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Outlook still bright, despite license moratorium, POGO suspension
The Philippines continues to be one of Asia’s fastest-growing gaming markets, with strong tourism arrivals and a growing domestic economy underpinning revenue streams.
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Over the past five years, gaming revenue has risen at a compound average rate of 12.8 percent, second only to Cambodia, where growth has surged 33.8 percent.
One restricting factor in the Philippines has been the attitude of the government under President Rodrigo Duterte, who has been circumspect about allowing further expansion.
On the land-based side, he put a moratorium on new casino licenses in March 2018, although recent comments from the presidential palace have indicated he may be softening his stance. On the i-gaming side, the Philippine Amusement and Gaming Corp. (PAGCOR) has suspended the issuance of Philippine Offshore Gaming Operator (POGO) licenses pending a clean up of the sector amidst reports of tax avoidance, illegal workers and increasing gaming-related crime. So far, however, the government has resisted pressure from China to impose an all out ban.
The focus section of this edition of Asia Gaming Briefings is dedicated to this exciting market, which is now snapping at the heels of Singapore as the secondbiggest in Asia.
Our first series of articles profiles Manila’s four integrated resorts, which kick started gaming growth in the Philippines.
Travellers International Hotel Group’s Resorts World Manila is the grand dame of the Manila properties opening up in 2009. That was followed in 2013 by the debut of Bloomberry Resorts’ Solaire Resort and Casino, which was the first in the Entertainment City zone of the capital. Next came Melco Resorts & Entertainment’s City of Dreams Manila in 2014, while the latest to make its entrance is also the largest, Universal Entertainment’s Okada Manila.
These resorts have had a major impact, with annual growth in gross gaming revenue of about 17 percent during the opening cycle from 2012 to 2016, according to Union Gaming research. That compares with growth of just 4 percent for PAGCOR-operated casinos.
However, competition is heating up around Asia, with multiple luxury properties sprouting in Cambodia and Vietnam and further expansion planned for Singapore. We therefore look at whether the Philippines can retain to keep its edge and what needs to happen to retain its growth trajectory.
Although much of the attention has been focused on Manila’s IRs, there has been considerable development in regional locations of the country. In fact, PAGCOR Chair Andrea Domingo has made it clear she would like to see the development of other regional entertainment hubs to help develop tourism in other parts of the country. We take a look at some of the progress, with Clark and Cebu leading the way when it comes to new properties and investment plans.
Lastly in this section we throw the spotlight on i-gaming. As the only jurisdiction in Asia to regulate i-gaming, the Philippines has seen an influx of firms from all over the globe, but mainly from Mainland China. The entry of so many Chinese is seen as one of the major factors propping up Manila’s real estate market, but it has also pushed up prices in general and created tensions with the local population. One solution that has been put forward to help monitor the activities of the POGO firms, in particular the Chinese, is to create two high-tech hubs to house them.
The argument goes they will be easier to regulate if they are grouped together. We look at the plans and ask whether they provide a workable solution when it comes to controlling the sector.
Philippines to fight off regional competition
The Philippines has been one of the best-performing gaming jurisdictions over the past five years and is expected to continue to outperform as the country’s operators expand, despite rising regional competition.
The gaming industry seemed to have the odds stacked against it when President Rodrigo Duterte came to power in 2016. For a spell before and after he was elected, Duterte, notoriously ruthless in his pursuit of eradicating the illegal drugs trade, appeared to have similar antagonism towards gambling.
However, by July 2019, the President used his State of the Union Address to highlight the record financial contribution of PHP16 billion ($315 million) towards the government’s annual budget by the Philippine Amusement and Gaming Corp. (PAGCOR) and the wider industry, which broke the PHP100bn revenue mark for the first time. As the public watched on, he asked PAGCOR chair Andrea Domingo for “more gambling, ma’am”.
Robust growth
The industry rose almost 23 percent year-on-year last year, posting total gross gambling revenue of PHP215.8 billion ($4.2 billion), putting it almost on a par with Singapore, the region’s second-biggest market. That figure looks on track to be exceeded this year.
