Appraising Changi Airport’s shiny new Jewel: Will all that glitters turn to gold?

SINGAPORE — Changi Airport’s S$1.7 billion sprawling Jewel project is its biggest gambit yet in its drive to become a lifestyle destination and open up new revenue streams, analysts said.

And while Singapore is the first worldwide to build a mammoth 135,700sqm retail and lifestyle complex in an airport, other air hubs across the globe are fast catching up as they go beyond competing just on operational efficiency, the analysts added.

Close to home, Hong Kong International Airport’s 350,000sqm SkyCity — which will house retail, dining and entertainment facilities — is set to open progressively from 2023 to 2027.

Airports globally — including Changi — are facing mounting pressure as air-travel demand outstrips capacity, necessitating expansion and investment in new services.  

While aeronautical charges help airports pay for infrastructural and service improvements, non-aeronautical revenues, including retail and rental incomes, are also vital.

To fund developments such as the upcoming Terminal 5 — which is part of the multibillion-dollar Changi East project — Singapore last year began imposing a new airport tax and higher departure fees. Passengers and airlines also have to fork out higher aeronautical charges over six years to finance the expansion and upgrading projects.

Mr Abbas Ismail, course chair of the aviation-management diploma at Temasek Polytechnic, said that Jewel is another way to ensure growth in Singapore’s aviation sector, as consumer spending will keep the airport financially healthy.

“Gone are the days when airports could get away with just being plain shoeboxes that efficiently got passengers from the curbside to the aircraft,” he said.

Today, travellers arrive hours before their flights and airports have had to morph from being “efficient processors of travel into entertainment venues”, Mr Abbas added.

Indeed, over the years, Changi has made strides to steadily evolve into a “destination in itself” — as the airport puts it.

Mr Abbas said that Jewel would raise the ante in airport competition, as air hubs around the world jostle to make their mark.

Even so, aviation analyst Mohshin Aziz said that countries should not follow Changi’s lead blindly, because airport operations remain the top priority.

“It is a dangerous thing to copy. Airports should focus on their operations first, which is their number one objective. Do it well, then move on,” said Mr Mohshin, an associate director at brokerage firm Maybank Kim Eng Securities.

GOING BEYOND THE NOVELTY DRAW

In the past fortnight, Jewel has been the centre of attention in Singapore and beyond its shores.

Half a million people flocked to the complex over a six-day public preview and 256,000 visits were recorded on its first day of operations last Wednesday (April 17).

But analysts said the novelty may eventually wear off and Jewel will need to keep refreshing its offerings to retain the crowds.

Dr Michael Chiam, a senior lecturer in tourism at Ngee Ann Polytechnic, said: “It (Changi Airport) must continue to attract the right retail mix to keep itself relevant to travellers.” 

Mr Samuel Tan, course chair of Temasek Polytechnic’s retail-management diploma, suggested that Jewel could facilitate delivery of customers’ orders to their departure gates or homes.

Associate Professor Lawrence Loh from the National University of Singapore (NUS) Business School said that it would have to devise other “novelties” to draw repeat patrons.

Connectivity could also be improved, as Jewel lacks a direct link from the Changi Airport MRT Station, added Assoc Prof Loh, who leads the Centre for Governance, Institutions and Organisations at the NUS Business School.

Right now, visitors can access Jewel from Terminal 1 or via a link bridge from Terminals 2 and 3.

CHIEF TARGET MARKET: RESIDENTS, NOT TRAVELLERS

Keeping Singaporeans captivated could well yield dividends for Jewel, as analysts said that it will cater largely to Singapore residents rather than airport users.

Jewel estimates that its yearly footfall will hover between 40 and 50 million, with six in 10 visitors being Singapore residents.

Since Jewel opened, Crowne Plaza Changi Airport, a hotel at Terminal 3, said that it saw a “gradual increase” in room bookings by Singaporeans for weekend staycations.

As for transit travellers, aviation analysts said that Jewel would appeal to some, but the majority would not choose where they transit based on the facilities on offer.   

Mr Ellis Taylor, deputy Asia editor at aviation news service FlightGlobal, said: “In most cases, passengers prefer shorter layovers and so the efficiency of an airport is… a bigger factor than what retail offerings there are.”

Mr Brendan Sobie, chief analyst at market intelligence provider Capa – Centre for Aviation, said that transit travellers are drawn to amenities on the “airside” — the part of an airport terminal beyond passport and customs control.

Changi Airport already thrives on this front with options such as duty-free shopping, dining and free movie screenings, he added.

Traveller Dannielle Stewart, 23, said that she would pick Singapore over other transit stops, because the addition of Jewel means that there would be plenty to keep her occupied.

But she would do so only if there was little difference in the transit time between the various stopover options, for instance.

“If I had no other reason to stop in Singapore, I wouldn’t go out of my way just to see Jewel,” said the nurse from Brisbane, Australia.

RECOUPING THE S$1.7B PRICE TAG

The 10-storey Jewel project is a joint venture between airport operator Changi Airport Group and property giant CapitaLand.  

Assoc Prof Loh of the NUS Business School said that Jewel would bring direct returns for the airport and CapitaLand, such as in rental fees and new revenue streams from potential climbs in passenger flow.

The effects from rental fees, retail consumption and passenger arrivals could be seen as early as in the next one to three years, he added.

Apart from the thousands of jobs created, Jewel’s opening also has a general branding effect for Singapore as an attractive business and leisure destination. This will benefit the meetings, incentives, conventions and exhibitions sector in particular, said Assoc Prof Loh.

The intangible returns, though, will take more time to ascertain.

Comparing the outlays on Jewel to Singapore’s investment in the Formula One night race, Assoc Prof Loh said: “There are clear direct returns like tourism and hospitality during the race period, but the indirect benefits are there for the country — they are just harder to exactly quantify.”

Changi Airport Group and Jewel could not respond to queries on how they will ensure that the development pays dividends and how they will measure this, or when they expect Jewel to break even.

Mr Taylor of FlightGlobal said that Jewel’s success would hinge on its commercial revenue, particularly the retail earnings it generates.

“With a captive market of transit travellers and links into the terminals, it should perform well, but like any long-term project, it will take some years to recoup the huge construction costs,” he added.

Agreeing, Temasek Polytechnic’s Mr Abbas said that Jewel’s retail financial performance would be key. “If there is good financial performance year to year, then it will help to pay off the development cost quickly,” he noted.

Huge capital investments like those for Jewel typically take three to five years to reap dividends, said Mr Abbas.  

Mr Mohshin from Maybank Kim Eng added that Jewel’s opening has already received favourable media attention around the world.

“National pride is hard to quantify,” he said.