Tay2006

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Strategic facilities management ofSuntec Singapore International

Convention and Exhibition CentreA case study

Linda Tay Faculty of the Built Environment, University of New South Wales,

Sydney, Australia

Abstract

Purpose – This paper aims to highlight how facilities can enhance the strategic competitive positionof a business organisation.

Design/methodology/approach – The methods of investigation used in this study includeobservation, in-depth interviews and secondary data.

Findings – This case study has shown that both hardware, i.e. facilities and software, i.e. businessphilosophy of the organisation are important to enhance its competitive position.

Research limitations/implications – This study has looked at only one case. Future research mayuse the same five-force model to assess and determine the contribution of facilities to the competitiveposition of a business organisation.

Practical implications – This study hopes to create more awareness among senior managementof the strategic importance of facilities to a business’s bottom-line.

Originality/value – Using a strategic management model, this paper illustrates the contribution of facilities management to the broader corporate goals.

Keywords Competitive advantage, Modelling, Market orientation, Strategic management, Facilities

Paper type Case study

IntroductionThe convention and meetings industry is today growing rapidly. While its absolutecontribution to a country’s national gross domestic product (GDP) may be small, thespillover effect is significant for the tourism sectors such as wholesale and retail trade,hotel and air transport. A study conducted in Singapore showed that for every$1 contributed by this industry, another $12 is generated in the national GDP(International Enterprise Singapore Press Release, 2001). As a result, manydestinations around the world have invested in the construction of conventioncentres (Oppermann, 1996). In particular, the Asia-Pacific region has seen rapidincrease in industry activity since the late 1980s. In its latest projection, the Union of International Associations (UIA) predicts that only Asia will experience a positive14.9 per cent growth in the next two years (UIA, 2005). The convention and meetings

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0263-2772.htm

The author wishes to thank the management and staff of Suntec City Development Pte Ltd fortheir generosity in sharing their experience and Renee Leong, for providing valuable assistancein the data collection and compilation process for this case study.

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Received September 2005Revised October 2005Accepted December 2005

FacilitiesVol. 24 No. 3/4, 2006pp. 120-131q Emerald Group Publishing Limited0263-2772DOI 10.1108/02632770610649386

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industry is a significant contributor to the Singapore economy. With its strategicgeographical location, Singapore has performed consistently well in attracting majorconventions (e.g. Asian Aerospace). Singapore was also identified as the top competitorfor the Australian convention and meetings industry (Weber and Ladkin, 2003).

Studies have shown convention facilities to be an important factor for the success of aconvention centre (Hazinski and Detlefsen, 2005; Weber and Ladkin, 2003). Thus far,studies on convention centres have consistently focused on the technical systems of convention facilities (Jalayerian, 1996; McMorrow, 1996). There has been a vacuum instudies that links convention facilities with business performance, i.e. the strategicmanagement of facilities. Consequently, the purpose of the case study is three-fold. First, itseeks to inform the state of facilities management practices within a convention centre inSingapore. This paves the way for future comparative research on facilities managementpractices within convention centres; especially those in Asia since this is the fastestgrowing region for the convention and meetings industry. Second, since technology hasbeen a key focus in convention centre research, this case evaluates the sustainability of technology as a competitive advantage. Finally, the case study aims to highlight howfacilities can enhance the strategic competitive position of the convention centre businessthrough a strategic management framework, i.e. Porter’s five-force model.

The case study begins with a literature review of the relationship between facilitiesand business performance. Key concepts that underpin this case study such ascompetitive advantage and the five-force model will be introduced here. Next, the casewill describe the creation, business philosophy and the facilities of Suntec SingaporeInternational Convention and Exhibition Centre. Following this, the case evaluateswhether technology can be a source of competitive advantage for Suntec Singapore andillustrates the role of facilities in enhancing the competitive position of the conventioncentre. Finally the case study closes with some concluding remarks.

Facilities and business performanceThe last three decades have seen the rise of many performance-enhancing theories forbusiness organizations. Whereas these theories have been extensively researched andapplied in industries such as hotel, human resource management, marketing,manufacturing, etc. only a handful of studies have been undertaken within the facilitiesmanagement industry to examine the link between facilities management and businessperformance.

