PHILIPPINES

Rich prospects for VIPs

China’s VIPs are once again driving gross gambling revenue across the region, with the Philippines tipped as being one of the best-placed jurisdictions to take a slice of the high-roller pie.

In 2017, VIP revenue in Macau staged an unexpectedly strong come-back, gaining 26.7 percent far outpacing the 10.4 percent growth in the mass market. However, since China’s crackdown on corruption VIPs are increasingly looking at alternative jurisdictions and have increasing choice across Asia.

“Most Chinese travelers decide on a destination depending on ease of access (visa rules) and currency (strength of yuan vs. other currencies). Of course for VIP gamblers, these factors may be less influential. Instead, the biggest draw would be a unique, high-end experience that would also offer retail, dining and of course amenities catered possibly for families,” said Margaret Huang, a research analyst at Bloomberg Intelligence, who spoke on a panel about VIP gaming trends at the ASEAN Gaming Summit.

With the IRs in Manila’s Entertainment City now nearing completion, analysts expect VIP revenue to increase.

“VIP is coming off a low base and growth in the Philippines reflects its continued ramping up phase,” said Vicky Melbourne, head of industrials, property and consumer, South and Southeast Asia, who also participated on the panel. “Low penetration and supply additions will contribute to the double-digit growth. As will favourable policies, improving China-Philippines government relations, visa on arrival status and proxy betting (through Macau junkets).”

“However, Philippines VIP revenue is small compared to Macau and Singapore and this growth will be counterbalanced by strong competition in the region,” she said.

According to data from Morgan Stanley, VIP revenue in the Philippines totaled US$1 billion in 2017, which compares with Macau’s US$16 billion and Singapore’s US$2 billion. The firm forecasts VIP growth of 36 percent in 2018 from the existing casinos.

Analysts argue much of the recent growth has come from proxy betting.

“Proxy betting offers the casino operators an alternative revenue stream. Despite the new regulatory framework announced in Oct 2017, under the AML, proxy betting continues to underpin the VIP segment,” Melbourne said.

“Risks of a slowdown in proxy betting could stem from China, given its campaign to control illegal capital outflows, and the strengthening of government relations,” she added.

According to Huang, gross gaming revenue from junket operators is also expected to rise with the introduction of more junket rooms at Okada Manila through 2018. Yet, it will hinge on the property’s ability to open up more hotel rooms to house these VIP gamblers.

Risks of a slowdown in proxy betting could stem from China.

Although Okada is still ramping up its facilities, one of the advantages of the Philippines is that its capacity is the largest in the ASEAN region, with over 2,000 gaming tables, 20,000 slot machines around 5,000 integrated resort hotel rooms, and proxy betting, according to Morgan Stanley.

Although analysts are bullish on the Philippines’ VIP revenue prospects, they warn there will be increasing competition, with casinos in Malaysia, Macau, Saipan and Cambodia, all adding capacity and improving facilities.

Despite the growing competition, Macau is not expected to lose its crown as the hub of VIP gaming in Asia anytime soon.

Fitch Ratings is predicting 13 percent annual growth for Macau’s grossgaming revenue this year, driven by 16 percent growth in the mass-market segment and 10 percent in the VIP segment, a significant slowdown from last year.

“Macau is the most attractive market for Chinese VIP given the SAR’s proximity to China and a critical mass of world class resorts,” Melbourne said. “Chinese VIP’s also look for anonymity, lines of credit, and well established rules and regulations. Some other markets have higher commissions and more flexible smoking and proxy betting rules, which may draw a certain subset of VIPs,” she added.

Vietnam, which is on the verge of a major revision to its tightly controlled gambling laws, could be another one to watch in the near future.

“Vietnam’s opening of local gambling and pipeline of new casino resorts should also help to accelerate gaming revenue growth,” said Huang.

Singapore’s two casino concessionaires also suffered from the Chinese corruption crackdown, with revenues falling as much as two-thirds between 2014 and 2016. With a small local market, Singapore depends more on foreign visitors, which makes gaming revenue more volatile.

Another reason for the drop is that Singapore’s gaming laws are a lot more stringent than neighbouring countries.

“Singapore can not have junkets, so they are using their own credit which means strong balance sheet is important,” said Praveen Choudhary, managing director and head of Asia gaming/lodging at Morgan Stanley.

The drop in incoming VIP traffic led to the development of more accommodation options for budget travelers and the rise of non-gaming entertainment. Despite their woes, the two casino operators were estimated to account for between 1.5 and 2 percent of Singapore’s economy last year.

While the consensus is that the frontrunners are Macau and the Philippines, other countries such as Japan, Australia, South Korea, Cambodia, Singapore and even Thailand may present future competition.

Looking ahead, the future looks rosy. A recent report by Fitch stated “We feel VIP tourism across the region will continue to recover, and ongoing growth in mass-market gaming tourism will support regional expansion.”

Tiger Resort Leisure and Entertainment

Okada Manila, owned by Japan’s Universal Entertainment, is the newcomer to Entertainment City, holding a soft opening for the resort in late 2016. At 44 hectares, the property is by far the biggest in the complex and the rollout of hotels and other facilities is continuing. At its completion of Phase One, Okada will have 994 hotel rooms and operate 500 tables and about 3,000 slots. Its centrepiece is the world’s largest coloured fountain, as well as a giant inner city beach complex, known as “Cove Manila”.

The casino floor will have about 500 table games and 3,000 electronic gaming machines, a 90,000 square-feet nightclub and beach club entertainment complex. It will also have an 8,409 square-meter retail promenade, a world-class spa and 40 restaurants ranging from casual, buffet, and international dining.

