Philippine market may be nearing saturation

    The Philippine market, which currently has two Integrated resorts, with potentially three more scheduled to come on stream, may already be nearing saturation and operators are having to pay more to buy in their business, a panel session at G2E Asia heard.
    “The Philippines is a potentially saturated market that does not offer much more opportunity for further IRs given what is already there,” MGM Resorts International senior vice president global gaming development Edward Bowers said. Add that to problems of infrastructure and it’s not a market that MGM has been devoting much time to, he said.
    A separate panel session Tuesday also raised doubt over the Philippines’ potential, pointing out that the market expanded significantly when Genting’s Resorts World Manila opened, but recorded growth of just 10 percent after Solaire International Resort & Casino opened its doors in 2013.
    Steve Rittvo, chairman of Innovation Gaming Group, said that like some other jurisdictions in the region there had perhaps been an overly optimistic assessment of the potential to attract Chinese visitors. As a result of lukewarm interest, casinos are having to pay more to buy in their business he said.
    Rittvo said he’s hearing that junket commissions may be as high as 2 percent in the Philippines, compared with a more normal level of about 1.2 percent in Macau.
    According to projections from CIMB, growth in Philippine GGR is likely to drop back to 9 percent this year. That may pick up again to 14 percent in 2015, the first full year after the planned opening of Melco Crown’s City of Dreams, but may slow again to just 6 percent in 2016.
    According to the two companies’ annual reports Resorts World Manila saw a 50 percent gain in promotional allowances to $57 million last year in the face of increased competition from Solaire, which spent $76 million in promotions for its $276 million in revenue.
    Despite the concerns, Melco Crown is confident about the prospects for its new Manila resort, which is scheduled to open in October. “We think we can double the number of VIPs coming into the country,” Melco chief of international marketing Kelvin Tan said, pointing to the company’s strong Macau credentials.
    However, Tan did say that the government needs to do more to improve bilateral relations between China and the Philippines to help the industry attract more mainland tourists. Chinese tourists to the country rose 70 percent last year and have the potential to rise further if political and visa issues are smoothed, Tan said, while acknowledging last year’s gain comes from a very low base.
    Bilateral ties between the two countries have been strained by a string of incidents in recent years, with Manila accusing Beijing of building an airstrip on a reef it claims as its own in the South China Sea. While relations with Hong Kong were also harmed after a 2010 hostage crisis in Manila in which eight Hong Kong tourists were killed. The resulting four-year spat was settled last month after the Philippines issued an apology and compensation to the families of the victims.