PH Resorts remains firm in its belief that it will be able to open its flagship property, Emerald Bay, despite recent complications, including Bloomberry Resorts pulling out its proposed investment. AGB sat down with the group’s COO, Angel Sueiro, ahead of the group’s annual general meeting, to get more insights on the project and its progress.
The COO expressed his confidence that the property could open as early as 18 months after securing new partnerships or investment, despite some changes to the gaming floor.
We’re joined today by Angel Sueiro, the chief operating officer for PH Resorts. You’ve been with the company since 2017. You’ve seen a lot of changes within the environment within the Philippines itself. I want to say looking at what has happened within the recent past, how is the Philippine market reacting? And how is it emerging from COVID? And how is this year overall looking for gaming operators and IR operators?
So far the year has been fantastic, the recovery from COVID has been great, and the most important lesson, or the most important factor is the fact that the local market is responsible for this recovery. So if you look into the materials and the numbers from operators like Solaire or Okada, most of the properties in Entertainment City, they are very encouraging. They’re beating their own records within their own numbers.
You see a lot of excitement on the gaming floor, you see a lot of new guests or new faces. And the most interesting part is quite solid growth where the focus is based mostly on local players, traditional markets or Korean players, for example, but mostly on the strength of the local market.
I mean, that has been proven within how the mass can drive you through the dark times. And that’s something that I think Macau is trying to shift into as well, within its shift away from VIP.
I want to look at the major thing that PH Resorts is doing now. It’s a huge investment project. It is the Emerald Bay, it’s the one that is going to put you guys more on the map. It’s been through a couple of trials and tribulations. But can you walk us through what is happening now within that process?
We were very affected through the pandemic situation in terms of capacity to finalize the project and to finance the project. Since that moment, we’ve been quite active, working on getting strategic partnerships to be able to complete the construction of this.
At this moment we’ve basically finished the civil construction of the project. So we just were pending on doing all the […] and the fit-outs. So roughly speaking, I’d say that we are at half of the process. I mean, I think we’ve been quite lucky in the sense that we’ve got a great location, we enjoy an amazing captive market there.
So that’s been expression of interest from different groups. Unfortunately, we are binded by NDA, but I can say we are quite well advanced in the conversations with some of these groups and we hope and expect to be able to complete these conversations and resume construction and finalize this project in a short period of time.
It’s a big project. And obviously when Bloomberry announced their intention to invest with you, within that, and within the other project as well, within The Base, it drew a lot of interest. And when Bloomberry decided to pull out, I’m sure that there was a bit of trepidation on your guys’ side.
But how long did it take before the potential investors started gathering? Because they must have seen that opportunity? They saw ‘Okay, now Bloomberry’s finally out of the picture. Now it’s time for us to get a piece of the pie.’
I think you described it perfectly. I guess one of the advantages that we have, we got a great location and a great market. But also the speed to access this market. The fact that we already have bids means that in a couple of years, we can have the operation up and running.
So it’s not like saying that you need to start from ground zero. And I think that made us very attractive for other possible investors or possible partners. Obviously these processes are very complex and they involve a lot of due diligence, a lot of conversations. But I could say that we’re very, very lucky in that sense.
So we were able to start conversations quite fast after finalizing the process with Solaire. So hopefully, we will be able to close these open conversations that are happening in a short period and be able to open the property that I’m absolutely sure will be a great success.
I want to check a little bit about the market. We have we talked a bit about how the domestic market has been the main driver. How much of a component is the company looking at in terms of VIP? Is there a main focus, has there been that focus within the design of the property as well?
With the VIPs, it’s always become part of the gaming mix of any progress. In our size, being a new group, a new casino company, we tend to be conservative in terms of risk. So we are not necessarily looking for the super VIP. So, for the major major VIPs. We believe that we are very well positioned to capture the next level of VIPs.
So again, probably we are not yet there at at opening, I don’t think any property in the first year of operation, the first couple of years of operation, is ready to face the risks of handling a VIP operation.
But we strongly believe now that the next market, the premium mass – there’s a lot of different definitions for that segment – that we will be able to offer them that will be at par with expectations and at the same time that will protect us in terms of risk: percentages, maximum, minimum bets [etc]. Overall, obviously, we want to have the VIPs. But we believe that it’s gonna take a little bit of time to build up to that segment.
It’s a big property, Emerald Bay itself, and then you’ve got The Base also, which is in development. I’ve been looking through some of the recent exchange filings and all that and The Base seems to be a little bit more under the radar at this point. What’s happening with that? Is the project being put on hold? ‘Let’s get Emerald Bay out of the way and then we can make sure that we leverage our resources’ [type of scenario]?
