Growth seen slowing as competition rises

The Philippines is expected to be one of the strongest growing gaming markets in Asia again in 2017, driven by another major opening in Manila’s Entertainment City, however growth is expected to slow over the longer term in the face of greater regional competition.

According to Fitch Ratings, the opening of Universal Entertainment’s $2.4 billion Okada Manila should help drive a high single-digit increase in gaming revenue in the country this year. But the firm sees signs the market is maturing, especially in the greater Manila area.

“We expect high single-digit gross gaming revenues in 2017 driven by the opening of the $2.4 billion Okada Manila and the continued economic growth in the Philippines. Longer term, competition from Macau and other Asia Pacific countries will restrain growth,” Fitch said, noting that junket-sourced VIP business makes up about one-third of gross gaming revenues.

The Okada Manila will be the third resort to open in Entertainment City and at 44 hectares will be the largest to date. The operator has pushed back its grand opening until the end of March. It joins Melco Crown Entertainment’s City of Dreams Manila and Bloomberry Resorts’ Solaire. A fourth IR from Travellers International Group will round out the offering in the zone, although its opening has been delayed to 2020.

Both Melco and Bloomberry reported strong gains in adjusted EBITDA and revenue for their most recent reporting period. City of Dreams posted a near 80 percent gain in 16Q4 revenue, while Bloomberry’s overall revenue for 16Q3 was up 11 percent, with its mass table drop jumping 61 percent. Travellers also reported a robust 14 percent gain in gross gaming revenue from its existing Resorts World Manila property, despite concern of cannibalization from the newer Entertainment City resorts.

Bloomberry has said it is interested in building a second casino in the greater Manila area, planning a $418 million investment in Quezon City. Aside from this, Joe Pisano, CEO of Jade Gaming Group says he doesn’t expect market regulator Pagcor to issue new licenses for smaller properties around the capital.

The Philippines is one of the few markets in Asia where locals are allowed to gamble, which is a key part of the attraction. However, tourism arrivals have also been steadily growing and the government is targeting a doubling of the current numbers by the end of 2022.

The country had 5.96 million arrivals in 2016, just shy of its six million target, but an 11.3 percent gain from the prior year.

Countries from Asia made up 60.56 percent of the total visitors or 3,613,725 arrivals. East Asia filled more than half of total volume with 3,040,860 arrivals, while the remaining fragments came from ASEAN with 461,698 arrivals and South Asia with 111,167 arrivals.

Korea was the biggest source market last year, but China rose to the third position amidst a thaw in political relations between Manila and Beijing.

China arrivals jumped 37.65 percent and tourism officials are targeting 3 million Chinese arrivals this year. On a visit to Beijing in October, tourism officials from the two countries signed a Memorandum of Agreement on Tourism Cooperation.

Improved air connectivity with China is also expected to boost arrivals, with several direct flights to different regions of the country launched last year.

Since November, Laoag has been welcoming around 400 Chinese tourists per week through China Eastern Airlines’ Guangzhou-Laoag chartered flights. Philippine Airlines (PAL) also took its maiden flight from the Changi International Airport to Cebu in December.

As a result of improved infrastructure and transport links, regional casinos are reporting healthy growth.

“Outside of the metro many areas have invested heavily in infrastructure on roads and airports facilities and this has driven both business and tourism to provincial destinations,” said David Lawrence, vice president of gaming operations at Widus International. “There have been several headlines that the new administration is restricting the gaming industry but for most operators this is an indication of Pagcor's focus on compliance of regulations and in the long run this is a good thing.”

Widus operates a casino in the Clark Freeport Zone, which was formerly home to a U.S. air base. There are another three casinos operating in the area, though Pagcor has recently shut down two properties.

Lawrence said improvements in transport links had boosted visitation both from the surrounding areas and from international markets. As a result, the group is expanding its property.

“Tourists are attracted to this due to the safe, relaxed and clean environment and offerings such as golf, scenery,” he said. “Here in Widus we have seized the opportunities these changes offer. The hotel and casino was expanding in 2014 and in late 2015 we announced our intention to invest U$100 million, this plan includes a $60 million flagship Marriott hotel which broke ground last year and will open in the second half of 2018.”

“The remaining commitment will be invested in facilities such as a water park and casino expansion. Knowing your market and investing appropriately are the keys as the Philippine market grows and we intend to continue to lead this growth,” he said.

Further regional expansion is expected in the Philippines, though Pisano says there will still be a minimum investment requirement of $300 million.