Inside Asian Gaming

inside asian gaming September 2015 32 City’s’ expanded Solaire Resort and Casino and newly opened City of Dreams Manila. Travellers’ net revenue fell 5.5% year on year in 2014 to 29.1 billion pesos ($647 million), and another 13.5% in this year’s first half. Gross gaming revenue decreased 12.7% last year to P26.2 billion and 7.9% in this year’s first half to P12.5 billion, putting RW Manila into second place in the market, behind Solaire at P15.6 billion. Thanks to cost cuts, Travellers’ first half EBITDA of P3.5 billion was just short of Solaire’s P3.6 billion. Industry executives express surprise privately that RW Manila got caught, citing its head start and more accessible location, across from Ninoy Aquino International Airport’s Terminal 3 and connected to major highways. Others suggest the market may be advancing beyond RW Manila’s middle brow offerings. Travellers says lower gaming volume is largely due to focusing on its mass business while exercising “more prudence” in its approach to the VIP segment, which accounted for as much as 70% of gaming revenue in previous years. First half VIP drop fell 37.5%, though VIP revenue was only off 6.3% thanks to higher hold. VIP compromised 46% of total revenue in the first half, which matches the VIP proportion of its 311 tables. RW Manila still has plenty in its favor. The $800 million complex features three hotels with 1,200 rooms, more than Solaire or City of Dreams Manila, under Genting’s all-suite Maxims brand, five-star Marriott Manila and Travellers’ own three-star Remington. The RW Manila shopping mall is larger than its rivals’ (Solaire’s retail will be smaller, whenever it opens). RW Manila also includes a 1,700- seat theater, multiplex cinema, nearly 50 restaurants and bars, and an office building housing Genting Hong Kong’s Star Cruises training facility that also provides courses for other hospitality companies. The resort isn’t standing still either. It’s in the midst of a $650 million expansion in two phases that will essentially double its size when completed in 2017. Phase 2—the initial resort is Phase 1— includes a new Marriott wing with 227 rooms and a grand ballroom that management hopes will drive more non-gaming traffic. That’s all expected to be finished this year. Phase 3 will add two new hotels—the Hilton Manila and Sheraton Manila—as well as expanding Maxims, 855 new rooms in total. Under market regulator Pagcor’s formula linking gaming capacity to accommodation space, RW Manila estimates the expansion will enable it to add up to 285 gaming tables, 1,710 slots (it currently has 2,000) and 1,710 electronic table game positions. The company has prioritized RW Manila expansion over its Entertainment City project, and some doubt whether Bayshore City will be built unless the market’s growth rate accelerates as Entertainment City develops. Travellers is a joint venture between Genting Hong Kong and Philippine billionaire Andrew Tan’s Alliance Global Group, a conglomerate with holdings spanning brandy and McDonald’s franchises to property. Mr Tan is a rags-to-riches hero of Philippine business, a self-made tycoon thought to have a firm grip on the national consumer pulse. Travellers President Kingson Sian is one of Mr Tan’s most trusted lieutenants and a company director. Mr Sian also serves as president of Alliance Global and a corporate director, as well as a top-level executive at other real estate and hospitality subsidiaries. Travellers listed on the Manila stock market in 2013, and like other Philippine gaming stocks, it’s been battered this year. At the start of September, Travellers shares were down 51% year to date, City of Dreams Manila developer Melco Crown Philippines was off 58% and Solaire parent Bloomberry had fallen 45%. Some local analysts feel casinos need to show better performance to get their stock prices moving up, while others believe the sector is being unfairly grouped with Macau stocks. Optimists may have the stronger case. The Philippines is the largest Asian market that’s showing significant growth, up 16% in the first half of this year, according to Pagcor, after a 14% rise last year. It’s got a strong and—unlike Singapore and South Korea—unrestricted domestic market backed by healthy economic growth and a diversified international base. Manila has new product in the pipeline to make it a more attractive destination. Travellers is Manila’s only private casino operator poised for two bites of that cherry. Now that’s a good position to be in. Chen Lip Keong likes to tell the story of buying himself a flashy car when he got his first taste of wealth. But Dr Chen—a Malaysian citizen who trained as a physician—soon traded it in for a Proton, Malaysia’s no-frills national car. He wanted his achievements, not his ride, to do the talking, and NagaCorp speaks volumes. Twenty years after taking its first bets on a barge on a branch of the Mekong, NagaCorp is poised to become a world class integrated resort operator on an international scale. It’s been a world class investment since its listing on the Hong Kong stock market in 2006—and Dr Chen, NagaCorp’s CEO and executive director, owns 41.7% of it. That $95 million IPO provided a shot of capital to complete the first phase of NagaWorld, now grown into Indochina’s largest gaming complex with 262 tables, 1,600 machines, 700 five- star rooms and 18 food and beverage outlets. The Hong Kong listing, bringing aboard former FBI agent Timothy McNally as NagaCorp’s chairman and instituting its own internationally monitored anti-money laundering procedures while Cambodia had no national rules highlight Naga’s efforts to impose global business standards on a frontier market. As an economic advisor to Cambodia’s long-serving Prime Minister Hun Sen, Dr Chen tries to make Naga a partner in Cambodia’s economic development, including creating a hospitality training center that places graduates in jobs with Naga and others. Naga has also pitched in everywhere from football sponsorships to police uniforms. Cambodia has been generous to Naga, too. A 70-year gaming license to 2065 with a 40-year exclusive in Phnom Penh let NagaCorp establish a solid base, initially focused on mass market and low- level VIPs from Southeast Asian markets where casinos are illegal or severely restricted, notably neighboring Thailand and Vietnam. Chen Lip Keong CEO and Executive Director NagaCorp