Sands’ focus on turning the IR into a MICE (i.e. Meetings, Incentives, Conventions and Exhibitions) that won them the bid. To the government’s credit, it is a good decision on the Singapore government part to let the industry take the risk and run the investment, rather with any intervention from their part so that the IR can be successful in the long run. Now, in the coming Sentosa IR bid, will the government return to the same formula to pick the winner? This time round, things are more heated up, as all three bidders have been running a charm offensive in the media to convince the house that they are the one to remake Sentosa into a new theme park that will integrate the casino into the fold.

Kerzner-CapitaLand consortium: The Kerzner-CapitaLand consortium has put in a S$5.28b bid for the integrated resort on Sentosa. Atlantis Sentosa is the theme for their bid to win the hearts of the house. They have committed S$2b for the maintenance and refurbishment capital expenditure for its proposed integrated resort in Singapore over the first ten years.

Among the three, it presented the most futuristic and state of the art design that might be too far ahead of her times. Of course, this can work both ways for them. They have employed Frank O Gehry and Associates to design the entire place which adopts sea creatures and robotics major players that can interact with the visitors. On the partnering front, they recently revealed their trump card to partner with Discovery, Nickelodeon and MTV. Both MTV and Nickelodeon will establish state-of-the-art interactive television studios within the resort while Discovery will run a kids’ camp on marine life – for children aged 3 to 12. The last partner on their list to date is Walter Conti from Edge Innovations who is instrumental for successful Hollywood movies like Flipper and The Perfect Storm. Edge Innovations create the animatronics (life-like computer animations seen commonly in videogames and movies for Kerzner’s proposed Atlantis Sentosa project.

Even with the all goodies, there is one thing which we have also witnessed during their bid is their response to crisis. Unfortunately, during the course of their bid, their late CEO Butch Kerzner died in an accident. Yet, the entire team was able to hold the thing together and presented the bid on the actual date. That would be another way to assess this team.

Strengths: Strong partners and futuristic design that gives Singapore an unique brand instead of sticking to the conventional formula. Joint venture with CapitalLand, a government linked company in Singapore.
Weaknesses: Design may be too futuristic for appreciation.

Genting-Universal: Among the three bidders, Genting was hailed as the front-runner (ChannelNews Asia poll with a 52%) at the beginning of the bid. With Universal Studios, they presented a less risky formula and conventional design to the table. Recently, they have announced to build a biomed research centre, with the assistance of the most renowned scientist in the human genome project, Dr Craig Venter (also co-founder of Celera). If they successfully win the bid, the consortium will set up a research and learning centre on Sentosa on marine life. In their offerings for the bid, they include a Universal Studios theme park, three water-themed attractions, the world’s largest oceanarium – the Quest Marine Life Park – with 700,000 dolphins, bat rays and open ocean fish and a Maritime Museum offering a multimedia experience by simulating a shipwreck.

One major advantage for them is their understanding of the market in our region, given that Genting has been running successfully for the last few decades. Their link up with Star Cruise might prove to be a useful tie up with the Genting resorts. Another likely reason why they might end up winning the bid, will enhance relations between both Malaysia and Singapore. If you have read the article entitled “Najib presses Singapore button” in Today and given the time to the decision for the IR is close, one might speculate that there is political pressure from Malaysia to convince our government that Genting is a good candidate to win the bid, for they are given more opportunities to be stakeholders in Singapore investments. Of course, this is a speculation but nevertheless, it does give them some leverage in winning the bid.

There is one thing to note. Even if Genting loses the bid, it is likely that Star Cruises will link up with the winner of the Sentosa IR. Of course, the synergy may not be efficient as if Genting is the winner of the bid.

Strengths: Strong partners with Universal Studios, link up with Star Cruises and Genting and good relationship with Malaysia (with them having a stake in Singapore).
Weaknesses: Too conventional.

Eighth Wonder: Eighth Wonder has been quite before the submission of their bid. In their own credit, they have tied up with Banyan Tree which is in the spa-resorts industry within southeast asia and recently went IPO. Like Sands, they placed the highest amount of investment on the table: $5.5 billion (the reports did not indicate whether it is US$ or S$). The design concept is a casino with a facade that looks like a deck of flying cards and are iconic in the use of innovative materials, high-tech fittings and the inclusion of contemporary art. For those who did not know, “Harry” is the unofficial English name of our Minister Mentor. They have enlisted Deepak Chopra, one of the famous wellness gurus, Pele, a football legend from Brazil and Siemens (to develop personalized technologies for the ease of the visitors) in their bid. In addition, they have also proposed world’s largest living coral reef lagoon. Their possible media partners are Star TV and National Geographic. Among the three bidders, they did not mention how much they want to put in for the maintenance of their resort and they seem to be pressing the right buttons in terms of appealing to local knowledge about Singapore (from Harry to football).

Strengths: Interesting ideas (for example Pele’s sports school) and design appeal to the unofficial English name of our Minister Mentor (Harry’s Island). Puts in the largest sum of investment and works with local business community.
Weaknesses: A lot of disjoint concepts unlike Kerzner, which centred on one theme in their proposal.

Discussion:
So, who will win this IR race? There are mentions that Singapore Tourism Board are looking into developing the southern islands. Does that mean that we might get the 3rd or 4th IR given that MM Lee did not rule out that possibility.

To fashion a guess (and I may be wrong about this), Kerzner is my first choice to win the bid, followed by Eighth Wonder as a dark horse. The rationale is that the Singapore government wants a unique brand for the Sentosa IR as an attraction to bring tourists into Singapore, and I am banking on the argument that they would like to have a government-linked company in the project (as they did not do for the last time).

References::
[1] See this URL for the official announcement and their reasons for picking Sands

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