Betting on the Philippines’ island potential

The Philippines was one of the best-performing casino markets around Asia in 2015, defying the regional slump to post a 17 percent increase in gross gaming revenue. Most of the focus has been on the multi-billion dollar resorts springing up in Manila’s Entertainment City, but industry experts say there’s plenty of opportunity outside of the capital.
The pristine beauty of the Philippine islands and the fact that locals are permitted to gamble make for an interesting mix for casino investors.
Mactan Island and Cebu Island have recently received multi-million dollar investments from the likes of the Sino-America Gaming Investment Group and SM Group. While the Aurora Pacific Economic Zone and Freeport Authority (APECO) now has the power to grant land-based and online casino licenses independently of PAGCOR.

Then there’s Clark Special Economic Zone, a former US Air Force base turned tourism and entertainment complex with casinos including the Royce, Casablanca, Widus, Midori and Mimosa. The majority of casinos, existing and new, are aimed at regional gamblers and tourists, but some have been built with the local market in mind with Bloomberry Resorts investing $40 million in a new resort project in Quezon City. The chunky investments – Sino-America is putting $1 billion into Mactan Island and SM Group $300 million (the smallest investment required by PAGCOR for casinos outside of Manila) into Cebu – prove operators are confident in the long-term potential of regions outside of Manila and Entertainment City.

But challenges still remain: “Land acquisition, deal structure, and securing all the necessary endorsements are amongst the most complex issues in the Philippines,” says Michael Foxman, chief executive officer of RiskWise Group. “Then, of course, you have to ensure the location is suitable for the desired project - there's very little ideal land available in the country. Mactan Leisure City, for example, is situated within a community not seen as lucrative gambling customers, and that’s why operators there are focused on attracting the tourism dollar,” he adds.

For operators looking to establish a long-term, sustainable income from gambling, capturing the tourist dollar will be key. However, experts predict that up to 80 percent of resort revenue will come from domestic tourism, with just 20 percent coming from international visitors. Political tensions between Manila and Beijing have made mainland travellers wary of the Philippines, while security concerns are also a deterrent.
That said, international visitor numbers have risen of late, up 11 percent year-on-year in April to 471,598 and even the Chinese are returning to the country – from January to April a total of 238,523 Chinese tourists visited.
This uptick has helped investors raise the required capital to push ahead with their projects.

Mactan Island and Cebu

Of all the areas primed for gambling growth, Mactan and Cebu are most likely to deliver in the short term with PAGCOR understood to be on the verge of issuing the jurisdiction with a gambling permit in the coming months. When it does, plans for Mactan Entertainment City – located in Cebu – will break ground. Once complete, the development will consist of three luxury hotels, as well as an entertainment complex that will include a full-scale casino, shopping and dining and a conference facility. The project has been developed by RiskWise with funding – set to top $1 billion – from the Macau Resources Group.

“We are focused on Mactan Island as this territory conforms with our profile of an integrated resort casino,” says Foxman. “We also see an opportunity to enhance the Asian gaming footprint in a beautiful tourism-oriented destination that’s accessible from numerous countries.”

Mactan and Cebu are certainly primed for such development. There’s an international airport on the island with regular flights to major Asian cities such as Singapore, Hong Kong and Manila, and the area already has the infrastructure required to deliver tourists to the various five-star beach-front hotels – including Shangri-La, Plantation Bay and Bluewater Maribago Beach Resort that have already popped up. More importantly, it has the investment and setup needed to accommodate the major uptick in visitor numbers that will likely occur once Mactan Entertainment City has been built.  

Clark Special Economic Zone

Clark offers many of the same opportunities as Mactan-Cebu; built on the site of a former US Air Force base it has been recently updated to become one of the most modern airports in Asia. Further expansion is currently taking place in order to turn Clark into the international gateway to the Philippines. The area already has an established casino and gambling industry, with some operators – Widus and Royce – currently mulling expansion plans. And while Clark lacks the white sandy beaches and crystal clear waters of Mactan-Cebu, it’s numerous golf courses and entertainment facilities are still a major draw for visitors and tourists.

But for the area to grow further, argues Joe Pisano, CEO of Jade Entertainment and Gaming Technologies, there needs to be an “increase in the number of international flights landing at Clark.” The airport currently receives flights from Singapore, Macau, Hong Kong, Kuala Lumpur and Qatar but that should increase once the airport expansion masterplan is completed in 2025, with capacity increasing to 80 million passengers a year via four terminals and three runways. What’s more, a high-speed train network will link Clark to Metro Manila, giving visitors and tourists another route to the area.

Complement or compete?

Both jurisdictions offer serious untapped potential for casino and gambling operators. With their close proximity to international airports and decent infrastructure they could easily compete with Manila as entertainment Meccas – at least on paper. But drawing players away from Entertainment City will be no easy feat. Pisano, however, argues that operators in Clark and Mactan-Cebu do not see themselves as competing with those in Manila, rather working with them to offer customers more gambling options.

“Entertainment City casinos work with regional integrated resorts to provide tourism options to their customers, places with white sand tropical beaches, golf courses, and other activities.” Foxman agrees: “This industry is about building customer loyalty. We don’t envision competing, what we will do is provide greater options for travellers to visit other areas outside of Manila.”

Customer loyalty is at the heart of any successful casino operation. As is their satisfaction. If operators are able to offer players more gambling options in different locations around the Philippines, their loyalty will only strengthen. There are major challenges in building integrated casino resorts in these new jurisdictions, but if developers and operators are able to make all of the pieces come together the potential is huge.