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Philippines pushes forward online to contain Covid damage

For this edition of our magazine, we focus on Southeast Asia, with a particular look at the Philippines, which longer-term is still viewed as one of the most promising markets in the region.

The country’s casino industry has been among the hardest hit in Asia, with the integrated resorts in Manila’s Entertainment City having remained mostly closed to the general public since the beginning of the crisis last year.

The capital and other areas of the country have faced successive waves of lockdown as the government has grappled to bring the Covid crisis under control in a sprawling archipelago that’s home to more than 108 million people.

After a five-month closure, the properties were allowed to open in August last year at 30 percent capacity with invited guests and long-term hotel guests only. The system was designed to allow the operators to fine-tune their operations to accommodate the new safety procedures and to train their staff.

As a result, operators in the Philippines reported a near 90 percent decline in revenue for 2020, the biggest decline anywhere in Asia.

However, the Philippine Gaming and Amusement Corp (PAGCOR) has not rested on its laurels. Concerned about the loss of a highly lucrative revenue source, the regulator last year announced that it would allow the casinos to accept online bets from VIP players. The news triggered a ripple of excitement in the online gaming world keen to see whether the announcement would pave the way for a regulated Asian jurisdiction for domestic players.

One of our articles in this section focuses on the more recent developments when it comes to these local licenses. So far, three integrated resorts in Entertainment City and a PAGCOR casino in Subic Bay have been authorized to accept bets and are understood to be carrying out trials. Industry experts say other governments around Asia are closely watching the Philippines’ experiment and are perhaps more willing now than ever to consider regulating the sector to repair Covid-ravaged coffers.

In this section, we also focus on the island of Cebu as a gaming hub. The island is one of the top tourism destinations in the country and is already home to multiple casinos. Two new large-scale properties are also under development, with PH Resorts saying its Emerald Bay will now open in the third quarter of next year, due to pandemic-related delays.

Analysts hold mixed views on just how exciting the island will be as an actual gaming destination and say the operators need to stay focused on catering to the tastes of the local market to underpin their earnings.

Switching countries, we also take a look at the prospects for Resorts World Las Vegas, which opens this month. It perhaps seems a stretch, but the resort is owned by Malaysia’s Genting Group, one of the biggest operators in the Southeast Asian region.

The group is highly diversified and in recent years has been making a push into the U.S. market. The more than $4 billion Resorts World Las Vegas will be the first from the ground up resort to open on the Las Vegas Strip and expectations are running high. Gaming revenue in the U.S. appears to have bounced back with a vengeance and Las Vegas is reporting booming trade.

Property President and CEO Scott Sibella also offers up his views on the opening in a Q&A with Asia Gaming Brief.

Cebu short-term IR success hinges on locals

Cebu, with its white sand beaches and coral reefs, was one of the most visited tourism destinations in the Philippines in 2019 and has sparked the interest of integrated resort investors as a potential gaming hub.

The province in the central Visayas is home to Cebu Island itself and about 150 smaller islands in the vicinity. Home to 3.3 million people, it’s the second largest metropolis in the country.

Visitor arrivals to the Philippines rose 15.2 percent to 8.2 million in 2019. Koreans made up the biggest segment of the market accounting for 1.9 million arrivals, although China was hot on its heels at 1.7 million and was the fastest growing, up 38.5 percent on the year.

Cebu, which hosts the new Mactan International Airport, was second to Manila in terms of direct foreign arrivals by air, accounting for 20 percent of the total, while the city was one of the most visited in the Philippines, according to the Department of Tourism.

From the figures, the potential is clear. However, the Covid pandemic has changed the international outlook in the short term at least and operators will need to tweak their offering to focus on the local market, experts say.

There are currently about 7 gaming facilities, several of which are smaller operations known as VIP clubs. The full-scale casinos are being operated by the Philippine Amusement and Gaming Corp (PAGCOR), with the major revenue contributor the Waterfront in Cebu City.