Andrew M. Klebanow, senior partner at hospitality and casino consultancy Global Market Advisors, notes that all of the industry’s primary segments, including the integrated resorts at Entertainment City in Manila, the regional casino-resorts in Clark and Cebu, the more than 40 PAGCOR operated casinos, and the online licensees are reporting increased revenues.
“Quite simply, the Philippines gaming industry can be characterised as an industry that is enjoying robust growth,” he adds.
Head start
PAGCOR’s vision is to be “the prime mover [to] make the Philippines the top gaming and entertainment destination in the ASEAN region, generating revenues that fund nation-building programs.”
The Philippines already has a head start over other markets in the region as its population is allowed to gamble and have provided strong mass market support. The country has a population of more than 104 million and one of the strongest regional economies, with 6.2 percent gross domestic product growth last year.
Regional neighbours, such as Cambodia, South Korea and Vietnam all ban locals and are entirely reliant on foreign visitors for growth.
The Philippines is also seeing rising tourism growth, in particular from China after ties with Beijing improved under Duterte. Tourism arrivals in the year to August were up just over 14 percent at 4.86 million.
“The integrated casino resorts at Entertainment City are similar in size and quality as those found in Macau and Las Vegas,” Klebanow says. “They offer true five-star gaming and lodging experiences. In addition, the greater capital region is dotted with a number of smaller casinos located in hotels. Their quality ranges from one- to four-star facilities.
PAGCOR has also played a vital role, helping to establish a fruitful regulatory landscape whilst encouraging the introduction of new technology, according to Joe Pisano, chief executive of Manila-based supplier JADE Entertainment and Gaming Technologies.
He says: “The other two major markets, Macau and Singapore, have been left behind as far as new product innovation. Here we can see the positive effects of support from the regulator.
“PAGCOR has allowed for the growth of casinos, internet gaming, sports betting, e-games, e-bingo and poker, which has made the Philippines the most advanced gaming market in the region. In other legal jurisdictions, regulation has stifled the growth of gaming.”
Infrastructure
Pisano adds that infrastructure investment is essential to maintain the momentum.
“Support for casinos from some of the regional cities would be a great boost to the industry,” he says. “With the continued support of the government and entrepreneurs, the Philippine gaming industry will remain robust.”
Klebanow adds that operators must continue to invest in their properties to satisfy the expectations of increasingly sophisticated and demanding Asian casino tourists.
He believes the giant Entertainment City complex will continue to garner the most attention amongst land-based operations, particularly with the opening of Resorts World Bayshore, while developments in Cebu and Clark – such as the Emerald Resort and Casino, with 1,186 slot machines, 80 mass tables and 66 VIP tables – are a cause for optimism in the medium to long term.
“With integrated casino resorts, regional casino-resort destinations, over 40 PAGCORoperated casinos that serve the local population and a rapidly growing POGO industry, the Philippines has one of the most dynamic and diversified gaming markets in Asia,” Klebanow says.
However, there is a note of caution with regard to the unpredictable Duterte’s regime.
“Casino operators must also contend with a leader whose views of casino gaming have evolved from strongly opposed to grudging acceptance,” Klebanow adds. “That may change in the future.”
Solaire seen retaining top spot in 2019
Bloomberry Resorts’ Solaire Resort and Casino is the market leader among Philippine integrated resorts and is expected to retain its crown this year, despite increasing competition.
Solaire was the first to open in Manila’s Entertainment City zone, in March 2013. The resort spans 16 hectares and consists of two main towers. Phase 1 is known as The Bay Tower, with an aggregate gaming floor area of approximately 18,500 square meters, with about 1,653 slot machines, 295 gaming tables and 88 electronic table games.
