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By Keith Richard D. Mariano

Gaming sector faces rising competition

Posted on February 13, 2017

THE PHILIPPINES faces stiffer competition from other Asia-Pacific economies in the gaming industry, according to Fitch Ratings, but the local market should still see a high single-digit revenue growth this year.

Fitch Ratings expects that, in the ‘longer term, competition from Macau and other Asia-Pacific countries will restrain growth’ in revenues of privately owned casinos in the Philippines. -- Bloomberg
In a Jan. 27 report, the global debt watcher flagged that completion from Macau and other gaming jurisdictions in Asia and the Pacific will restrain the growth of private casinos in the Philippines in the longer term.

“The initial results of the first three casinos operating under the licenses granted by PAGCOR (Philippine Amusement and Gaming Corp.) are encouraging relative to the investments made,” Fitch Ratings noted.

“However, the greater Manila market is showing signs of maturation with Resorts World Manila -- the first privately owned resort -- showing steep declines amid the ramp-up of the newer resorts,” it added in the report “Eye in the Sky Series: Philippines.”

The nine months to September last year saw Resorts World Manila operator Travellers International Hotel and Gaming, Inc. booked relatively flat gross gaming revenues of P18.92 billion.

That compares with the P17.95 billion recorded for the same period in 2015.

The listed company, however, noted its gaming revenues stayed afloat primarily because of an increase in volume across all segments despite lower win rates.

Industry-wide, Fitch Ratings expects gross gaming revenues to continue growing, after Tiger Resort, Leisure and Entertainment, Inc. commenced its casino operations in late December.

The debt watcher estimated aggregate gaming revenues of Philippine casinos close to $2.5 billion for the nine months to September last year, of which PAGCOR accounted for more than a third.

Tiger has invested $2.4 billion for the development of Okada Manila’s first phase, which covers 21.55 hectares of the 44-hectare property awarded by PAGCOR to the company within the Entertainment City in Parañaque City at the foreshore of the Manila Bay.

The company is developing 41,000 square meters (sq.m.) into a casino with 500 table games and 3,000 electronic games; a two-hectare dancing fountain; two hotels offering 993 rooms; a beach club that could accommodate 4,500 people; 21 food and beverage outlets; a high-end retail area spanning 8,409 sq.m.; and a 3,000-sq.m. spa.

Okada Manila is the largest and most expensive development in Entertainment City to date.

Bloomberry Resorts Corp. and the partnership of Belle Corp. and Melco Crown Entertainment Ltd., which have already opened their casino-resorts in the area, have invested more than $1 billion each.

Alliance Global Group, Inc. -- the group behind Resorts World Manila -- is working on the blueprint of the last casino-resort to open in Entertainment City.

In partnership with Malaysia’s Genting Group, the company intends to develop 31 hectares into a leisure and entertainment township called Westside City.

“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,” Fitch Ratings said.

“Longer term, competition from Macau and other APAC (Asia-Pacific) countries will restrain growth (junket-sourced VIP business makes up about one-third of the private casinos’ gross gaming revenues),” the debt watcher added.

Aside from the expected increase in completion in the Asia-Pacific region, Fitch Ratings cited among the “notable risks and constraints” for the Philippine gaming industry a potential escalation in geopolitical tension with China.

The debt watcher also cited possible legislation or executive orders against land-based casinos, given the Duterte administration’s stance against online gaming.

Fitch Ratings further cited the conflicting roles of PAGCOR as operator and a regulator, the Philippines’ below-average World Bank governance indicators relative to investment-grade peers, a nascent transportation infrastructure that will be hard-put to support ambitious tourism initiatives.