Inside Asian Gaming

INSIDE ASIAN GAMING | 18 COVER STORY games, 488 rooms and suites and an array of fine dining and casual restaurants. But Solaire wasn’t open more than a month before an obstacle arose in the form of a ruling by the Bureau of Internal Revenue that casino licensees, including the government-owned operator, PAGCOR, and their supporting junkets must pay the country’s 30% corporate income tax. The ruling has everyone seriously rethinking their profit projections. Predictably, share prices have tumbled. The big question, of course, is whether it will hinder the progress at Entertainment City, where Solaire is in the throes of a $400 million expansion slated for completion in the second half of 2014—with 300 suites, a theater, a spa and pool, retail and an expansive outdoor promenade—and Belle Grande Manila Bay, managed by Macau casino giant Melco Crown Entetainment, is scheduled to open next summer with 1,000 hotel rooms and suites and 1,900 EGMs and 350 table games together with what promises to be a vibrant assortment of non- gaming attractions. Two more integrated resorts have been licensed for Entertainment City with openings slated for further down the road. Resorts World Bayshore is backed by Travellers International Hotel Group, the joint venture between Genting Hong Kong and the Philippines’ Alliance Global Group that has already tasted success in the market as the developers of Resorts World Manila just a few miles away at Ninoy Aquino International Airport. Bayshore is looking to open in 2016 with more than 2,000 EGMs and 360 table games and 1,440 rooms and suites. Lastly there’s the tentatively titled Manila Bay Resort, a joint venture led by Japanese machine gaming tycoon Kazuo Okada and Robinsons Land, a major Philippine developer of hotels and shopping malls. At a projected cost of $2 billion, its plans call for an oceanarium, a sports arena and a giant Ferris wheel. The casino is to open in 2016 or shortly thereafter with 3,000 EGMs and 500 table games and a collection of hotels featuring 2,000 rooms and suites. All this has been predicated on friendly gaming revenue tax rates of 17% on VIP and an effective 27% on mass play, higher than Singapore’s blended 16% but substantially lower than Macau’s 40%. The phased opening of Resorts World Manila in 2009 and 2010 had a decisive effect on perceptions about the Philippines. As the property ramped up to its current 1,800 slots and 300 tables, as its supporting hotels opened and its retail, cinemas and other amenities came on line, gaming revenue in what had been a static market soared by more than 40%. It showed there was significant domestic demand eager to trade up to a better experience, and in the view of some analysts, the scale of that demand sets the Philippines apart. “The Philippine population of 97 million is almost three times that of Singapore, Malaysia and Macau combined, presenting sizeable onshore potential for the higher- margin mass segment,” investment bank Credit Suisse notes. Morgan Stanley has forecast 35% annual revenue growth through 2015 to $3 billion, which would have been unthinkable even five years ago when the market consisted of 13 or so smallish casnos and a couple dozen slot clubs operated by PAGCOR (Philippines Amusement and Gaming Corporation) with contributions from two private licensees, Panama-based Thurnderbird Resorts and Macau’s Jimei Group, which operate three casinos between them. Plans for Kazuo Okada’s $2 billion Manila Bay Resort call for an oceanarium, a sports arena and a Ferris wheel. CLSA Asia-Pacific Markets believes the market has an outside shot at $6 billion. “We believe the market is well-placed to exceed the current size of the Singapore market within the next six years,” says Credit Suisse. Driving this, of course, will be the new supply coming on line at Entertainment City. So a lot is riding on a happy resolution of the tax issue. Government, PAGCOR and the various licensees are discussing possibly waiving the “franchise tax” embedded in the existing gaming taxes, which would reduce them both by 5%. Another way might be to address the ruling at its source. This would involve restoring PAGCOR’s tax-exempt status as a government-controlled corporation, which was revoked back in 2005. “Overall, the situation remains fluid,” as one Philippines-based analyst told Gambling Compliance , an industry news site. Alliance Global struck a positive tone in a statement saying,“We are optimistic that the government and the industry will come out with a common understanding supportive of the growth and success of the business.” The phased opening of Resorts World Manila in 2009 and 2010 had a decisive effect on perceptions about the Philippines.