Industry suppliers are relocating their offices to the Philippines and expanding their local workforce to take advantage of the fastest growing market in Asia – one that shows no signs of slowing anytime soon.
Global gaming suppliers are setting their sights on the Philippines, many opening new offices and expanding their teams on the ground to capitalize on a gaming and integrated resort development boom.
In April, Australian-listed Aristocrat Leisure Ltd opened its new Manila office, including its first Philippines showroom, in a move it says provides greater reach to its customers across the country.
IGT is also expanding its Manila office, opened in 2013, and launching a showroom of its own, with a planned 1Q24 opening date that will see its local workforce grow to 24.
Around the same time, Light & Wonder will unveil its new Philippines office, to be located in Clark – around two hours north of Manila by car and home to some of the country’s newest casinos and integrated resorts, such as Hann Casino Resort and the expansive D’Heights.
Others are following suit, wary of the fact that while Macau remains the world’s largest land-based gaming market, and Singapore among the most iconic, the Philippines is without doubt the fastest growing market in Asia, if not globally.
“The market is growing and it’s dynamic,” says Ken Jolly, Light & Wonder’s Vice President and Managing Director, Asia. “It’s unbelievable what is going on here this year in sales, and I believe it will continue for a number of years.”
Driving this growth in recent years – Philippines industry- wide GGR is tipped to reach US$5 billion in 2023 from US$1.4 billion a decade ago – has been the development of world class integrated resorts, starting with Newport World Resorts (formerly Resorts World Manila) in 2009 followed by Solaire Resort in 2013, City of Dreams Manila in 2014 and Okada Manila in late 2016. And there’s more to come, with Solaire owner Bloomberry Resorts Corp due to open Solaire Resort North, located in Quezon City, next year, plus plans for a third Solaire property in Cavite in the years ahead.
Likewise, Newport World Resorts operator Travellers International Hotel Group is linked to a fifth major development in Manila’s Entertainment City precinct, known as Westside City, which will include a US$1.1 billion hotel and casino with 450 rooms, 400 gaming tables and 1,200 slot machines.
In Clark, the 2021 opening of Hann Casino Resort – a US$500 million revamp and expansion of the old Widus Hotel and Casino – has proved a game-changer for the region when it comes to offering world-class facilities. Neighboring Royce Hotel and Casino has followed suit via a similar expansion project opened earlier this year, while D’Heights – already home to two world class golf courses inside its Sun Valley precinct – has begun construction on another hotel and casino building that will double its lodging and gaming space.
And in Cebu, the 2022 opening of NUSTAR Resort & Casino has also elevated the leisure experience for the southern province, even while a second development nearby, The Emerald Bay, has stalled due to funding issues. Whether The Emerald Bay receives the capital injection it needs to resume remains to be seen.
It is with this in mind that Asia-Pacific consultancy firm GCG Gaming Advisory Services last year tipped Philippines-wide GGR to double again over the next four years to US$10 billion by 2027 – making it a clear No.2 behind only Macau when it comes to Asian gaming jurisdictions.
“The Philippines enjoys a strong locals market, a strong expat community (from Korea, China, Taiwan, Japan) and fully open international borders,” GCG said at the time.
“Strong regulations, introduction of PIGO (online gaming for the domestic market) and new airports in Cebu and Clark all indicate that the Philippines will be competing with Singapore for the top GGR position over the next few years.”
Daniel Milrad, Sales Director – Asia for Aristocrat, explains, “If you really look right now and see the product diversification in [Philippines] resorts and what they are offering, such as in Entertainment City, it is really no different to what you will find on the Las Vegas Strip or the Cotai Strip. That coupled with integrated resorts that offer the luxury, the F&B offering – it basically calls for an increase in inbound tourism as well as in the domestic market. All of this results in that growth we’re looking at.”
IGT’s own Sales Director – Asia, Michael Cheers, offers a similar viewpoint.