One notable study was carried out by Alexander (1992) who applied the totalquality management (TQM) concept and posited that quality managed facilities willhelp an organization achieve key objectives. The TQM paradigm emphasizes the use of external-based quality goals, the use of cross-functional teams, widespread employeeinvolvement in the quality improvement process, and the use of process design and

control techniques to ensure conformance (Oakland, 1989; Grant et al., 1994). Alexander(1992) concluded his work with a quality plan for facilities management but noted thatit will take time for benefits of many of these quality initiatives to emerge, althoughthere may be short-term improvements. Tranfield and Akhlaghi (1995) related facilitiesto business performance indicators through a strategic capabilities approach.According to the authors, this approach focuses on the design of routines(co-ordination through systems, procedures and structures) for long-term, continuingperformance improvement. The authors argued for the relevance of key integration

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indicators such as the degree of teamwork, standardization of inputs and culturalreinforcements for improving facilities management performance.

A closely related concept to strategic capabilities is the idea of competitiveadvantage. Just as strategic capabilities focuses on developing internal capabilities of

the firm, competitive advantage extends the concept by looking at internal capabilitiesthat will produce a sustainable positional advantage, i.e. superior customer valueand/or lowest delivered cost. There are two basic sources of competitive advantage:superior skills and resources. Barney (1991) lists four essential requirements for aresource/skill to be a source of sustainable competitive advantage:

(1) it must be valuable;

(2) it must be rare among a firm’s current and potential competitors;

(3) it must be imperfectly imitable; and

(4) there must not be any strategically equivalent substitutes for this resource/skill.

In line with this perspective, there have been many attempts to empirically derive

“generic” competitive strategies (Miller, 1986; Kim and Lim, 1988). Many of theseconceptualizations have been influenced by the work of Porter who first published a bookon Competitive Strategy (1980) followed by Competitive Advantage (1985). Porter assertedthat in order to derive a competitive strategy, the organization must first evaluate itsposition within the industry againstfive factors: power over buyers, power over suppliers,barriers to entry in the industry, the threat of substitute products, and the overall level of rivalry within the industry. Figure 1 diagrammatically portrays Porters’ five-force model.

While there has been many performance-enhancing models developed over theyears, the five-force model has received strong support from within the property andfacilities industry as a strategic management framework in understanding the role of facilities in business performance. O’Mara (1999) suggested that a thorough

understanding of a firm’s competitive strategy is required before determining thebest property and facility strategies. This understanding begins with a clear diagnosisof the forces of competition within the industry. From here, it is clear that the five-forcemodel complements the other strategic management concepts such as TQM andstrategic capabilities in that it provides an assessment of the external environment inorder that a competitive strategy may be developed through the firm’s internal

Figure 1.Porter’s five-force model

IndustryCompetitors

Supplier Buyers

Potential

Entrants

Substitute

Source: Porter (1985)

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capabilities. Similarly, Edwards and Ellison (2004) considered Porter’s model to besufficiently well developed and flexible to be capable of broad application acrossa range of different business types. This allows the property and facility implicationsto be explored over a range of different strategies applied to different organisations.

The cogency of the five-force model is thus well-positioned for this study.The next section provides the background information to Suntec City by describing

its creation, business philosophy and facilities. This then serves as a backdrop againstwhich the role of facilities in enhancing the business performance of Suntec SingaporeInternational Convention and Exhibition Centre will be evaluated.

The creation of Suntec CityLocated on 11.7-hectare of prime land adjacent to the Central Business District inSingapore, Suntec City is the single largest integrated commercial development withfive office towers, a shopping mall, and an international convention and exhibitioncentre (Suntec Singapore) with a total of 7 million square feet of space. Suntec City

Development Pte Ltd was formed by 11 Hong Kong tycoons in 1988 through a winningbid of S$209 million for the land. By 1997, Suntec City was completed and today offersdirect access to 5,200 hotel rooms, 1,000 retail stores, 300 restaurants and the region’snew centre for the performing arts, Esplanade – Theatres on the Bay.

The business philosophyIn the early days, Suntec City was called a bowling alley by the press because of thelack of visitors. Many attribute this to poor location as Suntec City was not nearenough to prime office and shopping locations. In response, Suntec City defined a nichefor itself as Asia’s Vertical Silicon Valley by embracing technology and today has anoccupancy rate of more than 95 per cent for its office and retail properties.