In Nov. 22, the company opened its SkyTower, or Phase 1a, which consists of a 312 all-suite hotel, 10 more VIP salons, 66 gaming tables and 230 slot machines. This year, the company opened the Philippine’s first electronic table games stadium called “Players Stadium” featuring a 360 square-meter surround screen.
Since opening, the company has seen steady growth in both revenue and EBITDA and had a share of around 36 percent of gross gambling revenue amongst the Philippines’ IRs in 2018, followed by City of Dreams Manila at 31 percent and Okada Manila at 19 percent.
Although Okada is ramping up fast and is expected to be a key contender, analysts at Morgan Stanley expect Bloomberry to retain its lead this year at least.
The firm expects GGR of the IRs to increase a further 15 percent this year, far outpacing Macau which is seen as flat to negative by most analysts. The market is still underpenetrated and tourism arrivals are increasing, led by visitation from Korea and China. Macau’s junkets are also expanding in the Philippines, which is seen as adding to growth.
Tourism arrivals in the year to August were up just over 14 percent at 4.86 million. Korea and China were the top two source markets, with 1.29 million from Korea, up 23 percent and 1.20 million from China, up 22 percent.
However, like its competitors Solaire also enjoys strong local support.
“We foresee that tourism will continue to play a significant role in the growth of Philippine integrated resorts. Growth will likewise be boosted by the rise in middle-class incomes and increasing connectivity across the region,” Chairman and CEO Enrique Razon told investors in June.
For Q2, the most recent figures as of the time of going to press, consolidated EBITDA was up 32 percent to a record PHP4.95 billion, with strength across all gaming segments.
VIP GGR gained 32 percent to PHP6.18 billion, while its mass table drop was up 14 percent to a record PHP12.5 billion, however net revenue in the segment dipped due to a lower hold rate.
Hotel occupancy did decline in the quarter to 89.4 percent from 93.2 percent as the company is converting its Grand Ballroom into new gaming space, which has cut capacity for hotel bookings linked to conventions and other events.
The company is now planning a second resort
in Quezon City, an area just to the northeast of Metro Manila and one of the most populous areas of the country.
Solaire has targeted a completion date of the end of 2022 for the resort, which is expected to have a strong mass market focus supported by locals. The property will have similar branding to its sister, but the design is expected to be on a more vertical scale given the smaller footprint.
It has a target capacity of 250 tables, 3,000 slots and up to 800 rooms.
Beyond the Quezon City project, the company also has plans for Solaire Phase 2, which is expected to begin after the completion of Quezon.
Morgan Stanley said the company has stronger cash flows and a greater land bank for expansion than its peers, which will help it increase capacity to drive further growth.
The group also has plans to harness growthin the cruise industry in the Philippines, which despite its potential with more than 7,000 islands, is in its infancy.
The company is building a cruise ship terminal at Solaire Manila.
Guillaume Lucci, senior advisor of the Solaire Cruise & Marina Project, Solaire Cruise Center Manila, told Seatrade Cruise News that the facility is expected to be operation in Q3, 2021.
In phase one, the pier will be able to receive two Oasis-size ships and the terminal building to handle homeporting for one large ship carrying between 3,000-4,000 passengers over an 8-10 hour period.
Premium-focused expansion plans
Travellers International Hotel Group opened the Philippines’ first integrated resort in the capital Manila in 2009 and is now revamping and expanding its facilities to attract a wider customer base.
Resorts World Manila, which sits on an 11.5 hectare site opposite the international airport, has built up a loyal mass market following among Filipinos, though has recently been in full expansion mode to add facilities to help it target the premium mass and VIP segments.
The company is rebuilding after a deadly attack by a disgruntled problem gambler in June 2017, which left 38 people dead. He set light to tables destroying the second floor, which remained closed for two years.
The original building, now known as the Garden Wing, reopened its second floor gaming facilities in July this year.
Travellers CEO Kingson Sian told local reporters after the company’s shareholder meeting in June that the new floor would feature approximately 600 slot machines and 100 table games. He added that it will be “an entire new floor of gaming space,” and, “As we expand the gaming space, we are attracting not only locals but also foreign players to come, and we can develop new junket relationships.”
