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Moving ahead

Friday, 29 June 2018 01:32
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A year after the deadly attack at Resorts World Manila, management continues to reinvent the property to recover and meet the challenge from Entertainment City rivals.

By Muhammad Cohen | Editor-at-Large

 

The tragic events of 2 June 2017 at Resorts World Manila sent shock waves across the Philippines and the gaming world. But the attack didn’t change the basic trajectory for the Philippines’ first integrated resort or the broader market. Gaming in the Philippines continues to show robust growth while RWM continues to lose ground to its Entertainment City IR rivals. The incident prompted RWM to modify its approach to reviving the property as its parent company creates its own Entertainment City resort.

Owned by Manila-listed Travellers International Hotel Group – a joint venture between local conglomerate Alliance Global Group and Genting Group’s Hong Kong arm – RWM obtained the first private casino operating license from Philippine regulator Pagcor and opened in August 2009 on 11.5 hectares across from Ninoy Aquino International Airport Terminal 3. Constantly building, RWM grew to more than 300 gaming tables and nearly 1,800 machines plus 1,454 guest rooms under the Marriott, Maxims and Remington brands with 1,100 more keys in Alliance’s contiguous Newport City complex – a mall with 91 retail outlets and four cinemas, nightclubs and dozens of food and beverage outlets, plus a 1,500-seat performing arts center and the Philippines’ biggest ballroom. In April 2017, RWM completed a 220-meter pedestrian bridge to the airport.

“We believe that RWM will always have a firm place in the Philippine integrated resort industry and it’s just a matter of anticipating and meeting the challenges of a changing business landscape,” Travellers Chief Operating Officer Stephen Reilly tells Inside Asian Gaming.

That landscape changed abruptly in the early morning hours of 2 June last year when a lone gunman pushed past security, began shooting and set the casino ablaze, killing 36 and injuring more than 50, then killing himself. In the aftermath, the casino was closed until 28 June. The second floor gaming area, center of the blaze, remains shuttered and will be converted to retail. The mall was shut down for nine days. But even as the incident’s impact unfolded, RWM had begun the recovery process.

SYMPATHY, SECURITY

“Stephen Reilly and his management team communicated clearly in the following days, both in conveying sympathies for the tragic loss of life and in articulating where their security could have been better,” Strategic Market Advisors Managing Director Matthew Landry says. “The company also enhanced its security protocols and systems, helping to restore public confidence.”

Other Manila casinos did likewise.

“At the time of opening, we employed over 250 security personnel and have almost doubled it since the RWM incident,” Bloomberry Resorts CFO and Treasurer Estella Tuason-Occeña says of her company’s Solaire Resort & Casino. “Pagcor also played an active role in ensuring that all IR operators have adequate security and have policies and procedures in place to better handle such incidents.”

The Manila market barely paused following the attack.

“A week or two after the RWM incident, there were less people in our mass gaming floor. But after two weeks, it was back to normal,” Tuason-Occeña says. Junket promoter Suncity Group Marketing Strategy President YM Choong says its business in the Philippines was “not affected at all” by the incident.

Despite the attack and the disruption at RWM, Philippine gross gaming revenue hit a record Php170 billion (US$3.2 billion) last year, rising 14% from 2016, extending a lengthy growth story. In 2008, before RWM, market GGR stood at Php40.5 billion (US$760 million).

WAVES AND TIDES

Visitor arrivals to the Philippines grew 11% to a record 6.6 million last year. Nearly half of the rise came from mainland China, up 43% to 968,447 – narrowly overtaking the US as the second biggest visitor source amid warmer Sino-Philippine diplomatic relations and a new visa-upon-arrival policy. South Korea remained the top visitor source at 1.6 million, the top three sources accounting for more than half of all arrivals. Japan was fourth at 584,180. In the first three months of this year, total arrivals rose 15%, Chinese arrivals up another 55%.

Economic growth underpins domestic market expansion. Last year Philippine GDP grew 6.7%, third best in East Asia and a sixth consecutive year above 6%. The economy grew a reported 6.8% in this year’s first quarter. That rising tide has boosted the gaming industry, especially Manila’s four IRs. At the start of this year, Morgan Stanley analysts Alex Poon and Praveen Choudhary estimated GGR at Manila IRs rose 27% in 2017 and forecast 32% growth for 2018.

RWM has trailed the trend since the attack. For the four quarters reported since the incident, from 2Q17, GGR fell 30% – gaming capacity has been reduced by approximately 70 tables and 400 machines – and EBITDA dropped 55%. The gap between pre- and post-attack numbers has narrowed in each of the past two quarters, though, and daily visitation is off less than 10%.

Brand consultant and Senior Partner at Prophet, Jay Milliken, believes RWM can bounce back completely. “What happened at Resorts World Manila was beyond their control,” he says. “As long as there’s no obvious negligence on the part of the company, it’s a relatively quick rebound.”

GRAND OPENING

To support recovery, RWM accelerated the launch of its Phase 3 Grand Wing, scheduled for completion by year end. The rollout began in May with new gaming space adding 35 tables and 414 machines, capacity to double in early August and surpass what was on the gaming floor before the attack. The wing includes new retail space and 949 hotel rooms under the Sheraton, Hilton and Okura brands.

The 191 room Okura, originated in Japan and new to the Philippine market, occupies space once earmarked for expansion of Maxims, a Genting luxury brand also found at its original Malaysia casino resort. The company says the RWM Maxims, where the 2 June gunman shot himself, will become the Philippines’ first Ritz- Carlton. The complex’s Holiday Inn Express was previously under RWM’s Remington brand.

“Turning to international brands with an airport location is a smart choice,” Landry says. “In particular I’d expect this to be effective with the international market. Generally speaking international tourists tend to spend more than domestic tourists and some will value the Ritz-Carlton brand.”

RWM’s challenges extend beyond last year’s attack.

“The property was already experiencing competitive pressure prior to June 2017 and that pressure was largely coming from Entertainment City,” Landry says. RWM’s gaming revenue peaked at Php30 billion in 2013, the year Solaire opened in Entertainment City, a PAGCOR-backed casino hub on Manila Bay six kilometers from RWM. EBITDA and margins peaked a year earlier.

Numbers stepped down again with the debuts of Melco’s City of Dreams Manila in December 2014 and Universal Entertainment’s Okada Manila two years later. Also in December 2016, an expressway linking Entertainment City to the airport opened, reducing a lengthy trudge through Manila traffic to a 20 minute breeze.

“RWM will likely find a role in the market, but the drawing power of having multiple options in Entertainment City, which is also convenient from the airport, will likely impact revenue in the near term,” Landry says.

Travellers says it will open its long-gestating Entertainment City IR, now called Westside City Resorts World, in 2021. As the saying goes, if you can’t beat ’em, join ’em.

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