MANILA, Philippines - The Philippine Amusement and Gaming Corp. (PAGCOR) said the 100-hectare entertainment and casino complex it and its four partners are building on Manila Bay will eclipse Las Vegas in terms of revenue in five years’ time.
Macquarie Securities Group estimates Philippine gaming revenues – which count both that of Pagcor and private casino operators like Resorts World – at $1.2 billion last year. Macquarie projects this can match Las Vegas’ annual $6 billion with the help of PAGCOR's Entertainment City.
"To keep the industry growing, then it's good that we lure more big names," Macquarie Philippines Research Head Alex Pomento said in an interview with ANC. "Based on the experience of Alliance Global's gaming unit Resorts World, we're still in nascent stage of growing the industry. The potential to make it a 5 to 6 billion dollar industry is there."
Both PAGCOR and Macquarie believe this can be done even without U.S. partners such as American billionaire Sheldon Adelson of Las Vegas Sands and casino mogul Steve Wynn of Wynn Resorts.
Three out of four investors in PAGCOR’s Entertainment City are local tycoons --- Andrew Tan’s Alliance Global, which tied up with Genting Hong Kong, to form Travellers International Hotel Group; Henry Sy’s Belle Corp. and Enrique Razon’s Bloombury Investments.
Japanese arcade game-maker Universal Entertainment is the lone foreign investor in PAGCOR’s list of licensees.
Macau, and more recently and swiftly Singapore, surpassed US gambling Mecca Las Vegas, thanks in part to the rising wealth of the Chinese and other Asians. But they had help from US casino giants Wynn and the Sands.
Talks with US operators
Pagcor records show that when the project was first announced in 2007, six investors originally made a bid for licenses, including a subsidiary of businessman Roberto Ongpin’s Philweb and William Gatchalian's Waterfront.
A Pagcor official said the previous administration held informal talks with other foreign names, including at least one from Las Vegas, but these did not prosper.
"My understanding is that there was an announcement, and that they (the foreign casino operators) actually came forward to inquire about the plan of the government at that time. But why they didn't actually proceed formally is not apparent in the records,” Francis Hernando, vice president at Pagcor Licensed Casino Development Department, said.
Hernando, who took office in February last year, said they conducted due diligence on the Entertainment City project and found no irregularities in the issuance of the licenses.
“We’ve done our due diligence. We think that the licenses that have been there are worth pursuing... We gave everybody a fair share. No one's favored over anybody,” he added.
But there may be a deeper reason why US casino magnates are absent.
Pagcor’s being both gaming operator and regulator, a potential conflict of interest, could have turned off other potential investors – something that Pagcor did not deny.
But Pagcor Chairman and CEO Cristino Naguiat, Jr. said the state-owned casino operator will, over time, become more of a regulator.
"In a few years time, we will see if PAGCOR will still operate as an operator here in Metro Manila with these big boys. As a government corporation, it's really hard to compete with them,” Naguiat said in a separate interview with ANC.
Naguiat said he doesn’t need Western names to meet his target.
"Personally, I have no plans of inviting them to come here, invest here. I'd rather deal with our ASEAN partners,” Naguiat said.
Besides, PAGCOR can accommodate other investors on top of the four, only if it can get extra land within the reclaimed property, Hernando said.
Of the 100-hectare Entertainment City, 56 hectares is owned by Pagcor and occupied by Travellers (30.5 hectares) and Bloombury (8.3 hectares). Universal leases its 40 hectares from another landowner, while Belle occupies 6 hectares in owner Henry Sy's Mall of Asia complex.
Hernando told ANC that PAGCOR is negotiating a deal to buy another 15 hectares owned by the Philippine Reclamation Authority (PRA) and the Nayong Pilipino Foundation. That property is contiguous to the casino complex and would allow Bloombury to expand its area by another 8 hectares, and whatever’s left would be given to Belle Corp.
Belle Corp. wants the extra land to build a second casino after its Belle Grande Manila Bay project it is building on Entertainment City.
“We’re still negotiating with PRA and Nayong Pilipino. Only after that can we proceed to formalize the expansion of Bloombury. And then that’s also the time we can start entertaining the request of Belle for additional land,” Hernando said.
The stakes are high and so are the risks. Pagcor’s four partners are putting in at least $1 billion each.
But Macquarie believes Philippine casinos will draw foreign investors and gamblers because of lower taxes and because the country welcomes so-called junket operators, unlike Singapore and the US.
"If you look at other markets like Singapore and Macau, there's some rigidity in the rules that prevent them from growing much bigger. so I think that's where the Philippines can niche itself. Continuously offer investor-friendly rules,” Pomento said.
Junket operators, a casino industry jargon, bring in high-rollers and handle their money for them.
Pagcor’s Hernando said the US and Singapore are tough on junket operators because of their money-laundering potential.
The Philippines has enough laws to curtail money laundering, he said.
In the meantime, Naguiat said PAGCOR is talking with its partners about how to ensure gamblers, vacationers and convention-goers can get to the casino quickly, and stay there as long as possible.
"We're already talking to our 4 proponents and they’re more than willing to fund the skyway from Villamor to the Entertainment City, that's about 5 kilometers, which means if you're a player, you know what time to leave," Naguiat said. "Basically from the airport to hotel that will take you only about 5-10 minutes."