Sian said once the venue is completely operational again, it will offer 465 gaming tables and 2,300 slot machines. The total number of gaming positions will be greater than what was offered before the attack.
Travellers, a joint venture between Alliance Global and Genting, has also been rolling out facilities at its new Grand Wing, which held a soft opening of its ground floor gaming area in May last year.
It added the Hilton Manila in October, while in January 2019, Sheraton Manila Hotel officially opened its doors to the public. By the time the Grand Wing is fully operational, it will have a third luxury hotel, the Okura Manila, increasing hotel room count at the Grand Wing to about 940, and bringing the group’s total hotel room count to 3,555.
The Okura is now expected to open its doors in Q1 of next year, while it also expects to complete the rebranding of its Maxim Hotel to a Ritz Carlton by the end of 2019.
The expansion in gaming facilities helped drive a 47 percent gain in gross gaming revenue in the second quarter of this year. VIP revenue reached 43 percent of the total from 40 percent in the same period last year, while non-VIP tables and slots were at 56 percent. The company didn’t give a breakdown for the lucrative premium mass segment.
Average hotel occupancy dropped to 77 percent from 81 percent due to the added capacity.
The group is developing a second IR, now known as Westside City Resorts World, in the Entertainment City area adjacent to Manila’s other IRs.
The $1.3 billion project broke ground in 2014, but the first phase is not expected to be completed until the end of 2022 and looks set to go through yet another design overhaul after a multi-layered accord with Suncity Group, announced in late October.
Under the deal, Westside and controlling shareholder Travellers are to lease the Westside City Resorts project site for “development of the main hotel casino.”
SunTrust, in which Suncity has bought a 51 percent stake, will be the sole and exclusive operator and manager of the main hotel casino.
The firm’s initial plan includes total gaming capacity of 400 tables and 1,200 slot machines, as well as 400 five-star hotel rooms, a car park, and non-gaming facilities themed around pool-side parties featuring a high-end pool club.
Under the original plan, Travellers had envisaged a strong non-gaming offering, aimed at creating the Broadway of Asia, with music and entertainment.
Travellers delisted its shares from the Philippine Stock Exchange from Oct. 21, being the second Manila operator to do so after Melco Resorts & Entertainment (Philippines).
The company said going private would allow the firm to address in a “timely” way, “evolving market demands and rapidly-changing customer needs without compromising its business strategies to competition.”
About 1.32 billion shares were tendered by investors in the $168 million offer.
Competition eats into earnings
Increasing competition in the Philippines is having an impact on Melco Resorts & Entertainment’s City of Dreams Manila, with no clear expansion plans in the immediate horizon to drive growth.
CoD was the second resort to open in Entertainment City in 2015. The 6.2-hectare, $1.3 billion property features six hotel towers with 950 rooms, including a Nobu, Nuwa and a Hyatt Regency. It has about 300 gaming tables, 1,708 slot machines and 221 electronic table games.
On the non-gaming side, Melco teamed with Dreamworks Animation to develop a family-oriented theme park known as Dream Play.
City of Dreams Manila houses Pangaea and Chaos, two premium nightclubs developed by the group and led by the distinguished nightclub operator and “International King of Clubs,” Michael Van Cleef Ault, who has created a number of renowned clubs worldwide. Both clubs are situated inside the iconic Fortune Egg, an architecturally-unique, dome-like structure, accented with creative exterior lighting design.
The property has been a strong contributor to the Macau-based operator’s earnings, though recently Chairman and CEO Lawrence Ho has been less optimistic about the outlook there.
In Q3, total operating revenue dropped to $130.5 million from $141.7 million in Q3 last year, while adjusted EBITDA fell to $49.9 million from $55.2 million.
The company again blamed increasing competition, especially in the VIP market, with rolling chip volume down to $2.44 billion compared with $2.98 billion a year earlier. It was also hit by bad luck, with the VIP win rate just 0.89 percent, well below the normal range of 2.85 percent to 3.15 percent.
