by FP Staff Mar 16, 2013 23:00 IST
MANILA (Reuters) - Big casino operators will be scrutinising the Philippines' debut as Asia's newest top-end gambling destination this weekend to see if Manila can deliver on promises of better profit margins and lower costs than global betting capital Macau.
They also want to know whether Bloomberry Resorts Corp (BLOOM.PS), whose shares have climbed 40 percent in the last six months on hopes of quick returns, can overcome national security concerns and flawed infrastructure to bring in VIPs from China to place bets at its $1.2 billion Solaire casino resort.
Top officials at rivals Melco Crown Entertainment Ltd (6883.HK) and Genting Hong Kong Ltd (0678.HK), with their respective local partners Belle Corp (BEL.PS) and Alliance Global Group Inc (AGI.PS), are among hundreds of guests who will witness the Solaire casino roll its first dice on Saturday.
"There are high rollers coming in to play ... I am expecting at least 1-1.5 billion pesos to be wagered tomorrow night," Cristino Naguiat, head of local regulator the Philippine Gaming Corp (Pagcor) told reporters on Friday. The opening ceremony will be led by Philippine President Benigno Aquino.
Solaire, the first of four casino resorts to open on a 100-hectare complex overlooking Manila Bay, hopes to help lift the Philippines' expected gaming revenues to $3 billion by 2015 from $2 billion this year by luring rich Filipino and Chinese gamblers to its halls, sparkling with crystal and gold.
Owned by the country's third richest man Enrique Razon, it expects to earn two-thirds of revenues at its 15-storey, 500-room casino resort from local players in its first year of operation, shifting to an even balance between foreign and domestic customers after a year or two.
Pagcor expects the Philippines' annual gambling revenues to hit $10 billion by 2017 when all four casino resorts at the Entertainment City complex are up and running, surpassing the $6 billion markets boasted by both Singapore and Las Vegas.
Michael French, Solaire's chief operating officer, said the company is close to signing deals with four big junket operators from Macau and Hong Kong who will help fill up the casino's 95 tables reserved for VIPs, about a third of its gaming tables.
"They won't all come here, we know that all the Macau junkets are very convenient to Hong Kong, to Guangdong province," French told Reuters. "But if we can get seven percent of Macau business to come here, then we all achieve our goals for the market."
Solaire's parent Bloomberry replaced property firm SM Development Corp (SMDC.PS) when it joined the stock market's key 30-company key index this month, meaning a bigger pool of investors is buying into it.
Chinese tourists come fourth to South Koreans, Americans and Japanese as top visitors to the Philippines, which attracted a record 4.3 million holidaymakers last year against Macau's 28 million.
"IT'S MORE FUN IN THE PHILIPPINES"
To attract junkets - intermediaries who bring in customers, loaning credit and helping players bypass currency restrictions - Solaire will offer commissions and allowances higher than the maximum 1.35 percent junkets get in Macau, French said.
The Philippines' privately run casino operators can extend attractive terms to junkets as a result of tax incentives: big spenders will pay 15 percent and mass market players 27 percent, versus Macau's blanket 40 percent.
As well as lower taxes, cheaper labour costs are expected to mean higher profit margins for casino operators in Manila.
"They would be running profit margins anywhere from 24 to 28 percent in Macau. And in Manila, profit margins are over 30 percent," French said.
"It's more fun in the Philippines," he said, echoing a government tourism slogan.
Still, the country is on a 'do not visit' tourism advisory issued by Hong Kong after a 2010 hostage siege in which eight Hong Kong tourists were killed.
Diplomatic spats related to a long-standing territorial dispute about the South China Sea also deter some travellers from mainland China.
"Hopefully these issues will resolve themselves in the near future," Lawrence Ho, chief executive of Melco Crown, said in Manila on Friday before signing a deal with Belle for a $1 billion Entertainment City casino resort set to open in mid-2014.
The project is Melco's first casino outside its home base Macau, and one of the biggest Chinese investments in the Philippines.
Ho, who is also a member of the Chinese People's Political Consultative Conference, part of the ruling Communist Party of China, is aware of the tension between Beijing and Manila.
"On top of building integrated resorts here, hopefully I can play a part in building relations." (Additional reporting by Erik dela Cruz; Editing by Daniel Magnowski)
more in Fwire