Staying on top

IT'S nearly closing time at the Giant Panda Forest. Kai Kai and Jia Jia are restlessly pacing their leafy, air-conditioned enclosures, oblivious to the gaggle of camera-clicking visitors a few feet away.

Kai Kai, a five-year-old male panda, eventually settles under some shrubs with his back to his audience and chews thoughtfully on some bamboo shoots, while staring at a small door in front of him. Jia Jia, his four-year-old female compatriot just over the artificial rock wall in the neighbouring enclosure, looking slightly grubbier as a result of frequent dips in her small rock pool, puts her ear to a similar door, straining to make out sounds of activity on the other side.

A zoo guide explains that the two pandas are eagerly anticipating their 5.30pm feeding that takes place daily behind the doors. The meal that awaits them comprises special biscuits, carrots, apples and more bamboo.

Here on a 10-year loan from China, the pandas are not quite as exciting as the attention-seeking otters or mischievous monkeys next door or even the red pandas housed in the same area. Yet, since their arrival, the endangered animals have been attracting as many 4,000 visitors every day. On a recent Saturday afternoon, tickets to see them, which cost extra on top of the admission fee to the Singapore Zoo, were sold out four hours in advance.

The two pandas will eventually be part of an exhibit at a separate theme park known as the River Safari, a new attraction operated by Wildlife Reserves Singapore (WRS). Stretching eastward up the Upper Seletar Reservoir, the new theme park is scheduled to open next year and will have several sections featuring the great rivers of the world, ranging from the Amazon to the Ganges and Mississippi. In its first year of operation, the new theme park is aiming to draw some 600,000 visitors.

A private-limited company 88%-owned by Temasek Holdings, WRS also operates the Jurong Bird Park and the Singapore Zoo, which opened in 1971 and 1973, respectively. "Over the years, we've launched various activities such as feeding programmes [and] educational tours. We have also added new facilities," says Isabel Cheng, chief marketing officer at WRS, in an email. Visitors to the zoo, for instance, can take boat rides at the surrounding reservoir. Now, WRS is preparing to expand its offerings further with the River Safari. That could put it at the centre of Singapore's effort to broaden and re-energise its tourism sector.

Tourism gamble
The local tourism sector has gone through rapid growth in recent years, fuelled by Singapore's decision in 2004 to license casinos. "If we want to grow our tourism traffic and double the number of tourists to Singapore, we don't just want them to come here because of the gambling, but if gambling is one of the things they want to do, then maybe we should allow them to do that in Singapore," said Prime Minister Lee Hsien Loong in his first National Day Rally speech in 2004.

In 2010, two integrated resorts (IRs), each incorporating a casino, opened their doors to great fanfare. By that time Singapore was also well into the successful hosting of the Formula One (F1) Grand Prix, and the imposing structure of Marina Bay Sands (MBS) became one of the circuit's highlights.

In 2010, Singapore had a record year for tourism, with 11.6 million visitors, a 20% jump from the year before. Tourism dollars collected were also a record S$18.8 billion, or a staggering 49% increase from the year before. The IRs alone were said to have added S$3.7 billion, or 1.7%, to Singapore's GDP within the first nine months of 2010. The momentum continued into the following year. In 2011, a record 13.2 million visitors streamed into the country, 13% more than the year before. Tourism spending climbed 18% to hit S$22.3 billion.

Not all players in the tourism sector were benefiting, though. According to the Association of Singapore Attractions, nearly half of the tourist venues in Singapore, particularly ticketed attractions in the city centre, reported a decline in visitors in 2010, compared with 2009. While the IRs were drawing in tourists like never before, they were also apparently cannibalising other local tourist offerings.

Since then, the tables seem to have turned, though. Struck by weakening consumer sentiment in the face of economic uncertainty, not to mention the novelty factor wearing off, earnings at both Las Vegas Sands' MBS and Genting Singapore's Resorts World at Sentosa have been on the decline this year.

Last month, Genting reported that earnings for the first nine months of 2012 declined 32% to S$515.5 million, on the back of an 11% dip in revenue to S$2.2 billion. On a quarterly basis, earnings for 3Q2012 ended December slumped 34% to S$138.4 million on a 16% decline in revenue to S$670.2 million. The main drag came from the gaming business. At MBS, lower VIP wagers brought down operating income by 37% to US$260.8 million (S$317.9 million) in 3Q2012 ended September.

MBS has said it is now intensifying its efforts to broaden its market. Among other things, it is reaching out to premium mass customers — those who are not quite high rollers but can still afford to drop some US$20,000 at the tables.

Will this intensify the competition that other local tourist attractions already face from the IRs? Or, will they see a positive impact from a new class of gamblers coming to Singapore? With other casino resorts in the region, do Singapore's IRs have any long-term competitive advantage? What else can Singapore do to attract tourists?

Multiple growth drivers
Industry watchers say the increased number of tourists drawn in by the IRs and other events have prompted many existing attractions, such as delectable hawker fare or streets of quirky shops only known to locals, to spice up their offerings in order to earn a place in the tourist's itinerary. That has indirectly helped transform Singapore into a more glamorous and exciting city for visitors.

Suggestions for fun in travel guides these days include shophouse rooftop cocktails and shopping in the Club Street and Arab Street areas. One pocket-sized travel guide, known for its lux and unconventional recommendations, proclaims that the country has evolved from being "Singa-bore" to "Singa-more".

Shopping and accommodation each typically account for about a fifth of tourism receipts, and have been growing steadily as more malls open and hotel room rates rise. Meanwhile, for several quarters, the lion's share of tourism receipts had typically gone to sightseeing and entertainment, which includes gaming. In 1Q2012, this amounted to S$1.5 billion, or 26% of total tourism receipts for the quarter. But in 2Q2012, this segment actually registered a 7% y-o-y decline, although it still racked up S$1.2 billion in spending.