In addition, two new integrated resorts are in the works. PH Resorts’ Emerald Bay is the largest of the two with 270 rooms scheduled in the first phase of its development. The property, designed by Steelman Partners, is on a beachfront location and is about 20 minutes from the international airport. It has now pushed its opening back to Q3, 2022.

The second is the Universal Hotels and Resorts’ NUStar Resort and Casino, which is also scheduled to open next year in Cebu City.

“We firmly believe that the presence of Integrated Resort properties in Cebu would provide a huge benefit in the region that would drive more tourists and casino players as Cebu becomes a world-class destination,” said Jose Angel Sueiro, chief operating officer of PH Resorts.

“Currently, Cebu enjoys a very strong and captive local VIP market not only in Cebu but also in the Visayas and Mindanao,” he said. “What is missing so far to make it attractive for international players is the existence of high-end facilities, which is what we are building,” he said, adding that PH believes the project has the potential to bring in the big gamers.

However, even without the Covid travel restrictions the market has changed. China’s introduction of a “blacklist” of countries targeting its gamblers has raised concerns as to whether VIP gamblers will be prepared to travel to highly visible neighbouring jurisdictions. While Beijing’s clampdown on international capital outflows will also hurt junket play.

“These new casino properties will need to rely upon the locals and as Cebu is the 2nd busiest airport then there is an opportunity to attract premium local play from Manila for short trips away to experience the new integrated resorts,” said Scott Feeney, CEO of Gaming Concepts Group. “The casinos in Entertainment City Manila are now quite established so there is a large base of premium locals already familiar with high-end gambling which the new casinos in Cebu can target.”

On the downside, Feeney said he doesn’t see Cebu as a prime location for international high rollers. “Yes the new projects coming up will be of similar scale to Manila’s Entertainment City but I can’t see real gamblers making the choice to go to Cebu over Manila and Clark.”

Feeney said he’s confident that Cebu can support the two new resorts coming on line, but that will probably be to the detriment of the older PAGCOR properties. He estimates demand next year at least could only support 100 tables and 500-800 machines at each casino property.

“Further out with all the uncertainty, the casino operators I feel need to get back to the basics of really focusing on the locals and what makes Filipinos tick,” he said. “We know they love to be entertained, but this has taken a backward status due to the insatiable demand from Junkets and Premium play from 2016 to 2019.”

Cebu enjoys a very strong and captive local VIP market not only in Cebu but also in the Visayas and Mindanao.

Sueiro says PH Resorts plans to adopt targeted strategies to attract both VIP and mass customers both overseas and domestically, “utilizing the principle of marketing to “catchment” geographies, comprising gateway metropolitan areas.”

Spectrum Gaming is more confident about Cebu’s potential as a gaming jurisdiction.

“Spectrum has done some work in Cebu over the years and our takeaways are that some projects are better than others,” said Spectrum managing director Fred Gushin. “In my view, Mactan Island, Cebu has potential as a gaming resort. The advantages of Mactan Island include that it is in close proximity to the newly rebuilt airport, it is on an island that has seen the opening and planning of several major hotel projects which brings a steady mix of potential gamers to the island.”

Asian jurisdictions eye Philippines online gambling lead

Other Asian jurisdictions are closely watching the Philippines’ efforts to bridge the land-based and online divide with a view to following suit, while Nepal is likely to have its first online operator live within two months.

Online gaming has either been a grey, or strictly taboo area in many of the region’s jurisdictions, but the Covid pandemic is triggering a re-think as cash-strapped governments seek to raise more revenue and aid their land-based properties.

This was the view of Jade Entertainment CEO Joe Pisano and Loren Stout, founder and CEO of Pixil Asia and Dragon Points Live, speaking at the recent Sigma Manila Roadshow.

“We are getting enquiries from governments about how PAGCOR is going about this and how they can go online,” Pisano said. “They have never looked online before and now they are looking into this for their casinos,” he said, adding it’s a positive move for the industry.

We are getting enquiries from governments about how PAGCOR is going about this and how they can go online.

