MMICC 2010 - 2nd Place - HKU

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CIRQUE DU SOLEIL A Growth Capturing Strategy Team 6 – HKUST Alex Wong | Jasmine Ling | Ula Xue | Vivien Yip

Transcript of MMICC 2010 - 2nd Place - HKU

Page 1: MMICC 2010 - 2nd Place - HKU

CIRQUE DU SOLEILA Growth Capturing

StrategyTeam 6 – HKUST

Alex Wong | Jasmine Ling | Ula Xue | Vivien Yip

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Agenda

• Situational Analysis• Market Analysis• Recommendations• Financials

Situational Analysis | Market Analysis | Recommendations | Financials

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Strengths

• Brand name: 15 shows with more than 70M tickets sold • Creativity: Established structured creation process

Opportunities Threats

Weaknesses

Situational Analysis

Situational Analysis | Market Analysis | Recommendations | Financials

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Opportunities Threats

Strengths

Weaknesses

• Lack of diversification:Las Vegas Resident shows for

50+% total revenue and much great portion of profit

Situational Analysis

Situational Analysis | Market Analysis | Recommendations | Financials

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Opportunities

Strengths Weaknesses

Threats

• Saturated market in North America:

US tourism industry growth rate: -5%

Situational Analysis

Situational Analysis | Market Analysis | Recommendations | Financials

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Weaknesses

Threats

Strengths

Opportunities

• Expand into emerging markets in Asia• Expand the creative platform and leverage on brand name

Situational Analysis

Situational Analysis | Market Analysis | Recommendations | Financials

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Strengths Weaknesses

Opportunities Threats

Brand name Creativity

Heavy reliance on Les Vegas shows

Emerging marketsExpand the creative platform

Saturated market in North America

Situational Analysis

Need for Diversification

Situational Analysis | Market Analysis | Recommendations | Financials

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Economy Growth

GDP growth (AP GDP growth of 7% in 2010 vs. 2.7% globally, China average 10% growth)

Affluent Population

Discretionary spending of affluent population in the three biggest cities in China: Reach 4.9 billion USD in 2015

2010 tourism industry estimates: Asia rise 4%, North America -5%, Europe unchanged (by IPK international)

Rising Tourism Industry

Lack of sound brand of entertainment show troupes

Market Not Mature

Potential for Asia Markets

Situational Analysis | Market Analysis | Recommendations | Financials

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Affinity to Popular Culture

Government Lead

Asian Market Analysis

Spending Pattern

20%

80%

Las Vegas

Gaming Revenue

Non-gam-ing rev-enue80%

20%

Macau

On average, a tourist will stay in Macau for 1.23 days

Separation of Gambling and Entertainment

Situational Analysis | Market Analysis | Recommendations | Financials

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Spending Pattern

Affinity to Popular Culture

Asian Market Analysis

1. China World Expo in Shanghai2. Singapore government actively called for bids for the two

casino resorts3. HK government`s involvement in HK Disneyland4. Thai government boosted the “Amazing Thailand,

Amazing Concept” value, with exemption of visa fees and reduced takeoff and landing fees

Government Lead

Situational Analysis | Market Analysis | Recommendations | Financials

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Government Lead

Spending Pattern

Asian Market Analysis

1. Disneyland, Universal Studio, Hollywood movies and Western-style entertainment diffused in Asia

2. New popular trends often emerge and spread over

Affinity to Popular Culture

Situational Analysis | Market Analysis | Recommendations | Financials

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Asian Market Analysis

Leverage on popularity of Western culture

Affinity to Popular Culture

Cooperate with government to gain support and backup

Rethinking partnership in Asia

Casinos may not be the best

Government Lead

Spending Pattern

Situational Analysis | Market Analysis | Recommendations | Financials

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Recommendations

Resident Shows Limited Runs

Asia

Touring Shows

Expand footprint in Asia

Resort in Shanghai Branding and recognition

Situational Analysis | Market Analysis | Recommendations | Financials

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Staged Performance in Asia

• Still immature and not well established• Popularity among customers to be improved

Asian Markets

• Root and core competence • International reputation and experience

Cirque du Soleil

Brand Building and Creating Markets

Enable Diversification

Situational Analysis | Market Analysis | Recommendations | Financials

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Touring Shows

Montreal & N. America

(4-5 years)

Europe(3 years)

Asia(2-3 years)

Australia(1 year)

S. America(1 year)

Existing Schedule

Situational Analysis | Market Analysis | Recommendations | Financials

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Touring ShowsStart and extend the tour in Asia

Asia(3-4 years)

Australia(1 year)

S. America(1 year)

Europe(3 years)

N. America & Montreal(3 years)

Situational Analysis | Market Analysis | Recommendations | Financials

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Limited-Run Shows

• Shorter show time: 1.5 hours• Mix of creativity and legacy• Revamp or extract the most exciting components

from previous successful shows• Innovation on storylines

• New use of existing costumes and props• Strong marketing and PR efforts• Relate to CSR or festive events

Situational Analysis | Market Analysis | Recommendations | Financials

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Limited-Run Shows

Drawing attention

Create scarcity

Creative challenge

Impacts

Gone-is-gone

Mix-and-match

Limited-run Shows

Marketing and PR

Situational Analysis | Market Analysis | Recommendations | Financials

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Resident Shows

• 7 shows in Las Vegas• Only at Macao and Tokyo in Asia• Room for further growth

Situational Analysis | Market Analysis | Recommendations | Financials

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Singapore Hong Kong Shanghai Taipei Seoul Bangkok

Purchasing power

Show compatibility

Tourist traffic

Infrastructure

Total 2 2 1 5 4 6

Expansion into Asia

Situational Analysis | Market Analysis | Recommendations | Financials

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Comprehensive Experience: Resort

