Sentosa IR Cost Rising Up!

Nov 7, 2007

Sentosa IR to cost $800m more, says Genting
Higher construction and labour costs and new attractions will bring the bill to $6b

THE price tag for Genting's Resorts World at Sentosa will be bigger than expected as a result of higher construction costs and additional attractions, such as a new roller coaster, being lined up.
Genting International now expects to spend $6 billion on the project, 15 per cent more than its original budget of $5.2 billion, said its managing director Justin Tan.

Of that extra $800 million, $275 million will go into the higher-than-expected construction costs; another $275 million will pay for the added attractions, with the remaining $250 million being put aside for contingencies.

The company explained that while it had locked down the prices for concrete and steel, labour costs and contractors' margins had shot up.

Mr Tan Hee Teck, the chief executive of Resorts World,said: 'If you look at Singapore today, there is $20 billion worth of construction going on. And because resources are scarce, the cost has escalated by more than we had anticipated.'

Resorts World is not alone in being stung by the changing economics of the construction industry. Soaring demand and the high prices of sand and steel have also hit building projects across the island.

Just two months ago, the other integrated resort, Marina Bay Sands, also disclosed that it was 'struggling...to stay within budget'.

Las Vegas Sands president William Weidner reckoned in August that the project could cost up to US$1.4 billion (S$2.03 billion) more than expected as a result of higher construction costs, as well as refinements to the design.

The executive director of the Singapore Contractors Association Limited, Mr Simon Lee, noted that contractors were dealing with close-to-full order books and were therefore being 'very selective' about the projects they were taking on.

Projects are thus attracting fewer tenderers, he added - not good news for Resorts World, which will award about $1 billion in jobs by early next year.

But Mr Tan still expects the resort to be ready for a soft opening in early 2010.
Construction is on track, with more than half the excavation, piling and reclamation works already done.

Asked about the new attractions being planned, Mr Tan said that two new rides would be put into the Universal Studios theme park, including a new roller coaster.

He added that four new multimedia shows would also be added, some designed by Jeremy Railton, who was behind the 2002 Winter Olympic Games ceremonies in Salt Lake City in the United States.

Money was being put into these and design improvements, he said, in anticipation of a 'bullish tourism outlook for Singapore and Asia in the next few years'.

Despite the higher budget, project returns to the resort are unlikely to be hit, the company said in its third-quarter results released yesterday.

It reported a loss of $393.4 million for the three months that ended on Sept 30, a reversal from the net profit of $86.9 million from a year earlier.