Investment News Analysis

The gamble in Manila

In December, Manila Bay Resort (MBR) – 1,000 rooms, 3,000 slots, and 500 gaming tables – will be the third mega-gaming operation to welcome gamblers to Entertainment City which, standing on 300 acres of reclaimed land in Manila Bay, will be the biggest casino and entertainment complex on the planet.

MBR’s owner is Japanese billionaire, Kazuo Okada – a former partner of Macau and Las Vegas casino magnate, Steve Wynn. Okada, once the largest individual taxpayer in Japan – his company, pachinko and slot-machine manufacturer, Universal Entertainment Corporation, at one time controlled 75% of the Nevada slots market – bought the 74-acre site in 2008 for US$300 million. When completed, development of the MBR site will have cost US$2.4 billion.

Entertainment City is regulated by government-owned and -controlled, Philippine Amusement and Gaming Corporation (PAGCOR) – the government’s biggest revenue earner after the Tax and Customs Authority. Investment for the project, estimated at US$15 billion, is all coming from private sources. Entertainment City gaming licences went for US$300 million.

The development, when completed, will house four integrated casino resorts, high-end hotels, shopping malls and a DreamWorks theme park. Two of the casino resorts are up and running. Solaire Resort & Casino (US$1.2 billion), owned and operated by local hotel and entertainment group, Bloomberry Resorts, opened in March 2013. City of Dreams Manila (US$1.3 billion), owned and operated by Melco Crown Philippines, a JV between Melco Crown Entertainment (MCE), and Philippines retail, banking and property conglomerate, SM Investments Corp., opened in December 2014. MCE was formed by James Packer (son of the late Australian media mogul, Kerry Packer), whose gambling and entertainment group, Crown Resorts, operates casino businesses in Australia, Macau and London, and Lawrence Ho (son of Macau gambling tycoon, Stanley Ho), CEO and chairman of Hong Kong and Macau conglomerate, Melco. The fourth resort, Westside City, costing US$1.4 billion and owned by local property developer, Megaworld Corporation, is expected to be completed by end 2020.

Entertainment City’s plan is to supplant Macau – 734 air miles, or 1 hour and 46 minutes away – as Asia’s premier gaming mecca. In 2013, cash from Macau’s casino business hit a peak of US$45 billion. Last year it took a real hit and pulled in just short of US$29 billion. It is expected to make about the same this year. China’s economic slowdown and Beijing’s corruption crackdown – including enforcing strict controls on money transfers to Macau – has been largely responsible for the one-time Portuguese enclave’s change in fortunes. The Philippines casino sector, meanwhile, seems to be going in the opposite direction. Last year it earned US$2.9 billion and is on course this year to make US$3.4 billion.

The Philippines, however, needs more than glitzy casinos serviced by luxury hotels if it is to attract that vital clientele of loyal high rollers. Well bank-rolled gamblers have no problems backing their cards and dice, but personal safety is another matter entirely. And the Philippines has a serious image problem internationally in that respect. Whether they’re coming in from Atlantic City or Shanghai, the one thing that concerns high-stakes players is security.

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