Proxy betting, new properties fuel growth

The Philippines is tipped to be one of Asia’s best-performing gambling markets again in 2017 despite concerns over how a smoking ban may affect casinos and an attack on Resorts World Manila that left 37 people dead.

According to analysts from Morgan Stanley, gross gaming revenue is likely to have grown 26 percent in 17Q2, driven by proxy betting from foreign VIPs. The mass sector is also likely to have grown, but at a lower rate. 

“We expect industry EBITDA to grow 8 percent quarter-on-quarter and 27 percent year-on-year to PHP7 billion in 17Q2, driven by Bloomberry and Melco, partially offset by Travellers,” said the brokerage.

Visitor arrivals to the Philippines were up 13 percent year-on-year to April, while both Melco Resorts & Entertainment and Bloomberry Resorts posted strong 17Q1 results, with revenue up about 74 percent and 40 percent respectively. Travellers International Hotel Group, which owns Resorts World, has suffered as the focus in Manila shifts to the Entertainment City hub and posted a slight decline in operating revenue in the quarter.

Universal Entertainment’s Okada Manila is now up and running as the third IR to open in the zone. 

At the World Gaming Executive Summit in July, Philippine Amusement and Gaming Corp Chair Andrea Domingo said the market had not suffered any dramatic drop off in June as a result of the Resorts World attack, in which a lone gunman burst onto the casino floor and set fire to tables, resulting in death from smoke inhalation.

For the full year, Domingo said she expects Pagcor’s own casinos to generate some PHP60 billion in revenues, compared with PHP55.1 billion last year. 

However, some analysts have noted that the incident will help to fuel perceptions that the Philippines is not a safe destination, especially amongst Chinese travellers. Casino executives in the country have commented that overcoming that view will be key to achieving the market’s full potential.

Morgan Stanley expects the Resorts World incident to have reduced GGR in the month by about PHP1.7 to 2 billion (US$33.6 to US$39.5 million). It said it expects business for the overall market to recover in July.

Udenna finalizing funding for Mactan resort 

The Udenna Group, developer of the Lapu-Lapu Leisure Mactan integrated resort, is set to complete the funding requirements needed for development, Business World reports. “The debt component is given by China Bank. They are very supportive,” Dennis A. Uy said in an interview with Business World, adding that the agreement will be signed soon. In May, the Udenna Group sold a 25 percent stake in listed oil company Phoenix Petroleum Philippines, raising PHP4 billion (US$80 million) to help finance the development of the Mactan IR in Cebu.

Live shooter drills for Manila casinos

After completing bomb threat and response exercises, Manila’s hotels and casinos are set to undergo active shooter exercises. According to Manila Police District (MPD) director Chief Supt. Joel Coronel, at least seven hotels including the Manila Hotel and Diamond Hotel, as well as casinos operated by the Philippine Amusement and Gaming Corp. (Pagcor) will take part in the drills. “We will be having a seminar first, then contingency planning with the establishments’ security officers,” Coronel said. After that, simulation drills will be conducted, teaching staff how to properly react to active shooter scenarios.

There is also uncertainty over a draconian ban on smoking in public places announced by President Rodrigo Duterte earlier this year. According to Domingo, under the new legislation, casinos will be able to allocate up to 20 percent of the total casino space to smoking, as long as there are buffer zones.

However, further details are not yet available and if that position were to change, the outlook for the market may be altered significantly.

“In most jurisdictions where total smoking bans were implemented, gaming revenue initially declines about 12 percent. In some jurisdictions and casino environments, the drop can be as high as 20 percent,” said Andrew Klebanow, senior partner at Global Market Advisors.

This would be especially true in the Philippines, where the majority of international casino visitors come from other Asian countries where theincidence of smoking remains relatively high.

According to the 2015 Global Adult Tobacco survey by the World Health Organization, about 23 percent of the Philippine population smokes, or 17.3 million people. That rises to about 42 percent for adult males. In China about 52 percent of men smoke, the same survey found.

As regulators reacted to the fallout from the Resorts World attack, a further potential negative emerged for the country’s casinos. 

A House of Representatives bill was filed seeking to impose an entry fee for all casinos. 

According to a note from Morgan Stanley, if implemented it would have a significant impact on the mass segment of the market. 

“Filipino gamblers view gambling more as an entertainment compared to Chinese gamblers in Macau, in our view”.