“COD Manila suffered in the VIP market as a result of low win rates, which has always been volatile,” Bernstein analysts wrote in a note.
Mass market table games drop decreased to $202.1 million compared with US$204.9 million in the third quarter of 2018. The mass market table games hold percentage was 31.3 percent in the third quarter of 2019 compared to 32.4 percent in the third quarter of 2018.
According to analysts, management has emphasized a focus on the mass market, saying most of its gamblers in this segment of the market are local.
However, unlike rivals Solaire and RWM, the company has not yet announced any firm plans for expansion that might help drive further growth.
It may take an extra two hectares of land owned by its local partner Belle Corp to build a luxury hotel with 300 to 350 rooms, but as yet, it has given no firm details.
At a shareholder meeting in April, Willy Ocier, Chairman of Premium Leisure Corp, said that discussions were being held about potentially developing a second IR in the Philippines.
Premium Leisure is a unit of Belle Corp. Ocier said discussions were being held between the partners, but specified that a new casino license would need to be issued by PAGCOR as the existing one only covered City of Dreams Manila.
The companies followed up with a statement to the stock exchange stressing that while the partners are open to expansion, there were no definite plans.
Race for rooms
Okada Manila, the biggest integrated resort in the Philippines, is seeing a strong ramp up with an urgent need to add more hotel rooms to keep up with increasing demand.
The property opened its doors in December 2016. Spanning more than 44 hectares, it features the world’s largest multi-coloured dancing fountain, designed by Los Angelesbased WET Designs, as well as a giant indoor beach complex, known as Cove Manila.
The first phase of development is nearly complete, with the company racing to finish its hotel Tower B, which will add 500 additional hotel rooms.
The tower is expected to be fully finished by Q2, 2020, although it has already opened up about 125-150 rooms in July, with a further 150 rooms expected around November.
Announcing its Q2 results, parent company Universal Entertainment said it expected a greater number of hotel rooms to help the company accommodate large group events and foreign tour groups.
During the quarter, its hotels had a 97.5 percent occupancy rate, with an average daily room price of Y9,613.
Analysts are upbeat about prospects for Okada Manila and expect the addition of more hotel capacity to help drive mass market revenue at the resort.
“The Philippines is one of the fastest growing gaming markets in the world, and when complete, Okada Manila is positioned to be a category killer in the market,” Union Gaming analyst John DeCree wrote in a recent note initiating coverage of Universal. “We are looking for mass market revenue to accelerate beginning in 3Q19 and continue through 2020 and into 2021.”
In the first nine months of 2019, the resort generated Y27.93 billion in gross gaming revenue, with both mass market and VIP seeing strong gains.
Union Gaming notes that the company appears to be bucking the trend in the VIP sector, which has seen a sharp slowdown regionally as China’s economy softens.
For Q3, VIP volume rose about 38 percent, while mass table win is up 41 percent and EGM win gained 35 percent.
“While we are focused on the mass market ramp at Okada Manila, VIP continues to outperform relative to our expectations, representing near-term upside to the story,” DeCree noted.
Tourism growth to the Philippines has been strong, in particular from China due to improving relations under President Rodrigo Duterte. However, unlike many jurisdictions around Asia, the Philippines is not totally reliant on tourism for growth in its casino sector.
Local Filipinos are permitted to gamble and with one of the fastest-growing economies in Asia, income levels are rising, boding well for the growth of the mass market segment. Income per capita has risen about 4.5 percent over the past five years.
Union Gaming notes Okada Manila still has significant capacity for further growth. The casino at Okada Manila is over 375k sqft, much larger than its competitors Solaire, which comes in at 200k, and City of Dreams Manila at 242k, while it also has a large land bank for future expansion.
In contrast to Melco Resorts & Entertainment and Travellers International, which are delisting from the Philippine Stock Exchange, Universal is seeking to go public with its local unit.