Okada recently expanded its sports book offering though an accord with platform provider FSB (UK), Paddy Power and Jade Entertainment and Gaming Technologies.

FSB will deploy its EPOS platform and trading tools alongside the Irish bookmaker’s trading team.

City of Dreams

The $1.3 billion City of Dreams Manila is owned by Belle Corp and Melco Resorts & Entertainment’s local unit. City of Dreams Manila has six hotel towers with approximately 950 rooms in aggregate, including VIP and fivestar luxury rooms and high-end boutique hotel rooms, a wide selection of restaurants and food & beverage outlets, a 4,612.44 square meters family entertainment center in collaboration with Dreamworks Animation, a live performance stage, two international nightclubs and a multilevel car park. It includes an approximately 260 room Crown Towers hotel, Hyatt City of Dreams Manila, a 365 room hotel managed by Hyatt International Corporation and Asia’s first Nobu Hotel with 321 rooms.

For Q4, net revenue at City of Dreams Manila was US$167.5 million compared to $144.7 million in the fourth quarter of 2016. Adjusted EBITDA rose to $53.8 from $50.2 million a year earlier.

Rolling chip volume totaled $2.9 billion up from $2.1 billion with a win rate of 3.1 percent versus 3.5 percent in the fourth quarter of 2016.

Mass market table games drop increased to $189.2 million from $149.0 million, while the gaming machine handle was $793.3 million.

Bloomberry Resorts

Bloomberry Resorts Solaire is a 16-hectare gaming and integrated resort complex along Asean Avenue in Parañaque City. The Bay Tower of Solaire consists of a casino with an aggregate gaming floor area of approximately 18,500 square meters (including approximately 6,000 square meters of exclusive VIP gaming areas), with approximately 1,400 slot machines, 295 gaming tables and 88 electronic table games. Bay Tower has 488 hotel rooms and 15 specialty restaurants. Contiguous to the existing Solaire Resort and Casino, the Sky tower consists of a 312 all-suite hotel, additional ten VIP gaming salons with 66 gaming tables and 223 slot machines. It also includes a certified 1,760-seat lyric theatre.

The group reported record results for 2017, though its performance in the final quarter was held back by a low hold percentage.

For the year, Solaire’s gross gaming revenues grew 16 percent to PHP 44.52 billion. Inclusive of a PHP407 million contribution from Jeju Sun in South Korea, the company’s gross gaming revenues grew 17 percent to PHP44.93 billion this year.

For the full-year. net profit came in at PHP6.06 billion, soaring 161 percent year-on-year.

Resorts World Manila

Travellers International Hotel Group, a joint venture between Genting Hong Kong and Alliance Global, is the owner and operator of Manila. The hotel room count for the group’s three hotels (Maxims Hotel, Remington Hotel, and Marriott Hotel Manila) remains at 1,226. The property is currently in the third phase of its expansion. “This new facility will be called Grand Wing while the original facility will be called Garden Wing.” said Kingson Sian, President & CEO of Travellers. “The Grand Wing’s three hotel brands will open in phases beginning mid this year, with all three open by year end.”

Grand Wing will have three international luxury hotels – Hilton Manila, Sheraton Manila Hotel, and Hotel Okura Manila, adding approximately 940 rooms. It will also include new gaming and retail spaces, as well as six basement parking decks.

Further down the road, it will open the fourth and final IR planned for Entertainment City, which is scheduled to open in 2020. As the first IR in Manila, the company has built up a loyal base of customers, especially in the local mass market.

For 2017, net revenues declined to P19.3 billion (US$369.2 million) in the year, due mainly to a nearly month-long closure of the gaming area after the lone gunman attack June. Gaming revenues fell to P17.1 billion, down 26.5 percent from 2016, while net profit reached P241.7 million, down 92 percent compared to 2016. However, while third quarter results were down as a result of the casino closure, Travellers reported a strong Q4 recovery, with a 5 percent increase in revenues from its non-gaming segment to P4 billion during the year driven by hotel and MICE operations.

Filinvest gets go-ahead for $200m Clark casino

The Philippine Amusement and Gaming Corp has given a provisional license to Filinvest Development Corp and its Mimosa Cityscapes unit for a $200 million IR project close to Clark International Airport.

“Filinvest Mimosa + Leisure City is envisioned to become the lifestyle destination north of Manila. Its enviable location close to Clark International Airport makes it accessible to both domestic and international tourists,” FDC President Josephine Yap, was cited as saying.

Yap noted that the company plans to work with a “leading casino operator” on the project, which will comprise a casino, a lifestyle mall, a five-star hotel and events venue.

The project also includes the renovation of the existing Quest Hotel, the two championship golf courses and villas, the reports said.

e-Cafes to add live dealer products

The Philippine Amusement and Gaming Corp is to allow the country’s eGaming operators to add live dealer table games to their product offering.

In a statement posted on the Pagcor website, the regulator set out the accreditation process for live dealer studio and production facilities seeking to offer services to the gaming terminals of licensed electronic gaming sites.

Pagcor said the license will be known as a Permit to Possess and applies to providers of a studio gaming setup. The cost of applying for the permit includes a PHP250,000 ($4,792) accreditation fee, valid for one year, with the renewal price set at the same level.

The Permit to Possess costs PHP1 million, also valid for one year, with a PHP1 million renewal fee. The memorandum also sets out a variety of other fees connected with the license.

The content/streaming provider will be required to submit a certificate from a certified gaming laboratory that its product is blocked from any Philippine IP addresses other than those accredited by Pagcor.