Destination as a revenue driver

Okada Manila, owned by Japan’s Universal Entertainment, is the new comer to Entertainment City, holding a soft opening for the resort in late 2016. At 44 hectares, the property is by far the biggest in the complex and the rollout of hotels and other facilities is continuing. At its completion of Phase One, Okada will have 994 hotel rooms and operate 500 tables and about 3,000 slots. Its centrepiece is the world’s largest coloured fountain, as well as a giant inner city beach complex, known as “Cove Manila”.

Managing Director Steve Wolstenholme spoke to AGB about the progress of the rollout and his optimism about nongaming opportunities in the Philippines.

AGB: Facilities at Okada Manila were gradually opened throughout 2017, how happy are you withprogress so far?

Okada Manila is an enormous multi-billion dollar resort, and when you develop a resort of that size there are always going to be some challenges when you first open. I’ve been involved in a number of pre-openings and this one no different, however in many respects it has been a very successful opening.

We are extremely happy with the results. It is not only massive, the design is particularly intricate which needs to be continually refined to ensure the powerful statement that it clearly exudes. We are not fully operational. We have two towers with extremely large standard rooms that start at 55 sq meters. We have some villas that go up to 1,400 sq meters. Right now, we have most of one of those towers completed and we sell those rooms and also give complimentary rooms to our casino customers.

For the other tower, the infrastructure is there and we are just doing some finishing touches. We expect to finish that tower during 2018.

AGB: What does Okada Manila bring to Entertainment City?

If you look at IRs, there are many around the world. Las Vegas is the birthplace, but we now see them in Asia -- in Macau and Singapore specifically. 

If you look at Okada we have taken it to the next level. This IR is not just a hotel and entertainment complex with a spa and retail and all the things you would expect to find. It has gone one step beyond and I think a testament to that is our Cove Manila.

It’s not only colossal, I think it’s a game changer. 

With these kinds of amenities and this type of spend, it’s not just going to put Okada Manila on the map, but also Entertainment City and Manila in general as a global entertainment destination as well as a business destination.

AGB: How important will non-gaming be in the Philippines?

There is a broader range of non-gaming amenities here. When designing this property, we built it with the future market in mind. We see great opportunities on the non-gaming side and Okada Manila was developed as an all-encompassing resort. If you look at the Philippines, the culture is quite western in many respects and if you look at that western model, visitors don’t just come for gaming. They come for great restaurants, world-class chefs, worldclass entertainment. We’re not suggesting that Okada or Manila will predominantly be a nongaming destination like Las Vegas, but from a local standpoint, non-gaming presents a huge amount of opportunity. Whereas from a regional standpoint, gaming is a very important part of the entertainment.

AGB: How is Manila evolving as a destination? 

If you think of Manila, the first thing that often comes to mind is congestion and traffic. But with all the infrastructure spending we’ve seen, such as the Skyway for example, you can get to Entertainment City from Makati or the airport in 15 minutes when previously it used to take an hour. The experience has changed and I think that will be very important for the development of Manila as a tourist destination.

You don’t have to stay within Okada Manila.

There are great shopping and cultural experiences in Manila. With all the infrastructure spending that the administration is doing, there are great opportunities for people to come here and enjoy those things as well.

The current administration is very probusiness. 

The relationship with Mainland China to ensure arrivals is going to make the destination more attractive to tourists. We have seen substantial increases in gaming revenue in the market, but we’ve also seen a strong rise in visitation. In Manila, we only have about 4.5 million tourists a year, and that is a big opportunity. If we look at some of the other more established regional destinations, such as Bangkok, they do many, many times more visitors and I think that alone is an enormous opportunity, as the brand perception of Manila

continues to be refined. I think where we have established ourselves is that the Filipino people are associated with hospitality. We have hired 6,500 people and they are very aware of the unique Filipino hospitality that we strive to give.

Manila in many respects is a stepping stone to some of the beautiful islands, but we want it to be more than a stepping stone. So, they come here and go to the islands, but they don’t just come here and wait at the airport. They come and spend two or three days here in Entertainment City before spending time in the islands.

AGB: What about future expansion for Okada?

Right now we have a lot of work still to do here at Okada Manila, and we have multiple phases, but having said that we are extremely bullish on the Philippine market in general and not just here in Manila.

Japan is an interesting market for us. We have Japanese DNA, our parent is listed on the Tokyo Stock Exchange. However, we are very focused here, but it’s up to our parent company whether they want to participate in the Japanese market. One thing we see as a differentiator for us is not only our building, but that we do have that Japanese DNA. Japanese tourists will feel very comfortable in a Japanese-centric property with exceptional Filipino hospitality.

Koreans are a definitely a big market here. We see a continued interest from S Korea, but where we see the biggest opportunity is promoting Japanese tourism and I don’t see any threat from Japanese IRs, as this is a very different experience.

AGB: There has been talk of a market listing. Is this on the cards?

That’s at the discretion of our parent company, which will decide when it’s the right thing to do, or if it’s the right thing to do. Certainly we are very bullish on the Philippines and we think it would be the right thing to list here should that decision be made. There’s no immediate plans to do that but ultimately, it would be likely to happen.

AGB: What progress has been made in signing junkets?