According to its CEO, Mr Wong Ah Long, a critical success factor for Suntec City isan open style of management that views criticisms as a source for improvements andswiftly responding to them. At the same time, Suntec also adopts a business concepttermed facilities service provider (FSP). The FSP concept transforms the traditionalrole of a landlord to that of a business partner with its tenants through strategicpartnership, business alliance and constructive connectivity. Under this broad FSPconcept, many IT initiatives have been implemented. These include:

. broad band access via fibre optic cable to enable internet communication amongtenants;

. incubators for start-up companies which comprise shared office space,management and administrative services, and access to capital via a networkof investors and a virtual set-up for companies that do not need physical space;

. a community web portal, with intranet capabilities, to enable tenants to shop,sell, acquire goods and services, book restaurants and/or travel reservations; etc.

. common telecommunications connection that enables tenants to communicatewith each other at no cost, thereby encouraging networking among tenants; and

. an internet call center enables tenants to provide online customer support fortheir web sites to build relationships with their customer and boost online sales.

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Suntec Singapore International Convention and Exhibition Centre (SSICEC)One of the key facilities of Suntec City is its convention and exhibition centre – SuntecSingapore. It has total gross area 100,000 m2 and is one of Asia-Pacific’s largestpurpose-built venues. The six-storey centre was built at a cost of S$620 million. Since

its opening, Suntec Singapore has won many awards with its standards of service,security and facilities and has hosted 1,356 and 1,288 events for the years 2001 and2002, respectively. Suntec Singapore’s vision is to be “The World’s Best Host” and itprides itself in its ability in customizing facilities to cater to their customers’ needs.They have the ability to organize a meeting of ten or a convention of 10,000 people.

The facilities available at Suntec Singapore include:. Car parking. Suntec City has the largest carpark in Singapore with 3,200 parking

lots spread over two basements. Music and landscaping is also present in thecarpark to provide the Suntec City user maximum comfort from the verybeginning to the end. In addition, there are trained traffic wardens in the car parkto direct cars to empty parking lots.

.

Convention hall. This is the largest column-free meeting area in Asia capable of accommodating 12,000 delegates in its 12,000 m2 column free space.

. Exhibition hall. Its 12,000 m2 floor space can be subdivided into three smallerareas if required.

. Ballroom. The2,150m2 ballroom is a multi-purpose, sub-dividable space thatis ableto accommodate 1,800 people theatre style featuring pre-function areas.

. Meeting rooms. There are 31 meeting rooms, ranging from 76 to 253 m2, havingthe capacity to fit in 10-400 people. All these rooms are equipped withstate-of-the-art technology to cater to clients’ needs. There is also a special VIPmeeting room for up to 26 delegates, in the Executive Suite, which has its ownlounge and bar area.

. Theatre. The theatre spans over two levels and has a 596 seating capacity.

. Concourse. A multi-purpose space on level 3 with 930 m2 of space, the concoursecan cater for up to 600 persons in banquet-style.

. Lobby. Another multi-purpose space at the entrance to Suntec Singapore, thelobby is mainly used for exhibitions and public displays.

. Gallery. The gallery is 3,700 m2 of versatile space located that can cater for1,000 delegates in a banquet-style settingor 3,000 delegates in a theatre-style setting.

To complement the above facilities, Suntec Singapore also provides services such asfood and beverage and it also has the largest banquet kitchen in Singapore, providingon-site and off-site catering facilities for all events. The Digital Congress Network

system provides infra-red simultaneous interpretation for up to 14 languages. Theemployment of this infra-red light instead of radio waves better ensures that soundsignals do not leak into adjoining halls. In addition, the portable seating system allowsflexible configuration and allows for easy set-up and retrieval. In addition, SuntecSingapore has also formed an alliance with its neighbours. This creates aself-contained and totally integrated destination. The alliance includes hotel partnersoffering attractive rates for convention delegates, shopping malls in the vicinity, andthe Esplanade – Theatres on the Bay.

