Fitch Ratings likes the gaming industry’s prospects in the Philippines, forecasting that the island nation’s global market share could grow from an estimated 3.3 percent currently to 5 percent in the next three to five years.
Continued development of Entertainment City, a government-sponsored resort district on Manila Bay in the capital city, will be the key, the debt-rating agency says, along with “robust domestic demand,” the country’s positioning as a “low-cost tourist destination” and increases in remittances generated by Filipinos working abroad.
“(The growth) will be driven by the absence of a regulatory clampdown on gaming by its citizens, growing tourist arrivals—a 12.1 percent increase during 2010 to 2012—and the rising number of (integrated resorts) in the country,” Fitch says.
Philippine gross gaming revenues are pegged at around US$1.4 billion currently. Fitch predicts that will grow by 12 percent a year through 2020 to more than $3.3 billion.
There are obstacles, however, a significant one being a change mandated last year in how the industry will be treated for tax purposes by the Bureau of Internal Revenue. Fitch believes the sector already is “heavily taxed,” citing the 15 percent levy on VIP gaming revenue and the 25 percent imposed on mass-market revenue. The BIR ruled last year that the industry must also pay the country’s 30 percent corporate income tax. Fitch is optimistic, nonetheless, saying, “The Philippines’ low-cost environment compared with other gaming destinations like Macau, Singapore, and Australia counterbalance the high taxes.”
The government to date has approved four licenses for destination-scale casino hotels at Entertainment City, each representing a multibillion-dollar investment by some of the country’s most prominent businesses.
The first, the $750 million Solaire, owned by Bloomberry Resorts, which is controlled by ports tycoon Enrique Razon, opened last March. This summer will see the debut of City of Dreams Manila, a joint venture between Macau’s Melco Crown Entertainment and Belle Corp., a subsidiary of Philippine retail and real estate giant SM Investments.
A Philippine subsidiary of Universal Entertainment, the Tokyo-based machine gaming manufacturer controlled by Japanese billionaire Kazuo Okada, has secured a couple of major local property and infrastructure developers as partners for its complex, called Manila Bay Resorts.
The fourth licensee is Travellers International Hotel Group, a joint venture between Genting Hong Kong and Alliance Global, a Philippine company with extensive holdings in travel, lodging, food and beverage and commercial property. Travellers owns the country’s largest and most lucrative casino, Resorts World Manila, located near the international airport in Manila.