“I think the quality of the product that’s being delivered in relation to the venues exposes non-traditional gaming players to a gaming experience,” he suggests. “That quality delivery of an F&B or a function experience, attending a MICE event, may result in that person being exposed to the gaming product, be it tables or slots, which helps to grow the market.
“And it grows it in a quality way where people feel that their leisure dollar can be spent at a time and place they feel very comfortable with. They know it’s secure, so now they start to look at what the benefits of the membership club are, and they realize that by regularly dining there they can get 20% off and can use their points.
“By building quality product, it continues to expand the exposure and the acceptance of gaming as a responsible and social leisure activity for adults.”
This, adds Cheers, is aided by “a national government that is comfortable with the concept of gaming and integrated resorts – people having fun responsibly – and a regulator (PAGCOR) that actually actively supports processes that allow the growth of that business.”
As an example, the IGT veteran points to Philippines gaming floors, where rearranging a gaming floor can take days, if not hours. In Macau, requests to move electronic gaming machines typically take weeks, which can mean units sitting idle while operators wait for the necessary approvals,
“They don’t miss a beat here,” Aristocrat’s Milrad observes. “The floors change every time you come here. If you have not walked the floor for two weeks, you come in and it’s totally different.
“That’s what I mean by product diversification – every time is something new and something fresh, and that’s what is unique about this market because it allows people to come in and see something new every time.”
Of just as much interest right now as the growth of the Philippines’ integrated resort market is the evolution of PAGCOR’s self-owned casinos – all 43 of them – operating nationwide under the Casino Filipino brand.
The issue of PAGCOR serving dual roles as both an operator and a regulator has long been one of contention, and while privatization has been raised as a possibility on many occasions over the years, it is only now under the purview of current Chairman Alejandro Tengco that such separation looks inevitable.
Appointed Chairman and CEO of PAGCOR in August 2022 by newly elected President Ferdinand Marcos Jr, Mr Tengco has made privatization of the Casino Filipino brand his top priority over the course of his six-year term, but he has also called for significant investment into these PAGCOR properties first.
Aiming to maximize their value, he revealed in July that PAGCOR would implement a three-step process towards privatization, starting with a refreshment and renovation of Casino Filipino properties – adding fresh paint, new carpet, new fittings and more.
More significantly from a suppliers’ point of view, the regulator will upgrade almost 4,000 slot machines across those properties to ensure product offerings are competitive with those in the nation’s integrated resorts, with negotiations already well underway. In a recent interview, Mr Tengco told IAG that PAGCOR has secured a good deal from suppliers in this regard, with final commercial terms to be announced soon. IAG understands this will include a mix of new machine purchases and revenue share agreements.
Likewise, suppliers are likely to reap the benefits of a recently announced update to the Philippines’ EGM Technical Standards, with Version 1.1 to take effect from 1 January 2024.
Among the key changes required as a result of these updated standards are a requirement that any win awarded in any individual game element or sequence of game elements must not be truncated; a requirement for a slot in the program or logic area door for the plastic security seal, which must be installed before EGMs are put into operation; and a requirement that all EGMs are made spill resistant so that liquid spills applied to the outside of an EGM don’t affect the normal operation of the EGM or affect the integrity of the material or information stored inside the cabinet.
None of the suppliers IAG has spoken to consider these updates as being particularly onerous, with Light & Wonder’s Jolly describing them as “fairly straight forward in terms of what we’re seeing now in markets around the world.”
That not only means lower development costs to ensure machines are compliant going forward, but as Cheers points out, “regulators making these changes drives redundancy. There is forced redundancy in the market, so we get the benefit of some replacement and additional units or some upgrade charges.”
For all of this recent growth and evolution, the Philippines remains unique for the opportunities it continues to present. A slots-dominated market – with machine revenues having accounted for 59.8% of Philippines industry GGR in 2022 – it is also a haven for linked progressives and some of the largest jackpots seen anywhere in Asia.