We have started junket operations. They are limited at this time, as we are building complete our offerings. We are not just opening the doors to any junket operator who wants to come here. We are very selective and want to ensure that we give a very good customer experience, so that we have longevity in that side of the business. We have started and through Q1 we will continue to introduce new junkets.

By the end of Q1, we will have established a good portion of our junket operations.

AGB: What is the current split between VIP and mass?

Right now our split is approx 60/40 in favour of mass because we don’t have the full complement of junket operations. In the course of 2018, as more junket operations come on board we expect that to reverse to be more like 60/40 in favour of VIP. Having said that, there is significant opportunity in that mass market and non-gaming market, which we see as being a great contributor to our bottom line. 

We are an enormous resort and if you look at it from investment size, it’s twice that of other IRs in Entertainment City. With that in mind our market segmentation is quite broad. We have the largest multi-coloured fountains in the world and that attracts a lot of foot traffic. A lot of those are local people, but we are also hoping to make the fountain a check box, must-see destination. Some of those people will game, some will just spend money on food and some quite honestly will just come to see the fountain and we’re ok with that, because we want to ensure that our awareness is broad and it’s across all market segments both locally and internationally at all ranges of availability.

AGB: What is the visitation mix between locals and tourists?

If you look at foot traffic it’s going to be dominated by local guests and if you look at revenue it’s going to be the reverse. We expect 70 percent of our customers ultimately to be local, but we see approximately 70 percent of revenue being from international visitors.

We see local as a great opportunity, but more of an entertainment opportunity. Whether that is to spend money on a slot machine or whether it is to dine, or visit the cove or just come and have a look.

The real opportunity from a locals standpoint is the Philippines is growing at nearly 7 percent in terms of GDP and that has an enormous ripple effect throughout the whole population. We have 6,500 people and 98 percent are local and that too stimulates the economy. Those people have more money to spend on entertainment and we are going to continue to see that stimulation with regards to the economy and this kind of interest in entertainment.

AGB: Has growth come at the expense of other resorts?

Even since we’ve been open, we have seen growth in the market. It hasn’t been the cannibalization that everyone expected, so I think critical mass is important.

AGB: What trends are you seeing on the floor?

At this time we do not offer video streaming. Ultimately that is an area, under the direction of Pagcor, in which we see opportunities. However, I reiterate that we don’t want to be reliant on any sector of gaming or non-gaming. We have seen the experiences in the market and they are very positive when it comes to video streaming and as we evolve our junket business we will look at that with an open mind.

We are here in Asia and traditionally that is a very table games-oriented market. We currently have 2,700 slot machines and we will have 3,000. That’s a lot of slot machines in an Asian market. We have a market here that is, from a local standpoint, quite Western-centric. Slot machines align themselves with the entertainment side of gaming. Having said that many of our regional clients like to experience that table games market.

AGB: How has the smoking ban affected business?

There was an era when the industry looked at smoking and gaming and how a ban affected revenue, and it was quite drastic. I think that quite honestly that has changed. There is definitely an adverse effect on revenue, but it is certainly not as drastic as has been seen in the past. Our casino is a smoking casino...there are non-smoking areas. Our property is non-smoking property in alignment with the regulation. Coming here people can at least understand that we are being respectful to our employees and to those who don’t smoke, but we also recognize that some people like to smoke and we have areas where people can smoke.

AGB: How comfortable are you with the current regulatory environment?

Pagcor is an operator and a regulator that gives them a broad understanding. There is some suggestion that they may privatize, but even if they go through the privatization process, the fact they have been an operator gives them a different perspective and it’s a very positive perspective from an operator’s standpoint. We have, as do the other IRs, a good relationship and it’s a working relationship. 

We meet with them on a regular basis. We want to be competitive from a regulatory standpoint and we feel we are competitive from a regulatory standpoint, predominantly for the reason mentioned.

The environment we are in right now is extremely workable. One thing we do very well, is that we do work together and if we propose some refinement to our business processes we do it collectively as an industry as opposed to individually.

AGB: Have you adjusted security after the June RWM attack?

We have the largest complement of security personnel of any IR anywhere in the world. We are very cognizant of our obligation to ensure that anyone coming here or working here feels safe. We are also very cognizant of the fact that our reputation is paramount. It involves security, it involves surveillance and monitoring and diligence. While we have to be aware of our bottom line and our business, we are not going to do anything that will compromise that security. It’s not the easiest building to come into. It is similar in many ways to going through airport security.

There is a perception out there that doesn’t meet the reality. When someone asks me from the U.S or Europe is it safe in the Philippines, I tell them I feel extremely safe here and enjoy living here.

AGB: How do you see the market in five years? 

I have lived and worked in the Philippines for two and a half years has been an interesting and culturally rewarding time. We have seen a lot of growth in the market. If we can fast forward five years I think the destination will be the primary driver of that continued growth.

While gaming will always be an important sector of this market, it’s more about entertainment and gaming as it relates to entertainment as opposed to bringing in that high roller. The high roller is going to be important but...also that local component of entertainment seeker is going to thrive.

I’m expat so will not be here forever. My responsibility is to ensure going forward there are more Filipinos in senior positions and quite honestly more Filipino women in those senior roles, as I am a firm believer that diversity builds strength and character.