Kok Thay cruis­ing ahead

Gent­ing Hong Kong comes out with new ver­sion of lux­ury lin­ers to tap into China mar­ket

The Star Malaysia - StarBiz - - Front Page - By LEONG HUNG YEE hungyee@thes­tar.com.my

INTO his mid-60s, Tan Sri Lim Kok Thay of the Gent­ing group doesn’t seem to be show­ing any signs of slow­ing down. In fact, he is steer­ing the cruise busi­ness at flank speed and as­pires to be known as the “King of Asian Cruise” in­stead of as­cend­ing to the ti­tle of “Casino King”, some­thing that his late fa­ther Tan Sri Lim Goh Tong had earned af­ter build­ing a casino on Gent­ing High­lands.

The group’s flag­ship com­pany, Gent­ing Bhd, com­mands a mar­ket cap­i­tal­i­sa­tion of RM30­bil, thanks largely to its casino op­er­a­tions on the high­lands and in Sin­ga­pore.

The Lim fam­ily con­trols the Gent­ing group through Kien Huat Realty Sdn Bhd, in which Kok Thay is a sub­stan­tial share­holder through the direct hold­ing of shares and in­di­rectly through a trust.

A ty­coon de­scribed Kok Thay as a worka­holic who is prob­a­bly one of the few in the top cor­po­rate cir­cles who has a busi­ness em­pire that op­er­ates at full steam on a 24-hour ba­sis.

“His phone has to be switched on for 24 hours be­cause the casino busi­ness runs all over the world,” says the ty­coon.

As for Kok Thay, it is his pas­sion for the busi­ness that still drives him.

And his affin­ity for the cruise busi­ness is telling with his probable plan to re­tire and live on a ship.

“I en­joy what I do, whether it’s the cruise or land side of the busi­ness and I would con­tinue to do it as long as I en­joy it. If I stop en­joy­ing it, then I might re­tire and live on a cruise ship.

“That’s what I started more than 20 years ago, with­out re­ally know­ing what it’s all about un­til today. I think we should be rightfully proud of it. But it’s still not fin­ished yet. The story is go­ing to get more ex­cit­ing,” says Kok Thay in an in­ter­view with Malaysian me­dia in Bre­mer­haven, Ger­many.

Kok Thay, who is the chair­man of Gent­ing Hong Kong Ltd (Gent­ing HK) that con­trols Star Cruises and the en­tire cruise busi­ness, speaks pas­sion­ately about the cruise busi­ness and the way for­ward.

He re­counts that his in­volve­ment with the cruise busi­ness stretches back to more than 20 years ago, when he started what was known at that time as Star Cruises.

Kok Thay’s first brush with the cruise busi­ness was in the 1990s when the Gent­ing group was op­er­at­ing a casino busi­ness in the Ba­hamas. Its lease ended and it was sit­ting pretty on prof­its, said to be more than US$5mil.

At that time, there was an op­por­tu­nity to in­vest in Car­ni­val Cruises, which was then a strug­gling cruise op­er­a­tor ply­ing the North Amer­ica and Cen­tral Amer­ica routes. Kok Thay was keen on it but his fa­ther (Goh Tong) was not. Over the years, Car­ni­val Cruises went on to be­come a US$5bil com­pany, while the Gent­ing group was still look­ing at ex­pand­ing its op­er­a­tions away from the high­lands.

Only in the late 1990s did the fam­ily go into the cruise busi­ness under the flag­ship of Star Cruises and kept on build­ing on it over the years – through a painful process.

Today, the cruise busi­ness comes under Gent­ing HK, which has a mar­ket cap­i­tal­i­sa­tion of HK$18.9bil.

Under the Gent­ing cruise um­brella sits three brands – the orig­i­nal Star Cruises brand, Dream Cruises and Crystal Cruises.

“We’re very proud that Crystal Cruises is part of Gent­ing cruises. We ac­quired it about two years ago and it gave us the mo­ti­va­tion that we had the strength and depth to build this new cruise brand, Dream Cruises,” Kok Thay says.

Ac­cord­ing to him, Crystal Cruises has the dis­tinc­tion of be­ing the most awarded cruise line in the world. Two lead­ing in­dus­try mag­a­zines – Conde Nast Trav­eler and Travel Trade – have awarded it as the No. 1 cruise line in the world for 20 years in a row.

Cruis­ing 4.0

Kok Thay says the group is now ready to trans­form the in­dus­try fur­ther with its “To­tal Free­dom” con­cept or what he deems as “Cruis­ing 4.0” with the lat­est ves­sel, the Gent­ing Dream.

It cost them US$1bil and took 12 months to build.

“This ship took 12 months to build, from what we call keel lay­ing to the han­dover. On land, it would be im­pos­si­ble to put up a 1,500-room ho­tel in 12 months from foun­da­tion. So, the ship­build­ing busi­ness, es­pe­cially what is done by the Ger­man ship­yards, is quite amaz­ing,” he says.

