The less than stellar first-year performance turned by the Philippines’ new US0 million Solaire Resort & Casino raises some questions about the national market’s ability to hit PAGCOR’s forecast of a billion- billion in five years.
Owner Bloomberry Resorts reported a loss for 2013 equivalent to US$29 million, which includes $6 million of red ink amassed during the Manila Bay’s property’s nine and a half months of operations from mid-March through December 31, most of which it blames on its former operating partner, Global Gaming Asset Management, headed by one-time Las Vegas Sands President William Weidner, which was fired in September.
Solaire generated $335 million in gross gaming revenue over that time, and PSX-listed Bloomberry says the resort has built momentum since GGAM’s exit, delivering fourth quarter GGR of $125 million, which nearly matched its rival, Resorts World Manila, which opened in 2009 as the largest and most lucrative casino in the country.
Fitch Ratings describes Solaire’s results as “encouraging” and expects Philippine gaming revenue to grow by double-digits at least through the opening of City of Dreams Manila next door in a special PAGCOR-sponsored resort zone in the capital licensed for four destination-scale casino hotels.
The $1.3 billion City of Dreams, a joint venture between Macau’s Melco Crown Entertainment and a local subsidiary of Philippine retail and property giant SM Corp., is slated to come on line in the second half of this year.
The other licensees are Tiger Resorts, a local subsidiary of Japanese machine gaming tycoon Kazuo Okada’s Universal Entertainment, and Travellers International Hotel Group, which owns and operates Resorts World Manila.
Tiger says the $1.3 billion first phase of its Manila Bay Resorts will open at Entertainment City on schedule in 2015 with 1,000 hotel rooms and a casino that will be the largest in the country, with 3,000 slots machines and 500 table games. Plans also call for 22 restaurants, 7,500 square meters of retail, a nightclub and a beach club. But the project has run afoul of the country’s foreign ownership laws, and Universal and various subsidiaries are under investigation in the Philippines and the United States in connection with bribery allegations. Tiger says it is confident it will get approval to open notwithstanding.
Travellers, a 50-50 partnership between Hong Kong-listed Genting Hong Kong, an arm of Malaysian resort conglomerate Genting Group, and Alliance Global, a Philippine conglomerate with holdings in restaurants, food and beverage and real estate development, is vague on the timetable for its Entertainment City project, Resorts World Bayshore. Initial plans called for a 2016 debut, but Travellers is in the midst of a major expansion of Resorts World Manila, which it is anxious to avoid cannibalizing.
In light of which, Fitch added that predicting the market’s growth beyond 2015 “is difficult to forecast given the risks [and] constraints” but said, “We think it will be difficult for the Philippines to surpass Singapore in terms of gaming revenues (roughly $6 billion) before the end of this decade.”
Gaming revenue at Resorts World Manila rose 6.9 percent in 2013 to $671 million, but operating profit was down 38 percent, in part because of a 50 percent increase in promotional allowances to $57 million to compete with Solaire, which is scheduled to open a shopping mall, a theater, a nightclub and 300 more hotel rooms later this year as part of a $1.2 billion full build-out.
Resorts World Manila already has all of that, plus more rooms in more price ranges and, for now, a better location, near the capital’s international airport and more closely integrated into the local highway network. Travellers is constructing new Sheraton and Hilton hotels at the site and adding more rooms to the existing Marriott and Maxim’s brands there.
Solaire spent a whopping $76 million in promotions last year for its $276 million in revenue. The new management is reported to be reorienting the gaming offering away from overseas VIPs and more toward RWM’s locals market, but the promotional numbers suggest that saturation could be on the horizon.
“The Philippines is a relatively mature gaming market with several forms of gambling available, including casino-based gaming,” as Fitch observes.
PAGCOR, the Philippines Amusement and Gaming Corporation, also operates a dozen mostly small and older casinos under its Casino Filipino brand but is struggling to achieve revenue targets. Last year it closed one of its casinos in Manila and plans to close another in June, leaving it with just two casinos in the capital.