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Challenges for Suntec Singapore international exhibition and conventioncentreThe convention and exhibition industry which includes meetings, incentives,conventions and exhibitions (MICE) is worth about a billion dollars a year and

provides 15,000 jobs in Singapore (International Enterprise Singapore Press Release,2001). While Singapore has performed well as a MICE destination, the industry isgetting increasingly competitive. Table I shows that there are several countries whichhave shown a growth greater than 50 per cent in the last ten years since 1993. Table IIshows the top ten international meeting cities in 2004.

Further, Malaysia’s Putra World Trade Centre has been playing a more active roleto promote the country as a convention and exhibition destination since it came under anew management in 1993. The authorities are also working on improving the air accessof destinations like Penang, Sabah and Sarawak from their key overseas markets.Equipped with strong economic performance, good infrastructure, affordable hotelrates, support from the federal government, state governments and airlines, the futureof Malaysia’s convention industry remains bright. Thailand’s newly completedInternational Trade and Exhibition Centre is also a worthy competitor to note as thecountry enjoyed a 69 per cent growth in its convention industry from 1993 to 2002.

Country Percentage of growth (1993-2002)

Iceland 173Australia 144Fiji 140South Africa 125Peru 113New Zealand 86Slovenia 83

South Korea 81Thailand 69Cuba 56Turkey 54

Source: www.uia.org

Table I.Countries registering

rapid convention centreindustry growth

Ranking Country

1 Paris2 Vienna3 Brussels

4 Geneva5 Singapore6 Copenhagen7 Barcelona8 London9 Berlin

10 Seoul

Source: www.uia.org

Table II.Top ten internationalmeeting cities in 2004

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On the local front, The Singapore Expo, located five minutes’ drive from the airportand served by the Expo MRT Station is one of the most recent and largest exhibitioncentres in the region. Since first opening its doors on 4 March 1999, Singapore Expohas hosted more than 218 theme shows and received over 5.7 million visitors. It has

60,000 m2

(645,000 square feet) of indoor, column-free exhibition space, another25,000 m2 (270,000 square feet) of outdoor exhibition space and 19 conference halls andmeeting rooms. Furthermore, the centre is technologically advanced and equipped withthe latest state-of-the-art presentation, interpretation, sound and lighting systems, andconnectivity. Designed by world-renowned and award-winning architect,Cox Richardson Rayner, the 25 hectare Singapore Expo was built at a cost of over$220 million.

Is technology the source of Suntec City’s competitive advantage?According to Day and Wensley (1988), competitive advantage can be defined assuperior skills or resources that a business deploys to set up barriers that makeimitation difficult. The provision of superior customer value or the achievement of lower relative costs result in better performance such as increased market share and/orprofitability. The concept of competitive advantage is central to business strategisingbecause the very purpose of strategy is about seeking new edges in a market whileslowing the erosion of present advantages. In general, there are two broad sources of competitive advantage:

(1) superior skills; and

(2) superior resources.

However, superior skills and resources are not automatically converted into positionaladvantages nor is there a certain performance payoff from superior cost ordifferentiated position. Both conversions are mediated jointly by strategic choices

including objectives and entry timing and the quality of tactics and implementation.Superior skills arise from the ability to perform individual functions more

effectively than other firms. For example, superior engineering or technical skills maylead to greater precision or reliability in the finished product. Other skills may be thosethat are derived from the systems and organisation structure that enables a firm toadapt more responsively and faster to changes in market requirements. As a FSP andlandlord, Suntec City’s finished product in this case is space that meets the need of itsusers. To understand the needs of users requires first and foremost, reliableintelligence generation, effective intelligence dissemination and swift responsiveness.This equates to the business concept of being market oriented. In Suntec’s case, anopen style of management and regular dialogues with its tenants and other usersserves to collect the important information about user needs. A flat organisation

structure ensures that the information gathered is disseminated effectively down thesupply chain. The FSP concept provides the cornerstone for Suntec to become a marketoriented business organisation. The initiatives under the FSP programme are designedto help tenants run their businesses more efficiently and effectively. For example,Suntec looks into the needs of smaller start-up companies by providing incubators andrelated administrative services and thus lowering the capital cost of these businesses – one of their primary concerns. By doing so, tenants are satisfied and this translates intohigh occupancy rates.

