KUALA LUMPUR, July 26 (Reuters) – Malaysia’s Genting group will open the doors on Friday to what it says is Asia’s biggest hotel, launching a venture aimed at reducing reliance on casino revenues but stirring concerns it could hit the softening sector.
Lee Choong Yan, Executive Vice President of Genting subsidiary Resorts World Bhd told Reuters the 3,300-room First World Hotel had not yet stopped growing, with plans to nearly double the number of rooms offered by 2005.
“When completed, First World will have 6,300 rooms. It will possibly be the largest hotel in the world,” he said.
That would put it ahead of competition such as MGM Mirage’s (MGG) 5,000-plus-room hotels in Las Vegas, Lee said. Asia’s next biggest hotels have less than 2,000 rooms, Genting officials said. Genting Bhd , which is also involved in oil and gas, power generation, paper and packaging, property and plantation, runs Malaysia’s sole casino, a 24-hour hilltop hotel resort in central Pahang state, drawing some 14 million visitors a year from the region, particularly Singapore and Indonesia.
The 1.2 billion ringgit ($316 million) First World, which Lee described as a budget three-star facility, began business last December, rolling out new rooms in phases along with a convention centre and entertainment complex.
It now accounts for nearly half of the 6,900 rooms available on the sprawling hill-top resort.
“We are confident of getting a good UFA return,” Lee said in an interview but declined to give more details on the financials.
He said business to date had been brisk, with room occupancy at more than 70 percent since December.
Analysts feared that the deluge of new rooms might hit the already softening hotel industry with average occupancy rate of less than 65 percent since the September 11 attack on the United States.
Tourist arrivals during the first six months of this year dropped about 12 percent from a year earlier, but Tourism Minister Abdul Kadir Sheikh Fadzir told Reuters the First World Hotel would be good for the industry.
“We are still picking up from September 11 and the recession but we need more rooms in this particular place. It is unique and shouldn’t hurt the other hotels in the other areas.”
About half of Genting’s visitors are tourists, mostly from the region, but the group wants to win more of the 13 million plus visitors who come to Malaysia each year.
The Genting group is headed by rags-to-riches tycoon Lim Goh Tong, who became a hero to other ethnic Chinese when he beat the odds to win the much sought after licence in 1969.
The 84-year old casino czar, then a small-time government contractor, impressed Malaysia’s first premier Abdul Rahman by carving a road up a steep, jungly hill to build his Genting Highlands gaming and leisure resort.
But the glitzy complex sticks out like a sore thumb in mostly Muslim Malaysia and Genting’s casino licence is renewable annually, exposing it to an increasingly conservative Muslim lobby objecting to its main revenue source.
Islam deems gambling a sin and Muslims are banned from casinos. Leaders of the main Islamic opposition party have said they would shut the casino if they were to win power in the state during general elections due by 2004.
Last year, Genting pitched for one of three casino licences offered by Macau in a bid to shift some of its gaming business overseas. But it lost to Macau’s own gaming king Stanley Ho and Las Vegas moguls Steve Wynn and Sheldon Adelson.
The Macau failure sparked a 10 percent drop in its stock price, but the share has since recovered. Genting closed Friday up 30 cents at 13.70 ringgit.
Genting and its 55 percent subsidiary Resorts World said last month they were poised for better results this year following the recovery in the economy and their expansion programmes.
Multex Global Estimates’ consensus of 24 brokers forecast a net profit of 711 million ringgit ($187 million) for Genting for financial year ending December, up 57 percent from a year earlier, with earnings per share (EPS) estimated at 100.95 cents.
Resorts World net profit is expected to rise 67 percent to 586.70 million ringgit year-on-year.
More than 80 percent of Genting’s revenue comes from gaming, though the group is on a diversification push.
“I don’t think there will be a time when the hotel business can overtake the casino,” said Mak Hoy Kit, an analyst at KAF Seagroatt & Campbell.
“It’s still very much a case of the hotel complementing the casino, not the other way around.”