The Philippines’ GDP per capita is 60 percent lower than China’s, and the entry fee may deter grind mass and family customers. But the note also added that Morgan Stanley “remained positive” on the long-term development of the industry because a similar bill surfaced back in 2014 but made no progress.

That, combined with improved infrastructure and a strong economy, should drive higher traffic and spending per capita. When it comes to VIP and premium mass, Morgan Stanley also said the impact would be “less”.

“[This is because] the minimum bets of premium mass and VIP tables are generally PHP3,000 or above and hotel room rates are generally PHP8,000 or above (PHP11,000 during the weekend). Also, this will not affect proxy/phone betting in VIP rooms.”

Tiger Resort Leisure and Entertainment

Philippine’s largest integrated resort, the 44-hectare Okada Manila, is continuing to roll out its attractions, opening up its giant water fountain feature and 116 deluxe accommodations at the end of March. The $2.4 billion casino resort held a soft opening on Dec. 21, and officially commenced casino operations on Dec. 30.

The resort will feature two Y-shaped hotel towers with a total of 993 rooms, a casino floor with about 500 table games and 3,000 electronic gaming machines, a 90,000 square-feet nightclub and beach club entertainment complex. It will also have an 8,409 square-meter retail promenade, a world-class spa and 40 restaurants ranging from casual, buffet, and international dining.

The restaurants include culinary masterpieces of Michelin-star chef Hirofumi Imamura at the Japanese Kappou Imamura restaurant.

Bloomberry Resorts

Bloomberry Resorts Solaire is a 16-hectare gaming and integrated resort complex along Asean Avenue in Parañaque City. The Bay Tower of Solaire consists of a casino with an aggregate gaming floor area of approximately 18,500 square meters (including approximately 6,000 square meters of exclusive VIP gaming areas), with approximately 1,400 slot machines, 295 gaming tables and 88 electronic table games. Bay Tower has 488 hotel rooms and 15 specialty restaurants. Contiguous to the existing Solaire Resort and Casino, the Sky tower consists of a 312 all-suite hotel, an additional ten VIP gaming salons with 66 gaming tables and 223 slot machines. It also includes a certified 1,760-seat lyric theatre.

For the three months to end-March, Solaire registered robust growth across all segments with all time high VIP volume, mass table drop and slot coin-in for 2017. VIP volume, mass table drop and slot coin-in, grew by 34.7 percent, 23.7 percent and 26.2 percent, respectively, for 2017 compared to the same period in the prior year. Gross gaming revenue increased by 39.7 percent.

City of Dreams

The $1.3 billion City of Dreams Manila is owned by Belle Corp and Melco Resorts & Entertainment’s local unit. City of Dreams Manila has six hotel towers with approximately 950 rooms in aggregate, including VIP and five-star luxury rooms and high-end boutique hotel rooms, a wide selection of restaurants and food & beverage outlets, a 4,612.44 square meter family entertainment center in collaboration with Dreamworks Animation, a live performance stage, two international nightclubs and a multilevel car park. It includes an approximately 260-room Crown Towers hotel, Hyatt City of Dreams Manila, a 365-room hotel managed by Hyatt International Corporation and Asia’s first Nobu Hotel with 321 rooms.

Total operating revenue for 17Q1 rose 74 percent, with casino revenue making up 93 percent of the total. Rolling chip volume rose to PHP121.3 billion from PHP70.9 billion, while for mass revenue the table games drop was PHP7.7 billion up from PHP5.7 billion the year earlier.

Resorts World Manila

Travellers International Hotel Group, a joint venture between Genting Hong Kong and Alliance Global, is the owner and operator of Resorts World Manila. The hotel room count for the group’s three hotels (Maxims Hotel, Remington Hotel, and Marriott Hotel Manila) remains at 1,226. Phase 2 at RWM is nearing completion with the addition of 228 rooms in the Marriott West Wing in 17Q4. Phase 3, which will consist of three hotels, Hilton Manila, Sheraton Manila Hotel, and Maxims II, will be completed by 2018. It will also include an additional gaming area, new retail spaces and six basement parking decks. PAGCOR has approved new gaming capacity of 420 gaming tables and 4,148 gaming machines at the resort.

The casino was the target of a deadly attack by a lone gunman in June who set fire to casino tables killing 37 people. The company has now been given permission to reopen and is creating a new casino on the ground and third floors of the property. The second floor will no longer be used for gaming, but will contain other non-gaming activities. Company officials may face charges of negligence as a result of the incident.

In 17Q1, parent company Travellers reported total revenue slipped to PHP5.26 billion from PHP5.57 billion.