SCHOOL OF HOSPITALITY, TOURISM AND CULINARY ARTS

Bachelor of International Hospitality Management (Hons.)

HTM 3213 Tourism Economics

Name

Student ID

Chai Synwei

0304535

Chong Hui Sien

0302957

Yamone Phu Mon

1102LM89819

Billy Huang Ling Li

Joshua Lim Zhi Xuan
Lecture:
Ms Uma Thevi Munikrishnan

Date of Submission:
17th October 2013

0303753

Strength
1. Strong presence in leisure and hospitality segment.
Genting Berhad operates its leisure and hospitality segment through its subsidiary,
Genting Malaysia (formerly known as Resorts World). Its activities cover theme parks, gaming,
hotels, seaside resorts and entertainment. The Genting Group was founded in 1965 by the late
Tan Sri (Dr.) Lim Goh Tong with the development of a beautiful highlands resort, named
Genting Highlands Resort. It located at 2,000 meters above sea level and 58 kilometers from
Kuala Lumpur, capital of Malaysia. The Resort World Genting offers five hotels which include
Maxims Genting, Highlands Hotel, Theme Park Hotel, Resort Hotel, and First World Hotel.
These 5 hotels have more than 8,000 rooms, over 50 fun rides, 200 dining and shopping outlets.
In addition, First World Hotel is the worlds largest hotel which provided 6,000 accommodation
rooms. The main attractions of the resort are its casino, theme park, concert shows, food &
beverage and retail shopping. It is one of the most popular tourist destinations in Malaysia. Apart
from Highland Resort, Genting Berhad also owns and operated 2 seaside properties which are
Awana Kijal Golf, Beach & Spa Resort in Terengganu and Awana Porto Malai in Langkawi.
Strong presence in leisure and hospitality segment would thus improve overall revenue and profit
growth for Genting.
2. Diversified business operations
Genting Berhad has a broad and diversified business portfolio, which includes the
management of casinos and resorts, plantations, property development, oil and gas, e-commerce,
information technology and biotechnology. The three main pillars of Genting Berhads
investment are gaming, plantations and energy. However, in year 2013 they are looking for the
fourth business. The group has over 26 years of experience in developing, operating and
marketing casinos and integrated resorts in different parts of the world, including the Americas,
Australia, Malaysia, the Philippines, Singapore and United Kingdom. It has been voted
Malaysia's leading corporation and one of Asia's best managed multinationals. The Genting
Berhad's diversified business reduces its exposure to downturns in demand for any particular
product segment and also increases its growth opportunities.

3. Biggest Casino in UK
Genting Malaysia now is the biggest casino owner in UK. It owns 46 casinos which
under its subsidiary, Genting UK Plc. The company operates under the Circus, Maxims and Mint
brands. The strong market position in UK in the casino market provides the company
competitive advantage over its peers. Thus, it helps to increase its bargaining power.
4. Robust financial Performance
The company recorded revenues of MYR19,559 million ($6,409.9 million) during the
financial year ended December 2011 (FY2011), an increase of 28.7% over FY2010. The
operating profit of the company was MYR6,673.3 million ($2,187 million) in FY2011, an
increase of 51.9% over FY2010. The net profit was MYR2,867.5 million ($939.7 million) in
FY2011, an increase of 30.2% over FY2010. Robust financial performance enables the company
to expand, consolidate and manage its operations well. It also makes the company financial more
flexible.

Weaknesses
1. Weaknesses performance of diversified business
The main business of Genting Berhad, hospitality and leisure industry change seasonally. During
peak season especially holiday season, it can accommodate highly while only low accommodation
during off season. In order to reduce fluctuation of revenue, Genting Berhad has diversified into
various other sectors such as plantation, oil, gas, information technology, and energy etc. Although
they have diversified into many sectors, it cannot make revenue as hospitality and leisure industry.
During these years, revenue fell 2.8 percent to 1.43 billion ringgit from a year ago because of weaker
performance in plantations and leisure industry in Singapore. Furthermore, there are weaknesses in
property and manufacturing divisions. It is estimated that there will be an increase in the property
firms; its revenue has become worse and worse. Additionally, manufacturing divisions revenues
increased by 6% but profit before tax fall. Thanks to this weaker performance, there are negative
impacts on the overall growth of the company.
2. Overdependence

The central business of Genting Berhad significantly concentrated in Singapore and

Malaysia. The revenue of Genting Berhad derived from Malaysian and Singaporean (39.8 % and
39.7 %). By depending on Singapore and Malaysia market highly, Genting Berhad`s demands
are quite unstable. The situation of Genting might have hostile impact in the long run due to
geographic concentration. As a result of this, the company overall development may be affected.
3. Weak return
It is recognized that weak return in Genting Berhad in the past few years. It shows the
weakness of the management of the company. Its return on investment and return on equity
declined during these years in comparison with 2005 & 2006. As a result of this, it may bring
about lack of investors trustworthiness.
4. Decreasing company `s current and liquidity ratios
When the company`s debt increased in the past few years, liquidity of the company
declined significantly. Therefore, not only net current assets declined but also company current
ratio. Going down current and liquidity of the company revealed that there are weaknesses of the
company balance sheet. As a consequence of this, it affects the expansion of the business or the
growth of the market.