Pisano said Nepal has endorsed its first online provider and that it should go live in 60 days, where Sri Lanka plans to develop a Dubai-style economic zone, which will include both casinos and land-based gaming.

Stout said that as the only country in Asia so far to regulate online gambling, the Philippines has set a benchmark.

The country has hosted Philippine Offshore Gaming Operators (POGOs) that provide their services to punters outside of the country since 2016. However, it has now taken the step to introduce online gaming for nationals.

“I know for a fact that other countries are looking at their regulations to see how they might handle this going forward.”

Under PAGCOR’s charter, five percent of its revenue goes towards franchise tax, while 50 percent of the remainder is used to fund nation-building projects around the country. The gaming sector has proved a lucrative source of funds, with its rapid expansion in recent years.

However, Covid has caused the cash flow to dry at a time when the government is lacking funds for social infrastructure. PAGCOR expects gaming revenue to drop to about PHP16 billion ($330 million) this year, about half of what it earned in 2020, which offers a clear illustration of why the regulator is willing to consider alternative sources, which were once considered taboo.

PAGCOR Chair Andrea Domingo has said that three of the integrated resorts in Manila’s Entertainment City - Okada Manila, Solaire and Resorts World Manila - have been given permission to accept online bets from VIP players. This is in addition to the greenlight given to one of its own casinos in Subic Bay and two platform providers. It has also permitted i-gaming on cockfighting, known as Sabong, which is highly popular in the Philippines.

While the potential for legal online gambling in Asia appears to be more in reach now than it has before, it’s unlikely to be a straightforward process and will be subject to setbacks.

Politicians in Sri Lanka are already debating the legality of the China-backed Colombo Port City, arguing that it may violate the island’s constitution. Efforts to open up the island in the past to foreign casino operators have also failed.

China’s attempts to crackdown on online gambling, especially those firms targeting its nationals, will also continue to be an issue for governments who may be keen on regulating and taxing online gambling, but are concerned about getting on the wrong side of Beijing.

Cambodia, under pressure from China, banned online gambling from the beginning of last year, although industry insiders say the practice is continuing.

Stout said given the large level of investment into Cambodia’s casino industry, putting in place regulations would be a sensible move to create jobs and tax revenue.

“I think that it would be only smart to do some kind of regulation along the lines of what the Philippines and PAGCOR has done,” Stout said. “I think it all bodes well for regulation. I think that they understand the opportunity. I think it’s a matter of time.”

Will Resorts World light up the Strip?

Genting is gearing up for one of the world’s biggest openings this year, with the $4.3 billion Resorts World Las Vegas set to become the first all new property in more than a decade to switch on the lights on the Strip.

RWLV is scheduled to open this month and the company claims it will be the first “truly groundbreaking” resort in Las Vegas.

It will have 3,500 rooms distributed across three premium Hilton brands. The casino will have 117,000 square feet of gaming space, with some 250 tables and 3,250 gaming machines, as well as state of the art technology and nightlife concepts, such as Singapore’s Zouk Club.

Resorts World Las Vegas will also have the distinction of being the most expensive property so far built in the city. And that hefty price tag carries implications for the group’s return on investment, with the operating environment having changed significantly from when the group germinated the idea.

Genting bought the land in 2013 from Boyd Gaming, which had demolished the Stardust Resort that stood on the site to develop its own casino complex.

The Asia-themed IR, which was held up due to a dispute with Wynn Resorts over design, was designed to pull in Asia’s premium players as well as to provide a new point of reference for the Strip. Since then, the fortunes of Las Vegas have changed with the pandemic crushing destinations reliant on incoming visitation, while the return of Asia’s VIP market is a subject of intense debate.

“The property is opening at a time when it’ll face similar operating pressures as other Strip operators – lower visitation and limited group activity,” Fitch Ratings analysts told Asia Gaming Brief. “Our current rating case expects RWLV to break even by end 2022 and reach its fully-ramped up EBITDA by end-2024. The property being the newest in Las Vegas could help to accelerate rampup but there is significant downside in the event of slower than expected recovery in inbound visits, which could delay our expectation by 1-2 years.”

