Philippines unlikely to eclipse Macau rivals

Published in: Latest Intelligence  

While Solaire Resort, Manila’s newest and most luxurious casino, may have a long way to go before it will steal a march on Macau, analysts say the Philippines’ entry into the VIP market may attract Chinese gamblers keen for more privacy.

“It is quite a good product and especially if VIPs want to have a lower level of scrutiny, it will gradually become a good place to go,” predicts Jeremy Tan from Kim Eng Securities in Hong Kong.

The $1.2-billion Solaire Resort & Casino is the first of four casinos to open its doors on prime reclaimed land in Manila Bay in a new gaming and entertainment complex called Entertainment City.  

Owned by container port services billionaire Enrique Razon’s Bloombery Resorts Corp., Solaire will have a monopoly until Henry Sy, the Philippines richest man, opens a rival casino at the site in 2014. Global Gaming Asset Management, formed by investment bank Cantor Fitzgerald with senior executives from Las Vegas Sands, is managing the casino and took a 9 percent stake in Bloombery in December.

Two more casino hotels – one being developed by a company controlled by Japan’s Universal Entertainment Corp. and the other a joint venture between Genting Group of Malaysia and the Philippines’ Andrew Tan - are scheduled at Entertainment City to open over the subsequent two years.

New resorts are always attractive to high rollers seeking fresh gaming markets, according to Richard Huang, an analyst with CLSA Asia Pacific Markets in Hong Kong. “While it could be the case that some people would want to go to the Philippines to avoid the type of political oversight there might be in Macau, there have always been other choices for these people in Singapore, Cambodia and Korea,” he said. “We’ve always taken the view that gambling in Macau is legitimate and that it’s not driven by money laundering. For those driven by other motivations, they have always had these other choices.”

The Philippines gaming market, with 42 mostly small casinos, is currently worth little more than $2 billion a year, but the country’s chief regulator Philippine Amusement and Gaming Corp. (Pagcor) estimates that this will rise to $10 billion by 2017 with the new casinos. 

Until now, the country has drawn little attention from Chinese high rollers and the junket operators who cater to them, says Graeme Croft, senior vice president of casino operations for Universal’s Manila project. “Definitely there will be an increase (in VIP traffic) but it’s probably a bit early to gauge what’s happening with Solaire because it’s only been open a few weeks and won’t be fully operational until May.”

Aside from privacy and novelty, Solaire may have little to draw attention from Chinese gamblers, say analysts. “It won’t have a big impact (on the Chinese market),” said Aaron Fischer, head of gaming research at CLSA in Hong Kong. “People prefer to go to Macau because the Philippines is too far away, it’s dangerous and the infrastructure is not very good.”

High-profile incidents such as a hostage-taking involving a bus of Hong Kong tourists in 2010, during which 21 Hong Kong citizens and four Filipinos died, have done much to damage the perception of the Philippines in the mind of Chinese travellers.

Nevertheless, Jeremy Tan of Kim Eng Securities in Hong Kong believes it will only be a matter of time before the four casinos at Entertainment City reach the critical mass necessary to begin attracting Chinese clients.

“Over the next few years it could become an alternative (to Macau) but I don’t think there will be intense competition because these casinos will be serving a domestic market too,” Tan says. “The domestic market trades at a smaller minimum bet, but then GDP growth has been quite strong for the country.”

Solaire's 18,000-square-meter casino includes nearly 300 gaming tables as well as 1,200 slot machines and a 6,000-square-meter VIP gaming salon.

With an entertainment lounge offering live music, 500 guest rooms and villas that overlook Manila Bay, the main gaming area is decorated in mother-of-pearl-encrusted columns and has a floor embedded with coloured glass. Guests have access to a 24-hour butler service, private chef, in-suite spa facilities, a home theater and private pool and jacuzzi. 

The property aims to garner 45 per cent of its revenue from high rollers and is likely to cut into VIP traffic at Genting’s Resorts World Manila, which opened in 2010 opposite Manila’s main airport as the company’s first foray into the market and quickly gained the favor of the country’s high rollers.

Ciaran Carruthers, a veteran casino executive now with the Asia Pacific Gaming consultancy, is among those optimistic about the country’s prospects. “As far as junkets and international VIP goes, the Philippines has incredible potential as a very strong secondary market to Macau,” he says. “I don't believe anyone is expecting it will surpass the revenues of that marketplace, but taking a strong stand as the only legitimate alternative option to Macau and generating significant revenues from this segment is very realistic.

“All the ingredients are falling into place as far as the product offering is concerned and with the lower tax rates, operational expenses and investment required compared with Macau, the market can provide very attractive packages to players and junkets and still maintain better margins than many of the Macau operators,” argues Carruthers.