Inside Asian Gaming

INSIDE ASIAN GAMING | April 2009 26 I f the Newport City project is relying on foreign tourists alone it could struggle, despite its proximity to Ninoy Aquino International Airport. A modest 3.14 million foreigners visited the Philippines in 2008 according to the country’s Department of Tourism. That’s a little more than one-tenth the number of visitors that Macau recorded in the same period. The good news is that of the top four national markets delivering tourists to the Philippines (judged by volume) three are countries with a lot of dedicated gamblers, namely: South Korea (611,629 visitors and a market share of 19.48%); Japan (359,306 and a share of 11.44%); and China (163,689 and a 5.21% share). Of more concern to investors will be the sluggish growth rate of Philippines tourism. Despite the regional boom time that lasted up to the third quarter of 2008, the country managed only 1.53% year-on-year growth in tourist numbers, as compared to 2007, according to DoT data. By contrast, Macau’s visitor numbers soared by 13.4% year-on-year in the first 11 months of 2008. Thesuccessorotherwiseofbothschemes is also likely to depend on controlling capital costs; on how highly leveraged the partners are on the projects and what the covenants are from the lenders regarding repayment of the interest and the principal. Last, but by no means least, it depends on the risk appetite and patience of the investors. “From our perspective, we accept there will be challenges in terms of funding and credit tightening,” says Mr Sian of Alliance Global. “But fortunately for us, we were able to bring in a very strong partner [at Newport Entertainment City] and we were able to close a deal prior to the global meltdown. Funding has been secured for that first project,” he adds. Local funding “Although credit has tightened globally, I think in the Philippines liquidity is still there for good projects,” says Mr Sian. “We’re looking to go out into the market and raise something like US$150 million to US$200 million dollars. We believe we will be able to secure that entirely in the Philippines. And so, for well developed projects with good proponents, people should be able to get credit still in the Philippines market.” “Pagcor has done a wonderful job in laying out the foundations for attracting investors,” he adds. “The proof is that ARUZE is here. Our partner Star Cruises has also invested here. In fact, Star Cruises have not only invested in us, in terms of Travellers’ International [a joint venture company between the two to run the hotels on the Newport City site] but they have also decided to move their entire back office to the Philippines. We’re talking about regional surveillance, their legal In Focus and that was granted on 2nd June last year,” said Mr Sian. “On 31st July we sold 50% of the company to Star Cruises and thus we brought in a gaming partner—Star Cruises being ultimately owned by Genting Group of Malaysia. Together we are embarking upon creating a dream and making the dream a reality. We are embarking on two projects. The first is called Newport Entertainment City, a 7.8-hectare property across from the [Manila] airport Terminals 2 and 3. The construction there is ongoing and we are looking to spend aroundUS$450million.The project will be completed in phases but we should be open this year,” added Mr Sian. Hotel offer He added the company was working to complete a five-star, 365-room Marriott Hotel on the Newport site and a 70-room all-suite hotel under a Genting brand called Maxim’s Hotel, plus a 1,000-room budget hotel. “Another part of the integrated entertainment concept will be a 1,000-seat theatre and there’ll be a mall. Most of that should be completed this year,” he stated. It’s reasonably safe to assume that when theplannerscameupwiththenameNewport City, they did not have in mind Christopher Newport. He was one of the most successful English pirates and explorers of the 16th century, plundering huge amounts of gold from the Spanish (the colonial power in the Philippines from 1565 to 1898) and from the Portuguese (the European settlers and later administrators of Macau from 1557 to 1999). Newport may need to plunder a few visitors from other regional casino jurisdictions if it is to be a success. “Because of this financial crisis the entire system changed, so certainly some [casino] operators around the world are struggling right now,”says MikioTanji, Executive Adviser in charge of preparing ARUZE’s entry into the Philippines market. Prospects “Butinthemediumtolongtermcertainly, growth can still be expected in this particular industry. That’s because fortunately the number of rich people is getting bigger and bigger in places like China, in India, in Brazil—in fact all over the world. It seems to be a kind of human instinct that people want to play machines or table games. They are tired to sit at a desk [at work] and face their computer and their paperwork. So maybe once or twice a year they like to get away from that and go on holiday to try their instinct and their luck on machines or table games,” he explains. “One important aspect for us on this project is certainly to invite Filipino people to our [Manila Bay] resort but at the same time to invite foreign people to the Philippines so that they can play at our casino and spend money here,” adds Mr Tanji. The Marriott brand can already be seen at the Newport City site, which is still under construction Not enough foreigners are currently saying ‘Wow’ to the Philippines holiday offer