It bought 66.6 percent of AsiaBest Group International in February to facilitate the future list of Tiger Resort, Leisure and Entertainment.
The ramp up of the resort has not been without its challenges, including a legal dispute with Kazuo Okada, Universal’s founder, who was ousted from the board in 2017.
Regions present expansion opportunities
The Philippines’ regional casinos may not get the same headline publicity as the bigger resorts in Manila, but the number of properties has been growing and their client base evolving as amenities and infrastructure improves.
In the Clark Freeport Zone, the D’Heights Casino recently opened, becoming the fifth property in the area after Fortunegate, Widus Hotel & Casino, Royce Casino and Midori Casino. In Cebu, developments are taking place at a slightly slower rate with two new casinos – the Emerald Bay from Udenna Corp and the Universal Hotels and Resorts – apparently under way after having been granted licences in January 2018, just before the institution of a government moratorium on new casinos.
Jose Angel Sueiro from PH Resorts – a part of the Udenna Group - says there is great potential in regional casinos in the Philippines due to the positive demographics and a lack of other quality entertainment options.
“In the Philippines we have, broadly speaking, about 50 million people in Luzon and another 50 million people in the Visayas – Mindanao region, with a totally different language, customs, and a different approach to leisure experiences,” he says “Beside that, in the Metro Cebu market we believe we are in a perfect position to attract a lot of customers from secondary cities in our region, to become their local casino.”
This necessarily dictates the nature of the customers at resorts such as Emerald Bay and the Thunderbird Casino, says David Lawrence, casino general manager at the latter. “Regionally the focus is on mass (play) due to the current market segments and dynamics of the properties,” he says.
However, he adds that “forward-thinking” regional properties are also looking at junket and proxy-betting inclusion.
The example from Entertainment City in Manilla, says Sueiro, shows that mass-play growth is tied to the continuing economic growth alongside the evolution of the casino offering. If these two factors remain in place, he sees expansion continuing in the regional space.
“We believe we will experience a similar scenario where gaming propensity will increase with a high-quality product exposure,” he says.
This also means attracting VIP play “(if) our offer is attractive enough to position ourselves as an alternative to existing Integrated Resorts.” Hence, the property benefits from new infrastructure (the new Mactan airport with more than 30 international destinations is just 15 minutes away) and a beach location alongside the property itself, which was developed and project managed by casino development names Paul Steelman and Tenman.
While Sueiro doesn’t disclose the amount of investment required for a regional casino in the Philippines, he does say that the focus is on ‘Galaxy-style’ F&B with top Michelin star restaurants as well as a more Venetian-style retail offering.
“Besides that we are putting a special focus on MICE facilities, a spa and water sports,” he says. “We also have a high-end satellite property in Bohol (Donatela Resort) that will help to complement our offer.”
As for the gaming offer in regional casinos, Lawrence says the Philippines remains a “very strong” slot market that skews 70/30 slots and tables, a percentage that changes towards 50/50 if it attracts a foreign audience.
Sueiro, meanwhile, says that the Emerald Bay will feature 146 tables and around 1100 slots at stage one of the development. “The deployment of the actual positions on the floor will be done under a phasing approach,” he adds.
A further big change in the regional casino market will come with the proposed privatisation of the PAGCOR properties. Until now, Lawrence says the monopoly status of PAGCOR had resulted in a somewhat moribund offering which left the space open in local markets for private operators to establish a presence.
It means, therefore, that choosing which of these properties might be worth taking on will be a task in itself. “For investment purposes in-depth research would be needed locally and cherry picking would be expected,” he adds.
Still Sueiro thinks that if the government does go down the privatisation route, some “interesting opportunities will become available.”
“The process regulations (existing employee guarantees, contract with suppliers, tax, license periods, bid process terms, etc.) will determine the success of the initiative,” he adds. “Demographics and market research (not just actual performance) will give a good indication about which ones are more valuable.”