The trend is particularly evident in Manila, where the competitive environment in Entertainment City has driven what Cheers refers to as the “jackpot duel – where every casino has a large sign outside showing their jackpot amounts and they just keep adding zeros to the progressive jackpot sign.”
While this can be a double-edged sword for operators – massive jackpots attract players but leave a significant dent in net revenues when they go off – the sheer demand seen across the market leaves them with little choice but to continue.
“Certainly the jackpot situation in Manila has become very competitive,” observes Jolly. “It’s a bit like Macau – everyone walks each other’s floors and if one is doing one thing, the others will follow.
“The jackpot [in Manila] is a change of life jackpot, and as suppliers we all have to change our math models to suit this market.
“It’s different in Cebu, which is under-machined and lacks enough quality venues in the market. Clark is going to become more competitive as more properties emerge over the next five years, and they will all be doing the same up there, trying to be a little bit better than their competitors.”
Adds Cheers, “When you have such big jackpots you need a significant number of machines underneath to support it, so if you’re lucky enough to have the flavor of the month game at the time and the operator requests a Php50 million (US$880,000) or Php100 million (US$1.76 million) start up jackpot, then you’ll know they will need 50 to 60 units under that to be able to run that link effectively.”
Suppliers, he says, have tried to push for more standalone games to diversify the market, but Cheers concedes, “When you are a listed company and driven by quarterly targets, you’re going to say as the supplier, ’Yes, I will do that deal for 50 machines’.”
One new segment that is emerging in the Philippines is remote gaming, and specifically the offering of online gaming services to both offshore and domestic customers directly from the casino floor. The practice is already well established in Manila and is rapidly growing in Clark, with operators putting aside designated areas of the casino floor to stream not only table games but physical slot machines as well, with machines literally being controlled by whoever is playing them from afar.
“The [remote] gaming machine market is growing considerably at the moment, and we are getting a lot of orders for that market, so I guess it is good for manufacturers that we get to put a slot machine in a space rather than doing it off a server,” Jolly explains.
While most leading suppliers already offer digital versions of their games to online casinos globally, the hardware option whereby cameras film the physical slot machine screen “does allow the player to have a continued connection to the venue of their choice,” notes Cheers.
“That’s a positive because if they don’t wish to travel to the casino that day but still want an hour of their gaming experience, they know their money is safe, it’s easy to log in and they’ve got a great library of games that will get refreshed. It can only grow the market.”
What appears certain looking forward is that growth within the Philippines gaming market is only going to accelerate, leaving it in rarefied air when compared to Macau – where there will be no more than six licensees for at least the next decade – to the duopoly of Singapore or to the monopoly of Malaysia.
In a Keynote Address delivered at the recent IAG Academy Summit at Manila’s Newport World Resorts, the President and CEO of the Clark Development Corporation, Atty. Agnes Devanadera, said her agency was currently “trying to manage the number of casinos, because we want those who are already there, those who have invested, to be able to maximize their potential in terms of generating revenues.”
However, she also noted that there were “many applicants” waiting to join the six current operators within the Clark Freeport Zone. IAG understands up to half a dozen more operators have either been issued with a casino license or own land within the Clark Freeport Zone with a view to developing properties once given the green light.
“I think you will continue to see this rate of openings and expansions, coupled with new infrastructure that is coming – I don’t think it is slowing down,” says Milrad.
“The other significant factor here is the growth of the middle income demographic across the Philippines,” adds Cheers. “People have more disposable income, they are looking for that leisure experience which often includes a visit to an IR, to a restaurant, potentially to a gaming experience, So I think this market is definitely going to continue to grow, aided by this broad customer base.”
“I think you’ll find that when PAGCOR does sell off their licenses and they become private, the new owners will grow those facilities,” says Jolly.
“Whether they expand those properties or move them somewhere else, I think the market will see those grow into decent-sized properties as well.
“Entertainment City will remain the driver of the market at this stage, with Clark developing, and who knows? With the privatization of casinos across the rest of the country, there may be some other spots we’ve never thought of emerging as new hubs in the future.”