Inside Asian Gaming

inside asian gaming September 2014 22 But then you can never count out a billionaire—certainly not one as obsessed with a vision as immense as Kazuo Okada’s—and the true eccentrics like him, those whose passion is the quest and who like to play it fast and loose with the born instincts of a gambler and a congenital inability to grasp the possibility of defeat, you may even find yourself rooting for them. And don’t bet against multibillion-dollar pleasure palaces either, especially not when they’re close to China and there are casinos attached to them. In the Philippines, Mr Okada is staking a battered reputation and a considerable fortune on his—Manila Bay Resorts—the US$2 billion mega-hotel and casino the 72-year-old machine gaming magnate envisions as the category-killer at Entertainment City. He’ll be up against some formidable competition. Solaire Resort & Casino has finally got its feet under it, it’s growing revenues and expanding. City of Dreams Manila, priced right up there with Manila Bay Resorts, is slated to open later this year with Macau casino giant Melco Crown Entertainment in charge. But then nothing has come easy for Manila Bay Resorts. The biggest obstacle Mr Okada has set for himself is securing a credible partner or partners to take a majority stake in the land underneath it and thereby resolve, or so he hopes, the criminal charges he and a host of Filipinos and Japanese nationals connected with the project could face under a finding by the Philippine Justice Department that straw companies were set up to evade limits on foreign ownership of land and other rights. Intertwined in this controversy is an alleged bribery scheme involving a politically connected businessman who is among those named in the land ownership probe. Actually, everything looked to be settled earlier this year via a three-way partnership that would have placed 60% of the land rights in Philippine hands in accordance with the law. Then it unraveled, apparently after one of the partners, First Paramount Holdings 888, backed out—not the first one to do so on Mr Okada’s tortuous road to Entertainment City. Philippine subsidiaries of Universal Entertainment, the Tokyo-based pachinko/slots giant that is his corporate flagship, then canceled their agreements with the other partner, Century Properties Group, which had signed on to develop a sizable portion of Manila Bay Resorts’ residential and retail components. Century sued and in July obtained an injunction barring Universal’s affiliates from negotiating to secure new partners. As messy as all this is, Manila Bay Resorts continues to forge ahead to a scheduled 2015 opening, in part because the government is all in, too. Entertainment City’s 120 hectares were created and carved out of the country’s teeming capital city to boost tourismand provide badly needed jobs. Despite the embarrassment Mr Okada’s legal troubles has caused the government, they want the investment, and Universal is not without a store of goodwill—its Aruze subsidiary operates a manufacturing and game design branch in the country and is a fairly significant employer. Universal categorically denies all the charges against it and says it is working cooperatively with the government to resolve the land ownership issues, and the company has been assured, it says, that it will have until “completion of the development” to do so. Century, in the meantime, has said it is open to mending the dispute and restoring the partnership along previously agreed lines. “The plan is for us to discuss among ourselves out of court, and then take it from there,” a spokeswoman told Reuters . Which touches, ultimately, on the fundamental appeal of Mr Okada’s vision—the fact that there is so much about Manila Bay Resorts that can go right. Its 44-hectare footprint is the largest in Entertainment City. The first of its three planned phases will feature 1,000 hotel rooms, none smaller than 60 square meters, with suites that top out at 600 square meters and villas designed at an expansive 1,000 square meters and larger. There will be 22 restaurants at opening, a domed pool with a Las Vegas-style beach club and nightclub, a luxury spa, sizable meeting and exhibition space, 7,500 square meters of high-end retail, parking for 2,400 cars, and all of it set behind a display of dancing fountains bigger than the famed Bellagio’s on the Las Vegas Strip. The casino will be the largest in Manila, 30,000 square meters, replete with 500 table games and 3,000 slot machines. Subsequent phases will include hotel towers, luxury residences, more retail and an oceanarium among their attractions. Galaxy Macau, Galaxy Entertainment Group’s flagship resort on Cotai, is the city’s highest-grossing casino, commanding a 13.5% share of Macau gaming revenue in the second quarter. It’s not the most profitable, however—that honor goes to The Venetian Macao, whose share was 9.2%—owing to a larger proportion of its revenues being derived from the VIP segment, where margins are lower than on mass-market play. Galaxy Macau’s share of the city’s total mass- Michael Mecca President and COO Galaxy Entertainment Group market revenue stood at 9.6% in the second quarter, versus The Venetian’s 13.7% and Sands Cotai Central’s 9.9%. But in the VIP segment, Galaxy Macau ruled supreme, with a 15.8% Q2 share (while The Venetian took 6.5% and SCC 5.7%). Moreover, GEG appears to be grabbing VIP business from its competitors in a shrinking market. In the first six months of 2014, VIP revenue market-wide was up 3% year on year, but Galaxy Macau’s VIP win rose 44% to just over HK$17 billion (US$2.2 billion). At the group’s StarWorld Hotel and Casino, VIP volume rose 12%, but because the property ran unlucky in the quarter (recording the lowest VIP win percentage in its history, at 2.5%), win declined 2% to HK$4.3 billion. In the mass segment, the company’s first-half growth trailed slightly the overall market’s 36% increase. Galaxy Macau’s mass win rose 32% year on year to $5.4 billion, while StarWorld Macau saw mass win grow 35% to $2.2 billion.