GovernmentCirque

du SoleilProperty

Developer

Artistic concept provider and stage performer

Promotion, land and infrastructure support

Shopping malls, hotel, theatre, restaurant, spa, and entertainment facilities

Situational Analysis | Market Analysis | Recommendations | Financials

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Strategic Advantages of Shanghai

Complexes Failure in London

No such obstacles in Shanghai

• Lack of creative control

• Slow project development

• Aggressive scale

• Government support

• Industry preference for upscale projects

• High expected demand

Situational Analysis | Market Analysis | Recommendations | Financials

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Strategic Advantages of Shanghai

• Local government– Economic indicators matter– Prefer land use for tourism

• Real estate developers– Face restrictions by central government– Switch from residential projects to resort

• Expected demand– Shanghai: Important tourist destination

Situational Analysis | Market Analysis | Recommendations | Financials

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Cirque du Soleil and Resort

• Wholly responsible for art design and creative content

• Instil Cirque du Soleil feeling into every point of contact with customers

• Hardware: Interior design, decorations, beds, costumes

• Software: Interactions and atmosphere

Situational Analysis | Market Analysis | Recommendations | Financials

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Other Resort Revenue

Cirque du Soleil

Box Office

(Capital Investment)

Government and Developer

(Property Construction)

Partnership Deal Structure

(Production)

Show

(Creative Royalty)(Theatre Operations)

(Show Operations)

Operating Profit

Situational Analysis | Market Analysis | Recommendations | Financials

100% (Property Construction)50% (Production) 50% (Production)

50% Box Office 50% Box Office100% Creative Royalty

50% (Theatre Operations)50% (Theatre Operations)50% (Show Operations)50% (Show Operations)

3% Resort Revenue97% Resort Revenue

-

-

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Timeline for Resort PartnershipYear

12 13 14 15Issues

Negotiation

Design and Construction

Show production

First Phase performance

Review

2nd Phase Performance

09 10 11 16

Situational Analysis | Market Analysis | Recommendations | Financials

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Revenue

2012 2013 2014 2015 20160

5

10

15

20

25

30

35

40

45

7 8 8 8 8

10 10 11 11 11

20 2122 23 23

Local

Other tourists

Tourists in Hotel

65%13%

8%5%10%

Revenue from Hotel Tourists

Ticket

Accommodation

Shopping

Food

entertainment

Situational Analysis | Market Analysis | Recommendations | Financials

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Profit

Revenue Production cost Operation Cost Theater Cost Profit0

5

10

15

20

25

30

35

40

45

50

44.645

15

15

5

7.145

USD Million

Situational Analysis | Market Analysis | Recommendations | Financials

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Asian markets with most opportunities

Different business landscape

Creativity and brands

Over-reliance on Las Vegas

Uncertain US tourism outlook

Potential of emerging markets

Touring shows into Asia

Limited-run shows to stir up markets

Resort collaboration

New revenue sources

Operations diversification

Tap the potential in Asia

New inspirations for creativity

Situations Markets Strategy Impact

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Backup SlidesTouring Shows Shanghai

Resident Shows Affluent Population in Shanghai

All Shows Resort Partnership

Resort World Sentosa Financial Details I

Marina Bay Sands Casino Financial Details II

Singapore Casinos Financial Details III

Asian Markets Financial Details IV

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Touring Shows

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Resident Shows

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All Shows

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Resorts World Sentosa• Built by Malay’s Genting Bhd for $4.4 billion opening

on March 2010• The 49 hectare integrated resort will cost S$600

million solely for land• S$1.6 billion on Southeast Asia’s first Universal Studio

theme park called Universal Studios Singapore.

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Marina Bay Sands Casino

• Opening: Apr 2010• By Las Vegas Sands• Fixed $1.2 billion cost of 6m sq. Feet, The most

expensive casino in the world• Three hotel towers with 2,500 rooms (>52,000

people)

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Singapore Casino

• Visitor arrivals in Singapore rose 24% in February from 2009 since its first casino opening

• Hotel occupancy rose 4.9• Each casino expected to contribute 0.5% to

Singapore’s GDP by 2015

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Asian Markets

• Economic growth2010– Asia: 7%– China: 10%– Global: 2.7%

• Affluent population

Source: AllianceBernstein

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Shanghai

• Rapid development and active brand building• Financial center and tourist hub in Asia• Welcome foreign investment• World Expo 2010

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Affluent Population in Shanghai

• Defined as earning US$6,000 to US$25,000 per year, numbers grew from practically zero over a decade ago to estimated 87 million in 2005; 317 million in 2015

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Resort Partnership

• Upscale Property Developers in China• With experience in running shopping malls,

hotels and entertainment facilities

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Financial Details

Revenue For Cirque du Soleil

USD Hotel Tourists Other TouristsLocal

Population Total(in mil) 19 19 20% Population Visiting 0.5% 1% 2%Ticket 100 100 100Accommodation 330Shopping 200Food 130Entertainment 250 50 20 Total consumption per person per stay 1010 150 120Total Revenue per year (in mil USD) 7.3435 9.785 20.24 37.3685

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Financial DetailsRevenue for Developer and Government

USDHotel

Tourists Other

TouristsLocal

Population Total

(in mil) 19 19 20

% Population visiting 0.5% 1% 2%

Ticket 100 100 100

Accommodation 330

Shopping 200

Food 130

Entertainment 250 50 20

Total share 82.555 18.05 27.2 127.805

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Financial Details

Capital Investment (per Show Program)

Production Cost 15

Variable Cost per Year

Operation Cost 17.5

Theatre Operation 5

Total Variable Cost 22.5

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Financial Details

Location Spending per Mainland Visitor

HK US$882

Taiwan US$1471