In the second quarter of 2024, Genting Singapore, the operator of Resorts World Sentosa (RWS), faces a projected 35% decline in EBITDA to approximately SG$245 million, as forecasted by Morgan Stanley. This downturn is attributed to various factors including seasonal trends, reduced visitor numbers, and operational challenges stemming from an oil spill near Singapore’s shores in mid-June. Despite these setbacks, the company remains optimistic about its long-term prospects, with significant expansion plans underway.
Factors Contributing to EBITDA Decline
Analysts Praveen Choudhary and Gareth Leung highlight several factors contributing to Genting Singapore’s expected decline in EBITDA for the second quarter of 2024. Primarily, seasonal variations in tourism affect Sentosa Island’s footfall, coupled with a decrease in operational hotel rooms by 23%. Additionally, the aftermath of an oil spill in mid-June has impacted several beaches around Sentosa Island, including Tanjong, Palawan, and Siloso. Although the beaches remain open, water-related activities have been restricted, potentially affecting visitor numbers and revenue during the latter half of June and July.
Financial Outlook and Historical Context
Morgan Stanley’s estimate for Genting Singapore’s 2Q24 EBITDA represents 80% of its 2019 levels, underscoring the current challenges faced by the operator despite gradual recovery in the tourism sector post-pandemic. The company’s strategic initiatives, such as the SG$6.8 billion waterfront expansion set to commence this year, reflect its commitment to enhancing RWS’s appeal and capacity. This development project aims to add approximately 700 new hotel rooms and several attractions, signaling a significant investment in future growth.
Upgrading Hotel Facilities
In addition to its expansion plans, Genting Singapore is undertaking a refurbishment project encompassing 1,200 hotel rooms across three properties: the former Hard Rock Hotel Singapore, Hotel Michael, and Festive Hotel. This initiative is designed to enhance guest experiences and maintain competitive advantage in the upscale hospitality market. By upgrading its accommodation offerings, the company seeks to attract discerning travelers and bolster its revenue streams amidst challenging market conditions.
Strategic Responses to Challenges
Despite the setbacks posed by seasonal fluctuations and the recent environmental incident, Genting Singapore remains proactive in its approach. The company continues to collaborate with Singapore’s government to mitigate the effects of the oil spill and ensure the timely cleanup of affected areas. Moreover, efforts to diversify and enhance visitor experiences through ongoing investments in infrastructure and attractions demonstrate its resilience and long-term vision.
While Genting Singapore anticipates a decline in second-quarter EBITDA due to multiple factors including seasonality and environmental challenges, its strategic initiatives and long-term investments position it favorably for future growth. The planned SG$6.8 billion waterfront expansion and ongoing hotel refurbishments underscore the company’s commitment to enhancing RWS’s attractiveness and competitiveness in the global tourism landscape. By addressing current challenges while investing in future capabilities, Genting Singapore aims to navigate uncertainties and capitalize on emerging opportunities in the hospitality and entertainment sectors.