Prospects for the Casino Industry in Manila, Philippines

Macau has grabbed most of the casino industrys attention over the past decade, but after 30 years of quiet casino development, the Philippines is suddenly upping the ante. Four huge casinos are under construction as part of a megaproject due to start opening next year in Manila that will draw gamblers from across Asia. Once its going full tilt, the country expects to generate $10 billion a year in gaming revenue. That will easily top Las Vegas $6.5 billion last year but trail Macaus $33.5 billion. In a way, the numbers make the case forEntertainment Citywhich Philippine officials envision putting Manila on the international gaming map and boosting tourism. As alleged in the attached articles, many newly established casinos are blooming in the progressive streets of manila. The Philippines is ambitiously starting to compete with Macau and Singapore for the casino industry and gambling market in Asia. Macau known for being Asias number one casino receives the most threat from Singapore, although in lieu of recent events, data points to Philippines as starting to rise in the casino industry, in fact it is already attracting a lot of foreign investors (Ralph Jennings, 3/28/2012 @ 6:00PM, A Piece Of The Action For Manila).

One of the newly established casinos would be City of Dreams Manila, a gaming and entertainment resort that recently opened in the Philippines. Costing $1bn, it was built by Melco Crown Entertainment in conjunction with Belle Corp, a luxury property developer owned by the family of Henry Sy, the richest man in the Philippines. It is one of the four giant casino resorts set to rise along Manila Bay between this year and 2016. So far, two of these four major planned casinos are already up and running; the Solaire casino by Bloombery, began operations in 2013, and has been successful so far and competitors such as Travellers International, operator of Resorts World Manila, and Melco Crown. The other two integrated resorts that are slated to open in Manila next year are Belle Grande, owned by a company controlled by Henry Sy, the Philippines richest man, and the Solaire Manila complex, owned by Enrique Razon Jr, the countrys third-richest (Manilas new casino seeks business from Macau, Singapore By Gavin Bowring and Felipe Salvosa and Philippine casino hits jackpot before first spin of the wheel by Roel Landingin | Feb 19 2013 11:01).

The agreement betweenBelle CorpandMelco CrownEntertainment to develop and run the $1bn Belle Grande could give Manilas plan on renovating the Philippines into a gambling community a big boost. Melco Crown is a joint venture between Australian billionaire James Packer and Lawrence Ho, son of Macau casino tycoon Stanley Ho. According to Francis Hernando, the vice president of PAGCOR (Philippine Amusement and Gaming Corp) the involvement of Melco Crown sends a positive message to the main market in China that a name they are familiar with is also operating in the Philippines. Melco Crowns CEO Lawrence Ho expects CoD Manilas revenue breakdown to be more evenly split 50/50 between VIP and mass-market customers (July 15, 2012 4:32 pm, Manila steps up to Asias gaming table, by Roel Landingin).

So far, two of the four major planned casinos are already up and running; the Solaire casino by Bloombery, began operations in 2013. CoD has the potential to cannibalise a significant chunk of existing market from the likes of Bloomberry, as well as Pagcor, which simultaneously acts as the national gaming regulator and operator or several casinos nationwide. The resorts potential to attract a big domestic following is also boosted by CoDs tie-up with SM Group, the Philippines largest operator of shopping malls, which has helped drive the complexs brand development. The countrys gaming regulator, Pagcor also runs 13 small casinos across the country, including four in Manila, and has also licensed six privately owned casinos. At a macro level, the Philippines chances of nibbling into Macau and Singapores market share has been further boosted by recent slowdowns in both. Macau, for example, recently recorded its eight consecutive month of negative growth in gaming revenue, dropping 17.4 per cent year on year in December to MOP23.75bn ($2.97bn). Macaus full-year revenue fell 2.6 per cent year on year, the first annual decline since records began, largely in line with widespread anti-corruption crackdowns in mainland China and growing entry visa restrictions. This could push some China-based high-rollers to consider Manila as an alternative, particularly given its proximity and cost competitiveness relative to Singapore (Manilas new casino seeks business from Macau, Singapore By Gavin Bowring and Felipe Salvosa).

Investor bullishness on the local gaming sector has long been reflected in the stock markets, given the significant local demand (in a market with no local restrictions on domestic gamblers). It is also in par with the governments plan to significantly boost the tourism sector. Pagcor, the Philippine gaming regulator, had in 2009 first inaugurated Entertainment City, a major strip of land right along Manila Bay earmarked for development as a fully-fledged gaming and entertainment zone in order to increase tourism in the Philippines (Manilas new casino seeks business from Macau, Singapore By Gavin Bowring and Felipe Salvosa).

Abigger domestic market is the Philippines' key edge against other more established gaming destinations in Asia, states a report by Credit Suisse on the Philippine gaming industry. In its The Philippine Gaming Sector report, the Zurich-headquartered international financial services groupsaid thePhilippines is viewed as having a potentially large domestic market to complement the VIP market coming in from abroad. The VIP marketis traditionally the main cash cow of casino hubs. The Philippines' large domestic market is expected to sustain the gaming industry, more so than its casino hub neighbors Macau and Singapore.

The Philippine population of 97 million is almost 3 times that of Singapore, Malaysia and Macau combined, presenting sizeable onshore potential for the higher-margin mass segment. Meanwhile, limited hotel capacity and the absence of new casinos elsewhere in the region until 2015 could result in a spill-over of foreign VIPs into Philippines, the report stated.

The entry of Melco Crown is also seen as a vote of confidence in the countrys regulatory system in the wake of criticism from Wynn Resorts that official corruption in the Philippine gaming industry is deeply ingrained. Indeed, some backers of the four casinos going up beside Manila Bay failed sign up big casino operators in Las Vegas and Macau because of doubts about the potential of the Philippine market but Cristino Naguiat, Pagcor chairman, estimates that, once all four integrated casino resorts the other two being Gentings Resorts World Bayshore and Mr Okadas Tiger Resorts are up and running, the Philippines could generate as much as $10bn in gaming revenue by 2016 (July 15, 2012 4:32 pm, Manila steps up to Asias gaming table, by Roel Landingin).