Nomura analysts expect the property to be a drag on net profit for the initial few years with the high start up costs resulting in losses to the bottom line. However, based on an analysis of other venues in the area, it does expect the resort to begin contributing from next year.

Nomura expects revenue of $350 million next year on EBITDA of $82 million, while that figure is expected to rise to $477 million in 2023 for revenue and $112 million for EBITDA.

It will also be an interesting test for the old adage “if you build it, they will come.”

The property is opening at a time when it’ll face similar operating pressures as other Strip operators – lower visitation and limited group activity.

Some industry observers say the concept still carries weight.

“Historically, new properties on the Las Vegas Strip have always driven incremental visitation. This will be no different,” says Josh Swissman, founding partner of Las Vegas-based, The Strategy Organization. “The timing of the opening is actually well suited to existing trends and sentiment around Covid-19. Currently, Las Vegas is enjoying a boost in visitation with additional desire to travel anticipated for the second half of this year (and beyond). That bodes well for Resorts World Las Vegas across multiple customer segments.”

Swissman also points to various unique selling points that will help Genting draw in the crowds.

“First its design, architecture and amenities are drawn from different influences than those typically seen on the Las Vegas Strip,” he said. “Additionally, I think the partnerships that they have struck with Hilton Corporation, AEG Presents and others will draw from those companies’ preexisting fan bases. What’s more, the entertainment offerings that have been announced will be a draw.”

Katy Perry and Celine Dion have been announced as residency acts.

The sprawling Genting Group is one of the world’s largest casino companies, owning properties in the U.S., Singapore, U.K., Bahamas and Egypt through its various subsidiaries. It also owns Resorts World Manila through its Travellers International Group venture with Alliance Global.

RWLV to rev up post pandemic revival

Scott Sibella, president of Resorts World Las Vegas, speaks with Asia Gaming Brief about the upcoming opening of Resorts World Las Vegas, how he sees demand springing back after the pandemic and the likely revenue mix.

Firstly, congratulations, the property appears to be getting positive reviews. What would you say was the unique selling point?

We’re building a truly integrated resort with everything guests need for the ultimate vacation or visit. The resort will offer an array of amenities under one roof, from casual experiences and dining options, to high-end attractions such as fine-dining restaurants, a world-class theatre and some of the city’s most luxurious suites. I believe our guests will really love the way we’ve programmed the property – we have an immersive arrival journey, a variety of room products and plenty of fun, new experiences. The diversity of offerings, advanced technology and the exciting moments awaiting within the property will set the resort apart.

Has the pandemic pushed out this timeline?

I’m proud to say we are opening on time. Though the pandemic brought unprecedented hurdles, we were fortunate that construction never fully stopped. We’re prepared to open our doors on June 24 and excited to finally unveil what we’ve been working so hard on.

How do you view current levels of demand/ visitation in Las Vegas?

Several factors will have an impact on how quickly Las Vegas is able to recover post-pandemic. We have the benefit of seeing demand trends and monitoring how visitation progresses – drive markets will be key and convention business and air travel will be major factors. People want to come to Las Vegas, and we are encouraged by how many travelers have already been returning. Las Vegas is already showing strong signs of recovery and we are so excited to be a part of the city’s revival.

We’re prepared to open our doors on June 24 and excited to finally unveil what we’ve been working so hard on.

How have you rebalanced the design/ offering to reflect the company’s Asian roots while appealing to a wider audience?

The property’s design will combine traditional and modern architecture with progressive technology while paying homage to Genting’s roots with subtle Asian touches within the art, decor and service standards.

What do you expect the revenue mix to be between gaming/non-gaming and similarly between VIP/premium mass and mass?

Given what we know about today’s Las Vegas traveler, we’ve seen somewhat of a paradigm shift and we’re about expecting 70 percent of our revenue to come from non-gaming amenities such as dining, entertainment and more. While we will offer an incredible casino experience unlike anything else on the Strip and welcome the traditional gaming customer, our property was designed to resonate well with all types of guests and interests.