POGOs to resist political pressures
With the win from China-facing igaming operations forecast to hit RMB230.7bn ($33 billion) in 2019, authorities in the Philippines have little incentive to curb activities of Philippine Offshore Gaming Operators (POGOs).
According to H2 Gambling Capital, a market data and analytics company, that figure is likely to rise to RMB252.9bn next year.
Since China urged its Asian neighbours to help stamp out online gambling targeting its nationals in August, Manila has stepped up its efforts to clean up the industry and has temporarily suspended the issuance of new licenses. However, so far President Rodrigo Duterte has resisted calls for an all out ban, unlike Asia’s other igaming hub, Cambodia.
The Philippines is wealthier and has experienced some of the strongest economic growth in the region at 6.2 percent in 2018, according to the World Bank. It is not as reliant on Chinese trade and investment, or prone to geopolitical pressure as Cambodia.
What it has done is to increase pressure on POGOs to ensure they are paying the correct taxes and to clamp down on immigration violations among the hundreds of thousands of Mainland workers, many of whom entered on tourism visas.
There are also proposals to increase taxes on the sector, in particular with the addition of a 5 percent franchise tax; a gaming tax of $10,000 a month per table for a live set-up casino and a $5,000 a month gaming tax for random number generator (RNG)- based games, as well as a $1,000 presumptive corporate income tax per seat for POGOs.
So where do these pressures leave the Philippines as an igaming hub for China and the Asian continent as a whole? Tax changes and employment crackdowns are one aspect of the debate, but the country is unlikely to implement any stricter or more prescriptive legislation for fear of the economic impact it would have on the igaming sector there.
POGOs paid PHP175 million ($3.4 million) in taxes in their first year of operations. That rose to more than PHP579 million in 2018, with the figure jumping to PHP1.63 billion in the year to August alone.
One industry contact who agreed to speak to Asia Gaming Brief on condition of anonymity says: “The Philippines-based igaming companies are not going to stop targeting China. Both the Chinese and Philippines officials know that. The question is more about how far the POGOs can push their activities in China without upsetting the authorities there too much.”
And even though “the Chinese have complained publicly about the serious issues they say are caused by online gambling; such as financial security, money laundering and evasion of the country’s strict capital controls, all parties know that the industry is not going to stop”, adds the contact.
The industry itself has proposed a degree of self-regulation to calm authorities’ nerves. Oriental Game has suggested setting up POGO hubs that would offer “one-stop” solutions to help companies comply with Philippine regulations.
“Everything will be there,” Kevin Wong, general manager of Oriental Group, told the Philippine Star. “PAGCOR will have an office there. We’ll also invite the Bureau of Immigration and the BIR.”
“If you locate in a POGO hub, no one would say that you’re illegal because all the other agencies are already there. So in terms of numbers, visas, the tax identification number, income tax, all will be covered,” he said.
When it comes to product verticals, China is also evolving in line with the rest of the Asia-focused industry. Where once live casino was the dominant product for much of Asia, sports betting has now taken over as the most important igaming vertical in terms of volume and revenues, followed by casino and poker.
And while live casino is still very important for Asian casino sites, it is clear that they cost more to produce than online-only table games, or online slots. The latter have been growing consistently thanks to an influx of new suppliers, who are keeping operators in the region supplied with regular content and growing their share of the market.
Another source who works with a leading Philippines-based gaming technology supplier adds: “All parts of the Asian igaming sector are constantly modernising and are getting increasingly sophisticated and the directto-consumer model is gradually replacing the agent system.
“This means companies don’t need to have as many contacts on the ground and can market their products directly to players in their target markets. And even though Cambodia is closing down operations and there has been a big exodus of Chinese executives from Sihanoukville, igaming firms are setting up in countries like Thailand, Taiwan or Vietnam to target China and other jurisdictions.
“That, and the fact that the Chinese market is so huge and potentially rewarding, are just some of the reasons why the igaming sector in the Philippines is unlikely to change much for the foreseeable future.”