Opportunity

1. The macroscopic development of tourism in Malaysia

The two table show that Malaysia has became one of the largest tourism countries no
matter in Asia area. However, Malaysia is also the top 10 international tourism destinations in
2012 on the premise of the global economic crisis. Form this, we can see Malaysia is a country
that have great promising and potential. Many economists agree that shrewd state management
can be better than market forces in getting a developing nation on its feet, and Malaysia
government continues to promise its country all around the world. Dato' Rustam Yahaya, the
Ambassador of Malaysia to the Sultanate of Oman, hosted the event called Visit Malaysia Year
2014 at the Shangri-La Barr Al Jissah Resort and Spa, which featured a presentation on the
developments of tourism in Malaysia in Oman 2013, and he said Malaysia has been very active
in promoting tourism, which is now the third biggest contributor to the national economy he also
said, If you don't go, you won't know, most importantly, tourism opens Malaysia to the rest of the
world. Furthermore, Malaysia is a multicultural, multilingual and multicolored country, mainly
contain Malayan, Indian and Chinese, China and India are the countries have the greatest
population all over the world. As the two biggest developing countries in the world, the citizens
have the economic capability and purchase power to travel around the world, and Malaysia
cannot let this opportunity go away.
2. Genting Malaysia Berhads opportunity

Genting Malaysia Bhd is investing more than RM400 million to build the world's first
Twentieth Century Fox Theme Park to replace the old theme park at Resort World Genting,
Genting Highlands, featuring 25 movie-based rides and attractions, that will open in 2016.
Chairman and CEO Tan Sri Lim Kok Thay said the investment on the theme park was
part of a RM3 billion Resort World Genting refurbishment programme which include the
construction of an additional 1,300 hotel rooms adjoining the First World Hotel.
International tourism continue increasing, Malaysia government active in promoting
tourism industry and the development of Genting Malaysia Bhd, all these factors combine
together should provide a excellent opportunity to Genting Malaysia Berhad.
3. Pursue the foreign market
Genting Malaysia Bhd is investing 3.8 billion US Dollar to build up a new resort in
Miami - Resort World Miami. It included 4 hotels, able to provide 5,200 rooms, 1,000 residential
units, 1 conference center, shopping center, 50 restaurants and bars and 2 casinos. These two
casino is 47% bigger than the Venetian hotel in Macao, the present biggest casino in the world.
In addition, in the first half of 2013, Genting Malaysia Bhd spent 350 million US dollar
for 87-acre site in Las Vegas form Boyd Gaming Corp in order to complete the Boyds
unfinished Echelon Resort and will be re-branded as Resort World Las Vegas.
4. The bright side under crises
In the context of global economic crisis and the US government closed, it seems Genting
Malaysia Bhd resolutely choose enter to American market is not a good time. However, on the
bright side, once this two projects - Resort World Miami and Resort World Las Vegas start to run,
it will bring America a lot of advantages, such as provide numerous jobs to the American citizens
and decrease the unemployment rate. Therefore, Genting will gain a good reputation in the USA,
if Genting is able to take a good use of this opportunity to build up the brand image and increase
the confident of the citizen, this will become a foundation to exploit the American market. It may
be a little risky, but sometimes crises bring opportunities.

Threat

1. The market in Singapore is steep

Singapore is a small country and she doesnt have high population; however, there are 2
casinos in Singapore. This will causes the casino market in Singapore become steeper and more
competitive. The steep increase in financial status has permitted the country to make a few great
outlays within the sightseer division and lets sightseers a matchless research in the country and
culture.
2. Government policy in Singapore
According to the Casino Control Act in Singapore, to discourage locals from gambling,
the government collects casino entrance fees $70 for a 24-hour period or $1,400 for a year
from all Singaporeans and permanent residents; may soon have a "visit limit" to protect
financially vulnerable local patrons who visit the casinos frequently. The aim is to have them
curb their gambling behaviour before they become financially distressed.
3. Financial Risk
Genting is facing intermediate financial risk. Genting maintains a conservative capital
structure and a consistent healthy financial profile, due to its strong cash flow generation.
Coupled with a measured approach toward acquisitive growth, Gentings funds from operations
(FFO) to debt averaged 64% in the past three years, which compares favourably against industry
peers. With the proportionate consolidation of financially weaker associate, Star Cruises is
remained adequate while cash flow measures is low, with three-year average FFO to debt at
32.4% and EBITDA interest cover at 10x.
4. Single-site risk
Single-site risk of gaming business also one of the threat. Gentings gaming operations
are exposed to single-site risk, as most of its facilities are located at Genting Highlands in
Malaysia. The countrys largely Muslim population imposes added risk to regulatory
environment, although such risk has been lessened with the more moderate National Front
Coalition in power.
5. Competitive threats
Genting Malaysia also faces increasing competitive threats from an expanding gaming
market in the region, e.g., Macau and Singapore. Nevertheless, Genting derives most of its
revenue from the steady grind market at home, which is more resistant to competition. The
development of two integrated resort and casino projects in Singapore, scheduled for a 2009

opening, may draw visitors away from Genting Highlands and impact on arrivals in Malayisa.
Singapore PM Lee Hsien Loongs announced yesterday that potential developers would be asked
to submit bids for the integrated resorts at Sentosa and Marina Bayfront. Analysts were reported
as saying that if the Genting group does not win the bid to build one of the casinos it could lose
its customers from Singapore and Malaysian states, like Johor, to Singapore. The Genting group,
comprising Genting International PLC and Star Cruises Ltd, and Universal Parks and Resorts, is
one of the bidders for the casino project. It is currently operating the casino in Genting
Highlands. All agree that in the long run the two integrated projects will benefit regional tourism
as visitors to Singapore may travel on to other ASEAN destinations.