New investments in the Philippines’ gaming industry are expected to boost tourism arrivals and bring inbound visitor numbers close to the 10m the government has targeted for the middle of the decade. On the down side, simmering disputes with some neighbours could make this goal harder to achieve and weaken the push to make the country the casino capital of the region.
A report issued by ratings agency Standard and Poor’s (S&P) in mid-June said that high levels of investment earmarked for the gaming industry were expected to be channelled towards the established gambling centre of Macau and the Philippines, which is emerging as its main challenger.
“Operators are expected to make multi-billion dollar investments in several new integrated casino resort projects over the next few years, mainly in Macau and the Philippines,” the report said.
The ratings agency has forecast that revenues from gaming in the Philippines will rise by 6% or more annually through 2015, significantly outpacing projected GDP growth over the same period.
A similar report by financial services group Credit Suisse on the gaming industry also highlighted the key contribution that the domestic market could make to growth.
“The Philippine population of 97m is almost three times that of Singapore, Malaysia and Macau combined, presenting sizeable onshore potential for the higher-margin mass segment,” the report, released in May, noted.
S&P added a word of caution by pointing out that investors were also exploring opportunities in other emerging gaming markets across the region.
However, both reports added that most new casinos planned for other sites were not scheduled to open before 2015. Credit Suisse also suggested that the absence of new casinos elsewhere in the region, coupled with limited hotel capacity, could provide the Philippines with a “spill-over” of foreign visitors until other resorts are built.
In the meantime, the Philippines is driving forward its plans for the 100-ha Manila Bay project, Entertainment City, which is being described as the local answer to Las Vegas.
The development is anchored by four multi-purpose resorts, each housing retail shops, theatres and entertainment complexes alongside their casinos. The first of the four, the $1.2bn Solaire Manila, opened its doors in March, and the others are slated to be operational by 2016.
Gaming revenue is projected to increase steadily over the next few years, with the Philippine Amusement and Gaming Corporation (PAGCOR) forecasting a rise from $1.4bn in 2012 to $5bn-7bn by 2016. Earnings from the industry could eventually exceed $10bn, the state-owned gambling company and regulator added. Entertainment City is expected to provide direct and indirect employment for up to 400,000 locals.
Benefits to the economy could be even broader, however. Tourism Secretary Ramon Jimenez Jr told OBG that the government was keen to raise the Philippines’ profile as a tourist destination on the back of the growing gaming industry.
“Gaming and casinos are a colourful and dynamic billboard for general tourism,” he said. “The Department of Tourism is not directly involved in managing this sector, but I support its development because it will invigorate the capital and provide an activity for visitors.”
While the gaming industry could do much to boost the profile of the Philippines as a holiday destination, some recent developments suggest challenges ahead. Despite targeting the fast-growing Asian markets, the Philippines has found itself at loggerheads with a number of its neighbours.
A territorial dispute with China over the Spratly Islands could see a cooling of ties between Beijing and Manila. Taiwan, meanwhile, recently advised its citizens against travelling to the Philippines following the May shooting of a Taiwanese fisherman in waters claimed by Manila. A similar warning issued by Hong Kong after a 2010 attack on a bus carrying tourists still remains in place.
Las Vegas research house Union Gaming Group recently warned that running tensions could hinder the Philippines’ efforts to edge the region’s gambling heavyweights, including Macau.
“We believe regional disputes like this could hamper mass market visitation to the Philippines from countries like China, Taiwan and Hong Kong, which are primary customer targets for Manila’s new and future casinos,” the organisation said in a research note.
However, while a number of regional tensions remain unresolved, visitors appear keen to explore Manila’s new gaming facilities, with Solaire Manila reporting revenue of $13.4m in its first 15 days of operations. A strong start could prove important for the Manila development, paving the way for the gaming industry to cement its position in the regional market.
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