For some perspective, however, only about a third of visitors to Singapore are actually tourists, analysts say. The other two-thirds are largely here for other reasons, including business and medical treatment, segments that have benefited from investment in the MICE (meetings, incentives, conventions and exhibitions) business by the IR operators as well as in top-end hospitals by corporate groups such as IHH Healthcare.

In 2Q2012, while sightseeing and entertainment spending weakened, a segment called Other Tourism Receipt Components became the largest recipient of tourism dollars. This segment includes expenditure on transport and, particularly, business and medical costs. In 1H2012, it accounted for S$2.9 billion of spending, which was a quarter of all tourism receipts for the period. In short, Singapore benefits significantly from spending from visitors who aren't just here for traditional tourism. These multiple sources of spending create a degree of resilience for the whole sector.

"Tourism is a cyclical business," says Derek Tan, an analyst at DBS Group Research who tracks the hospitality sector. "So, if you want to cut [the exposure] to that cyclicality, the market would need many growth drivers."

Looking ahead, medical tourism could begin to make an even larger impact. This year, the exclusive Mount Elizabeth Novena hospital opened. Owned by the IHH Healthcare group, it is aimed at the well-heeled medical tourist who would appreciate single-bedded rooms and concierge services. Singapore is aiming to grow its share of global medical tourism to 3% this year, from practically nothing in 2000. According to Standard & Poors, the medical tourism market had been growing at about 12% between 2004 and 2008.

Regional competition
Much like casinos, however, there is plenty of emerging regional competition for MICE and medical services. According to Frost & Sullivan, the healthcare market in Asia-Pacific as a whole is expanding rapidly and is expected to make up 34.6% of the global healthcare market by 2015. This year, the medical tourism market in Asia is expected to be worth US$4.4 billion, and expenditure in the region is expected to reach some US$2.9 trillion by 2020.

At the moment, it seems the Bangkok hospitals have the lion's share of this market. They serve more than 43% of medical tourists coming to Asia, while Malaysia is seeing a rise in the number of patients from Singapore, in addition to Indonesia. Additionally, India is also moving in on the opportunity, with its government said to be pouring some US$3.6 billion into medical tourism infrastructure. Frost & Sullivan estimates show the Indian medical tourism market is worth some US$2.3 billion this year.

Competition is rife in the conventions and leisure sectors as well. Industry analysts point out that Thailand has traditionally been a key player in the MICE industry, with costs much lower than in Singapore. It has been out of action in recent years due to political upheavals and natural disasters, but could soon see a resurgence. Meanwhile, Johor Baru has opened Legoland and Hello Kitty Town, and Genting has said it is already planning another resort in Iskandar Malaysia. That could draw some MICE business away from Singapore.

Quality over quantity
To boost Singapore's chances of maintaining its position in the tourism sector, the STB has embarked on an update of its Tourism 2015 campaign, which was developed after the SARS downturn and focused on driving up visitor numbers through initiatives such as the mega projects. Now, the focus is on customised experiences for the different types of visitors.

"We are betting on the proposition that the more we understand why people are coming to Singapore, the more we can create reasons for them to want to come back as well," says the STB's deputy CEO, Neeta Lachmandas, at a recent industry roundtable. "In the past, we used to do destination advertising. We have now augmented that [and] set up a consumer research and insights division. We want to understand someone coming from India versus someone from China, or from different parts of India, what their different needs are."

Initially billed as Tourism Compass 2020, it was a strategic shift conceptualised over two years with feedback from the industry. The aim of Tourism Compass is to ensure sustainable growth of the tourism industry through creating greater value for visitors and enhancing yields, or in effect going out to attract the type of visitor who would spend more. "When you're in land-scarce Singapore, while you're not neglecting the average kind of spending, you're really aiming for the higher end, because there are many who can afford [to holiday here]," CIMB's regional economist Song Seng Wun tells The Edge Singapore.

The STB says Singapore is on track to achieve 17 million visitors by 2015. There were 7.1 million visitors between January and June this year, an 11% increase from the year before. Tourism receipts collected topped S$11.5 billion, or 7% more than in the same period last year. Tourism contributed 4% to Singapore's GDP last year and the STB sees that doubling to as much as 8% eventually.

Achieving these targets isn't just about beating the competition, though. It is also about riding Asia's growth. "We can actually be growing with the region," Lachmandas says. "More collaborative opportunities, as a region, are a good way of how we can grow in Singapore." In the cruise sector, for example, it would only make good business sense if other ports in the region improved their infrastructure and collaborated with Singapore — a point made by tourism officials at the opening of the Marina Bay Cruise Centre earlier this year.

In fact, analysts believe that for now, there is enough growth in demand in the region for all players to benefit. "You have rising incomes and wealth in the region. Unless you have a deep recession that wipes out large parts of wealth, with moderate economic growth of about 4% to 6%, with middle-income [population] growth, there is plenty of opportunity," CIMB's Song says. "Of course, we can never be complacent. Just as we move up the value-added chain, so will everyone else."

The key is to have the right offerings and marketing strategies to ensure that people stay long enough in Singapore, says Tan of DBS. "The question is, will we see tourists staying longer?" After all, the three or four days that the average tourist spends may not allow him to enjoy all the attractions that Singapore offers.

For now, the IRs and high-profile events such as the F1 race will continue to drive the sector, for better or worse. But with the addition of new hospitals this year and the River Safari theme park next year, complete with the two giant pandas, Singapore's tourism sector might soon begin looking a little different.

This story first appeared in The Edge Singapore weekly edition of Dec 24-31, 2012.

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