Yeah, that’s basically the main idea. We are very, very focused on opening the Emerald Bay. So most of our human resources and financial resources are focused on that one.
Clark is a great market, you know, looking to the numbers for some properties, like Hann, the numbers are fantastic. So we believe that it’s in a strategic place to ensure the future development of the company. But at this particular moment, our main priority, main focus is to open the Emerald in Mactan.
So it has to be asked, is there any possibility that you will not be able to open the property?
We don’t contemplate that. I mean, we believe that we have a great product, we have all the right components to make it happen. We are quite fortunate to be engaged in quite advanced conversations with possible partners. So, we don’t contemplate that possibility.
Is there a timeline now that’s definitive in regards to the opening? Or do you have various scenarios? Is there one scenario which you’re currently working on, the second scenario, which involves further investment, a third scenario with multiple investors? And what is the shortest timeline we can look at?
From the moment that we complete our financing needs, mostly from the moment that we are able to finalize the conversations with the possible investors, we are looking to an 18 months, 24 months period to finish and open Emerald Bay. That should be again, if we are conservative we can be talking about 24 months, we believe that we can do it even faster, within 18 months. But as safe statement, we can say that in 24 months we should be opening and operating from the moment we complete our financing, or finalize the conversations with investors.
Does that entail that there will be a non-gaming component opening first and then the casino later? Or are you going trying to open the casino first, and then strategically open the rest of the amenities on the property?
There are different possibilities or different scenarios in that regard. The Philippines gaming regulator, PAGCOR, requires that a certain number of rooms must be opened in order to open the casino itself. So that’s one requirement. Let’s say, if I want to open with X number of tables or X number of slot machines, I need to have this number of hotel rooms.
So that’s one of the factors that we consider when we are doing our timelines, and it’s quite an important factor.
Because in terms of the construction process details, the physical opening of a casino is not as complex as the physical opening of the hotel rooms. Or maybe it’s not the complexity, but the volume of work required – just the casino gaming floor is less than the volume of work required to open 500 rooms.
So that’s probably one of the major factors that we consider when we’re doing our own time charts, our own planning.
Saying that, we are looking into the possibility to have a partial opening. I already have one of the towers ready, in terms of built rooms. And if I get the […] approval, probably I will open the casino, even if it’s not with a full capacity, in order to be able to produce enough cash flow to sustain operations and be able to face our financial obligations.
Obviously, within any of these major projects, we’ve seen this happen in so many different countries and under so many different companies, there are adjustments to the planning of the project itself as the financing needs change, the overall global financial market changes and investor sentiment changes as well throughout the whole process.
So looking at the gaming floor itself, are there any changes and what are the current metrics you’re looking at? How many table games, how many EGM was how many slots? How many VIP rooms, if there are any?
Yeah, you make a great point. Originally, we were talking about opening around 120 tables, 700 slots – that was part of the original plan. I’m always a big proponent of opening small and then expand. I always go back to the basics: to fill the casino on a Friday night and Saturday night when you have the capacity, that’s quite easy. But to be able to […] on a Tuesday morning, make the place not look empty is also a challenge.
So, to expand is easy, to contract is hard. We’ve been looking into this in our operations. So in our case, that was the original capacity, I don’t think there will be major changes on this original capacity but all the changes on the configuration of these tables, of these rooms.
So, you made a good point, you mentioned the VIP rooms. We know there’s been a big change in terms of the Chinese junkets. So that means probably some of the plans that we’ve had before have to be modified or adjusted.
We see now, for example, the Korean market has been always there, no question, but it’s becoming bigger and bigger. And we see a lot of upcoming markets.
We see Chinese living abroad, for example, Chinese communities living in Singapore, or ASEAN. So all those require different configurations, so maybe no really big VIP rooms, maybe now moving into smaller rooms that can be used by small junket operators, and not the usual ones that would take up a lot of space. So that’s probably one of the changes.
We are obviously looking quite carefully into the gaming trends – there’s been ups and downs, for example with the tables and things like that, that has an impact on the floor itself.
And again, into some of the demographics, it’s quite interesting to analyse – before we were talking before the local market – [how] to develop the local market. One of the questions is why? Why suddenly? Obviously, it’s been there, but why suddenly is it so strong?
And obviously one side is related to economics, macroeconomics, but I believe that there are also some trends, in terms of the demographics of the of the local market. We obviously want to understand those trends and adjust the product mix to take advantage of these new players that are coming.
So we start with this basic idea of around 120 tables and around 700 slots, plenty of space for expansion in the future, immediate expansion hopefully. But probably we will be doing changes in terms of the tables and slots configurations, VIPs, semi-VIPs, whatever you want to call them.