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Potential entrantsThe seriousness of the threat of entry depends on the barriers present. Essentially thesources of barrier include cost advantages, product differentiation and capitalrequirements. In the convention centre business, the most effective barrier lies in

product differentiation. And in the case of facilities, the location of Suntec Singaporecan be utilised to market it as the gateway to Asia. Singapore has the advantage of being in a geographically strategic position. In addition, the security, the effectivetransportation network, state-of-the-art facilities and proximity to neighbouringMalaysia and Thailand for extended holiday is a whole locational advantage thatdiminishes the threat of potential entry. In a study by Dube and Renaghan (1999) onthe lodging industry’s best practices, the authors noted that a hotel’s location is astructural quality that is tremendous source of sustainable competitive advantage.Convenient location remains the primary hotel attribute driving purchase decision.

Suppliers

Suppliers can exert bargaining power on participants in an industry by raising pricesand reducing the quality of purchased goods and services. Powerful suppliers canthereby squeeze profitability out of an industry unable to recover cost increases in itsown prices. A supplier is powerful if it is dominated by a few companies, the product isunique and if the industry is not an important customer of the supplier group.

Suntec Singapore depends to a large extent on outsourced service providers to meetthe needs of their clients. To ensure a ready supply of services, Suntec Singaporerecruits worldwide for these services and talents. In addition, because SuntecSingapore is a big client and offers a big contract, there are many willing suppliers tooffer services such as broadband access, maintenance, etc. Further, suppliers of services such as cleaning and building maintenance belong to highly competitiveindustries and as such they have a weaker bargaining position against Suntec

Singapore.

CompetitorsThe competitive position of a firm is weakened if competitors are numerous or areroughly equal in size and power. The competition Suntec Singapore faces can beanalyzed at two levels. The first level relates to the appeal of the country destination asa whole, while the second level is concentrated on the convention centres withinSingapore.

At the international level, the competitors are many and are competitive in terms of size and power. However, from Table II, it appears that Singapore is doing well comingin 5th as the top ten international meeting cities. It is also worthy to note thatSingapore is the only Asian city to make it into the top ten. However, Australia,

South Korea and Thailand are increasingly popular given the results of growth ratesin Table I.

On the local front, Suntec Singapore is still a preferred venue due to its easyaccessibility to various other entertainment outlets and hotels. The positive image thatis associated with the Suntec brand name also proved the success of its marketing andbranding initiatives through the years. To remain ahead of competition, SuntecSingapore has to ensure that its physical facilities are consistent with its branding asAsia’s Vertical Silicon Valley, i.e. it is state-of-the-art and that meets the needs of the

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MICE industry. Dube and Renaghan (1999) observed that for the top hotels, thephysical product is closely tied to fulfilling either functional or aesthetic brandpromises.

Although the neighbouring hotels can also be considered to be Suntec Singapore’s

competitors for local banquet events, their co-location within the Marina area generateagglomeration economies by creating a total experience for its visitors. In addition, thescale of the Suntec City Development including its office and retail blocks sends astrong signal to Suntec Singapore’s competitors on its financial and managementcapabilities to retaliate when its market position is threatened.

BuyersA buyer group is powerful if it purchases in large volumes and if the products itpurchases are standard or undifferentiated. The buyers of Suntec Singapore can beclassified into several groups: foreign exhibitors, local exhibitors and local banquetevents. The foreign exhibitors are an important clientele group. Cancellations during

the SARS (Severe Acute Respiratory Syndrome) outbreak in Singapore during 2003meant losing about 1,000 foreign exhibitors and this translates into a loss of about$2 million. Similarly, smaller local event organisers are powerful in the way that theyare price sensitive since they work on high overheads. The best buyer group appears tobe the local banquet events, especially the wedding banquets where price is lesssensitive if the buyer perceives value in the product offered.

The swift response by Suntec to introduce thermal imagers and SARS informationkit is a positive step to allay fears and enhance its attractiveness to buyers. Its largequantity of space and versatility in configuration is an added advantage for largeexhibitions and convention. Studies by Canen and Williamson (1998) and Kerns (1999)have shown that facility layout is an important factor towards competitiveness of a business. Further, marketing Suntec together with its neighbours as a total

self-contained and integrated destination with retail, hotels and entertainment outletswill enhance its value to foreign buyers. The Fountain of Wealth, as the largestfountain in the world further enhances Suntec’s attraction to its foreign buyers. For thelocal banquets, more can be done to create awareness of the availability of smallerspaces for say weddings. In addition, Suntec Singapore’s image is very much“corporate”, possibly due to the publicity of big corporate events coupled with thespaciousness of the place that may be too “cold” and impersonal for events likeweddings. Hence, more “warmth” can be injected into the ballrooms by way of decor,lighting and design.

