Philippines casino market remains resilient amidst uncertainty

ICR - Philippines regulatory asian
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Compared to its counterparts in Macau and Singapore, the Philippines casino industry would seem to be the underdog in Asia, however the strength of local demand and proxy gaming could help the country’s casino market ride out recent troubles, suggests gaming consultant Ben Lee.


The head coach of the Philippines national basketball team, Chot Reyes, is known for telling his players “We’re the underdogs”, when the team competes on the international stage.

On a similar note, boxer Manny Pacquiao relished his rare status as the underdog in his 2015 fight against Floyd Mayweather Jr, “Being underdog is what I want.”

This same underdog spirit is evident in the country’s casino industry. Despite negative headlines and a rocky 2016, gross gaming revenue in the Philippines rose 19 percent to a record P149.12bn ($3bn) while Macau faced declining casino revenue for the third year in a row.

This contradictory growth story may explain the national regulator Pagcor’s decision to expand the country’s industry further despite concerns regarding saturation and a recent rise in terrorism which sees the spectre of martial law threatening to extend beyond the southernmost island of Mindanao.

“For tourism, I don’t think these factors are having much of an impact on the day-to-day as far as casinos are concerned. But in terms of future long-term growth, it will enforce a ceiling on the industry,” explains Ben Lee, managing partner of IGAMIX Management and Consulting.

“While the industry may grow on the back of the local economy or proxy gaming, certainly compared to the level of growth one sees in Macau, South Korea or Vietnam, it is not so clear-cut for the Philippines.”

In March, Pagcor stated that it would refrain from issuing new gaming licences for Manila during the next five years, following requests for ‘breathing space’ by existing integrated resort operators in Entertainment City.

Aiming to develop integrated resorts in other areas of the country, the regulator is now looking to the central island of Cebu as the nation’s next major gambling destination, and has already issued a licence to Udenna Corporation to develop its Lapu-Lapu Leisure Mactan project.

“Cebu is the second largest metropolis in our country, there are cities there near the airport where the local government welcomes casinos,” said Pagcor’s CEO, Andrea Domingo, speaking at the ASEAN Gaming Summit.

Lee suggests that Pagcor’s corporate structure is forcing the operator-cum-regulator to look further afield for fresh opportunities.

“Being a semi autonomous body they are not allowed to downsize their staff,” Lee continued.

“So basically to maintain that level of manpower, they have to look at expanding, and what they’ve been doing is to look at firstly the provinces, i.e. expanding Pagcor’s own casinos further out; in addition to setting up another complex on a similar format to Entertainment City, which will possibly be based in Cebu.

“The licence they issued recently to this new project is not completely new, it has certainly been in the works for quite some time.

“However, Dennis A. Uy, the person they sold the licence to is obviously new, being, I believe, a financial donor to the president’s election campaign, so that’s unsurprising there.”

While Pagcor’s Cebu ambitions have received extensive coverage, Lee also revealed that the regulator is in the process of rolling out a new mini-casino format.

“These are privately-owned casinos, managed by Pagcor and they consist of anything from six to ten tables, approximately fifty machines and they are located in suburban shopping malls.

“I’ve already seen two of these mini-casinos around Manila and I believe there are more in the pipeline.”

While proxy betting is banned in other gaming centres in the region such as Singapore, Australia and Macau, it operates in a legal grey area in the Philippines, and has contributed to a boom in VIP revenues.

Indeed, it is growing at such a pace that junket operator Suncity attributed 80 percent of its business in the country to proxy gambling, with just 20 percent from customers travelling to casinos for live table games. But there could be clouds on the proxy horizon  —  China and the Philippines recently joined forces to tackle illegal gambling, as part of Beijing’s broader campaign to curb illicit capital outflows, with the first arrests taking place in April.

The coordinated crackdown comes amidst warming ties between Chinese president Xi Jinping and his Philippine counterpart Rodrigo Duterte, who has made illegal gambling the third front in his war on crime.

“There’s a lot of contradiction there,” says Lee, referring to the partnership between China and the Philippines to take on illegal betting, which for now has not targeted proxy betting.

Despite this, he suggests there is reason to be cautious: “China warning specifically that they would crack down again on foreign casinos should be heeded by all, especially those operating in the online space,” he asserts.

Referring to the recent Resorts World attack, Lee clarifies that while tragic, the incident is unlikely to stall the industry’s momentum in the long-run.

“The main result of the incident is a short term impact  —  from the local market’s point of view  —  but at the end of the day that will rebound very quickly.

“Yes, the frequency level of violence in the Philippines is higher than one experiences elsewhere in Asia, but it is what it is.

“In terms of proxy gaming, since those players don’t actually visit Manila, they are removed from any perceived risks. So I don’t think that segment of the market will be impacted either.”

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