Philippines spends billions to lure high-rollers from Macau
The Philippines has opened the first casino in an entertainment hub that is its answer to Macau, and billionaire Enrique Razon will have the gamblers to himself for the time being.
The port magnate's $US1.2 billion ($1.15 billion) Solaire Manila casino, which opened at the weekend, will have a monopoly within the capital city's new entertainment and gambling complex until the country's richest man, Henry Sy, opens a venture in 2014 in partnership with James Packer's Asian casino venture, Melco Crown.
It will be Melco's first foray outside Macau. The billionaires are investing in casinos as the Philippines seeks to emulate the success of Macau, where gamblers from China fuelled a 14 per cent revenue surge to a record $US38 billion last year. New resorts could help the country's gaming market expand five-fold to $US10 billion by 2017, its chief regulator estimates.
"Razon's venture is closely watched because it can prove if the Philippines can get a bigger share of junket and VIP market in Asia," said Allan Yu, who helps manage about $US11 billion for the country's Metropolitan Bank and Trust Company. "It's very promising and it looks like it's going to take off."
Shares in Mr Razon's casino and hotel company Bloomberry Resorts Corp have rallied by about 50 per cent in the past six months on hopes the new casino will profit from high rollers. Junkets provide credit and help draw Chinese gamblers to casinos overseas. VIP gamblers are the biggest revenue generators in Macau, the world's biggest gambling hub.
Solaire's gaming area is designed to get 45 per cent of its revenue from VIPs, or high-stake players, a partner of Mr Razon and president at Global Gaming Asset Management, Bradley Stone, said.
Mr Razon holds one of four casino licences the Philippine government awarded in 2008 and 2009 for Solaire.
The Philippines' privately run casino operators can extend attractive terms to junkets because of tax incentives: big spenders will pay 15 per cent and mass market players 27 per cent, versus Macau's blanket 40 per cent.
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 per cent in Macau. In Manila, profit margins are over 30 per cent," Solaire chief operating officer Michael French said.
Still, the country is on a "do not visit" tourism advisory issued by Hong Kong after a hostage siege in 2010 in which eight Hong Kong tourists were killed.
Diplomatic spats relating to a long-standing territorial dispute about some islands in the South China Sea also deter some travellers from China.
"Hopefully these issues will resolve themselves in the near future," Melco Crown chief executive Lawrence Ho said in Manila on Friday before signing a deal with Philippines developer Belle Corporation for the $US1 billion casino resort that is set to open in mid-2014.
The project is one of the biggest Chinese investments in the Philippines. A venture of Japanese billionaire Kazuo Okada and a fourth casino in the Manila complex by Philippine billionaire Andrew Tan and Genting Hong Kong are expected to open between 2015 and 2016.
Mr Razon faces existing competition outside the new hub, including from a gaming complex Genting and Mr Tan opened in 2009 at Manila's international airport.
State regulator and casino operator Philippine Amusement and Gaming Corp also has four casinos in Manila, which is only three to four hours' flight from China, Japan and South Korea.
The Philippines is counting on the new casino ventures to boost tourist traffic that lags its regional neighbours', including Indonesia and Thailand. It is also betting that these investments, set by the government at $US1 billion for each licence holder, will help lower the jobless rate, which is among the highest in Asia.