The Gent­ing Dream liner is built to cater specif­i­cally to the fast-grow­ing Chi­nese cruise mar­ket.

“We are bullish be­cause we don’t see a slow­down. All the play­ers are an­nounc­ing more ships be­ing based out of China,” Kok Thay says, adding that there are less than five ves­sels op­er­at­ing in China com­pared with 100 ships based in the Mediter­ranean and North Amer­ica.

“China is prac­ti­cally a vir­gin mar­ket. Our com­peti­tors are see­ing a five-mil­lion-cruise-pas­sen­ger mar­ket out of China. So you need a lot more ships.

“We’re very for­tu­nate to have placed an or­der. If not, we won’t be able to see a ship for another five years, and our com­peti­tors will take us to the clean­ers,” reck­ons Kok Thay.

He says with Gent­ing Dream, the group can now at least start the “to­tal free­dom” con­cept to get more data as to how the global-class ship should be built.

“To­tal free­dom” rev­o­lu­tionises the cur­rent free-and-easy cruis­ing con­cept. The “to­tal free­dom” con­cept al­lows pas­sen­gers a wider range of flex­i­ble on­board spend­ing choices com­pared to the cur­rent of­fer­ings.

In ex­plain­ing its Cruis­ing 4.0 con­cept, Kok Thay says prior to Gent­ing’s cruise, the two Amer­i­can play­ers dom­i­nated the cruise busi­ness and were rigid in their ways. The two are Car­ni­val Cruises and Royal Caribbean Cruises and catered mainly to Euro­peans and Amer­i­cans.

“I re­mem­ber in my first cruise, I had to bring my din­ner jacket to the Caribbean in 90-de­gree heat, and es­pe­cially for an Asian, you re­ally feel un­com­fort­able. You’re as­signed to a table and if you have a 6pm round for din­ner, you have to eat ... oth­er­wise you’re stuck.

“There’s only one choice, the main din­ing room, and ob­vi­ously, it’s all Western food. Af­ter the third day, you get so sick and tired be­cause there are no choices,” re­calls Kok Thay.

He saw an op­por­tu­nity – which is to build a cruise busi­ness to cater to the Asian crowd.

“When we planned for Star Cruises, we tar­geted it for Asians with the same cul­ture and back­ground. We need to of­fer that free­dom of choice. So we called it ‘freestyle’. When I talk about ‘to­tal free­dom’, it is mov­ing more in that di­rec­tion,” he says.

The cruise busi­ness in Kok Thay’s ter­mi­nol­ogy has gone through sev­eral phases.

The early phase of the cruise busi­ness, what Kok Thay de­scribes as Cruis­ing 2.0, is where the ship is pri­mar­ily built to cater for peo­ple go­ing on va­ca­tion. The ves­sels such as SS Nor­way are not meant for trans­porta­tion, have rigid meal times, for­mal at­tire and have re­stricted fa­cil­i­ties.

Cruis­ing 3.0 came in when Gent­ing bought Nor­we­gian Cruise Line in 2000 and in­tro­duced what it calls “freestyle” cruis­ing. A freestyle cruise con­cept ef­fec­tively means that there are no set times or seat­ing ar­range­ments for meals and no re­quire­ment for for­mal at­tire.

Now, Kok Thay is look­ing at Cruis­ing 4.0, which al­lows even more flex­i­bil­ity in terms of of­fer­ings such as din­ing and shows on board the ship com­pared to ves­sels under the “Cruis­ing 3.0” con­cept.

“With this new brand called Dream Cruises, we are look­ing at Cruis­ing 4.0,” Kok Thay says, adding that when Crystal Cruises gets its first ship built by its newly ac­quired ship­yard, that would be Cruis­ing 5.0.

Dif­fer­en­ti­at­ing the cruise rev­enue from gam­ing

From a busi­ness stand­point, Kok Thay notes that com­pa­nies in the cruise busi­ness have to re­main flex­i­ble and com­pete on the same field as the Amer­i­cans, as they are very ag­gres­sive and com­pet­i­tive.

“We have to stay on our toes, be creative and think out­side the box. This busi­ness has only three mean­ing­ful play­ers on a global ba­sis. Not many mega in­dus­tries have that small num­ber of play­ers.

“Be­tween the three of us, we ac­count for 70% to 75% of the to­tal global cruise busi­ness,” he says.

The cruise rev­enue is bro­ken into two parts – ticket rev­enue and on­board rev­enue.

Ticket rev­enue com­prises pay­ments for food, cabin and some form of en­ter­tain­ment. The rest of the amount spent by the cus­tomer on the cruise liner from en­ter­tain­ment to at­trac­tions such as gam­ing is con­sid­ered as on­board rev­enue.

Kok Thay balks at sug­ges­tions that the big­gest mar­gins come from the gam­ing busi­ness on board the cruise lin­ers.