SubstitutesSubstitute products are those which perform a similar function or convey a similar

benefit as your product but are different in a fundamental way. For example, cars werea substitute for horses. Substitutes can entirely change the rules of competition in anindustry. For Suntec Singapore, the advancement in telecommunication technologyhas posed some form of threat. This became apparent during the SARS period in 2003.Video-conferencing became a feasible alternative for some conference organisers.While it is unlikely that video-conferencing will eradicate face-to-face conferencescompletely, it nevertheless may be an option for some organisers. In response, sinceSuntec’s mission is to be Asia’s Vertical Silicon Valley, the vertical integration of

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video-conferencing and other conference related facilities and services (e.g. the settingup of Suntec Integrated Media) augurs well with Suntec’s vision. At the same time, areview may be needed to consider the impact of video-conferencing on the spacedemand of Suntec Singapore.

ConclusionThis case study has sought to examine the competitive advantage of Suntec City andhow facilities and its related services can enhance Suntec Singapore’s competitiveposition. Through the five-force framework, it is clear that the competitive position of Suntec Singapore can be enhanced through its facilities and services such as theintegrated location, facilities that enhance Suntec’s corporate image of a partner inbusiness rather than a landlord, etc. Although Suntec City positions itself as “Asia’sVertical Silicon Valley”, its performance is sustained to a greater extent by the“software” rather than the actual hardware although the hardware provides animportant visible impact. To this end, having a market-oriented culture that places

importance on collecting and disseminating market intelligence as well as respondingto market needs ensures a more sustainable competitive position.

References

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Hazinski, T. and Detlefsen, H. (2005), “Is the sky falling on the convention center industry”,available at: www.hotel-online.com/News/PR2005_2nd/May05_ConventionBiz.html

International Enterprise Singapore Press Release (2001), “The show will go on: findings confirmthe economic benefits one trade exhibition can bring to Singapore”, available at: www.iesingapore.com

Jalayerian, M. (1996), “McCormick place prepares for the 21st century”, Consulting-Specifying Engineer , Vol. 20 No. 4, pp. 38-44.

Kerns, F. (1999), “Strategic facility planning”, Work Study, Vol. 48 No. 5, p. 176.

Kim, L. and Lim, Y. (1988), “Environment, generic strategies and performance in a rapidlydeveloping country: a taxanomic approach”, Academy of Management Journal , Vol. 13No. 4, pp. 802-27.

McMorrow, E. (1996), “Restoring honor to the Javits name”, Facilities Design & Management ,Vol. 15 No. 3, p. 29.

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Miller, D. (1986), “Configurations of strategy and structure: towards a synthesis”, Strategic Management Journal , Vol. 7, pp. 233-49.

Oakland, J. (1989), Total Quality Management , Heinemann, Oxford.

O’Mara, M.A. (1999), Strategy and Place, The Free Press, New York, NY.

Oppermann, M. (1996), “Convention cities – images and changing fortunes”, Journal of TourismStudies, Vol. 7 No. 1, pp. 10-19.

Porter, M.E. (1980), Competitive Strategy: Techniques for Analyzing Industries and Competitiors,The Free Press, New York, NY.

Porter, M.E. (1985), Competitive Advantage: Creating and Sustaining Superior Performance,The Free Press, New York, NY.

Tranfield, D. and Akhlaghi, F. (1995), “Performance measures: relating facilities to businessindicators”, Facilities, Vol. 13 No. 3, pp. 6-14.

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Weber, K. and Ladkin, A. (2003), “The convention industry in Australia and the United Kingdom:key issues and competitive forces”, Journal of Travel Research, Vol. 42, pp. 125-32.

Further reading

Suntec City Development Pte Ltd (1998), Suntec City, Times Edition Pte Ltd, Singapore.

Corresponding authorLinda Tay can be contacted at: [email protected]

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