“When you look at this ship (Gent­ing Dream), it is de­signed to pro­vide a life­style ex­pe­ri­ence. This is the new way that the old in­dus­try is try­ing to build.

The player that gets it right will en­joy the big­gest mar­gin. It doesn’t mat­ter whether it comes from the ticket side or on­board rev­enue side,” he says.

He feels that Gent­ing’s cruise busi­ness is be­ing seen as skewed to­wards gam­ing be­cause of its other casino op­er­a­tions.

“That’s how we get stereo­typed be­cause we’re Malaysian and we have a casino busi­ness,” Kok Thay says.

“While that may be true with the Star Cruises brand, if you look at Crystal Cruises, there’s no gam­ing dol­lar there. Not that it doesn’t have a casino, it does.

“All cruise ships have casi­nos, but it de­pends on which area of the world you are op­er­at­ing in, which mar­ket you are fo­cus­ing on and the prod­uct it­self. Cruise prod­uct it­self. Cruise ships have be­come more in­no­va­tive,” he ex­plains.

In the first six months to June 30, 2016, Gent­ing HK’s rev­enue from cruise and cruise-re­lated ac­tiv­i­ties in­creased 44.8% to US$384mil com­pared with US$265.1mil in the same pe­riod in 2015.

Its net rev­enue in the first half of 2016 (H1’16) in­creased 41.2% to US$307.8mil from US$218mil in the first half of 2015 due to an in­crease in ca­pac­ity days of 20.9% and an in­crease in net yield of 16.8%.

The in­crease in both ca­pac­ity days and net yield was pri­mar­ily due to the in­clu­sion of full six months’ con­tri­bu­tion of Crystal Cruises in H1’16, as com­pared with its post-ac­qui­si­tion con­tri­bu­tion since May 15, 2015 in H1’15.

Its rev­enue from non-cruise ac­tiv­i­ties was US$51.9mil in H1’16 com­pared with US$10mil in H1’15, pri­mar­ily con­tribut­yard ed by rev­enue from yard re­pairs and con­ver­sion ac­tiv­i­ties as a re­sult of the ac­qui­si­tion of ship­yards in Ger­many.

The group’s earnings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion for H1’16 was neg­a­tive US$28.1mil com­mil pared with US$29.6 in H1’15.

Kok Thay also notes that the group is in a unique po­si­tion be­cause there is an en­try bar­rier to the US$50bil in­dus­try.

Bank­ing on shi and cruises

Gent­ing HK is cur­rently the only cruise op­er­a­tor in the world with its own ship­yards. The com­pany has ac­quired three ship­yards in Wis­mar,

Warne­mu­nde and Stral­sund, Ger­many, for 230.6 mil­lion eu­ros (RM1.04bil) and re­named them as MV Werften.

Kok Thay an­nounced that Gent­ing HK would be in­vest­ing an ad­di­tional 160 mil­lion eu­ros (RM462mil) in its ship­yard busi­ness, bring­ing its to­tal to some 260 mil­lion eu­ros.

“We have al­ready stated that there would be another 160 mil­lion eu­ros. So, the to­tal would be 260 mil­lion eu­ros, but I think round­ing it up to 300 mil­lion eu­ros may not be a sur­prise be­cause we re­ally need state-of-the-art tech­nol­ogy to stay com­pet­i­tive,” Kok Thay says.

MV Werften will de­liver the first of four lux­ury Crystal River ships in 2017, the first of a se­ries of 20,000-gross-tonne Crystal En­deavor Class po­lar ex­pe­di­tion yachts in 2018, and the first of a se­ries of 201,000-gross-tonne Star Cruises Global Class cruise ships by 2020.

The planned an­nual out­put of MV Werften will be stepped up in fu­ture years to even­tu­ally build two NeoPana­max cruise ships of over 200,000 gross tonnes each and one Pana­max cruise ves­sel.

Kok Thay ex­plains that Gent­ing HK bought its ship­yard busi­ness be­cause it had no choice, as the de­mand for cruise ships has grown so sub­stan­tially that slots have be­come scare in terms of the de­liv­ery of new ships.

Since tak­ing over the helm. Kok Thay has been known to make bold de­ci­sions like the one to put money in Sin­ga­pore to build one of the two casi­nos. It has paid off in en­sur­ing that the Gent­ing group stays rel­e­vant within the re­gion.

Gent­ing’s cruise busi­ness has al­ways been com­pet­ing on an in­ter­na­tional plat­form. With Kok Thay at the helm and tak­ing a keen in­ter­est, it could just be the break he needs to tap into China’s grow­ing de­mand for cruise hol­i­days.

Dream ship: Gent­ing Hong Kong’s in­au­gu­ral ship for its Dream Cruises lux­ury cruise line, Gent­ing Dream. The ves­sel em­ploys a so­phis­ti­cated bal­cony-light­ing sys­tem.

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