IN the late ’70s the Marcos administration decided to pursue a project that aims to reclaim a portion of the Manila Bay, part of what is now known as the Cultural Center of the Philippines (CCP).
Ambitious as it was at that time, the CCP was just part of the grand plan developed in 1905 by the American architect David Burnham for the development of coastal road properties along the southern segment of the Manila Bay coastline stretching from Luneta to Cavite City.
That project was called Boulevard 2000, and was later changed to so many other names, including “Bay City”.
The grand plan was that CCP will eventually be subsidized by the commercial properties that dot along that thousands of hectares of land that, until today—more than a hundred years later—still needs reclaiming.
Part of that reclaimed commercial land was assigned to the Philippine Amusement and Gaming Corp. (Pagcor), a state-owned casino operator and regulator of a huge chunk of the country’s gambling industry.
Nayong Pilipino
AS Pagcor’s charter was nearing its expiry in 2008, it needed to convince legislators that the agency is still relevant and not just simply an operator of casinos and a gambling industry regulator, profits of which were partly being used to fund some of the Philippine President’s pet projects.
As ambitious as the century-old Manila Bay reclamation project, Pagcor thought of spicing up its role in the industry by opening the country’s gambling market to the world and compete head on with the billion dollars worth of gambling sites in Macau, China, in Las Vegas in the United States, in Australia and in Malaysia.
Pagcor operates its own gambling facilities under the Casino Filipino brand. These facilities were and still are mostly located in Luzon, but there were a few branches in the Visayas and Mindanao.
But casinos, through the years, even with the entry of relatively small players, have become stale as these have had to compete with small-time competitors like horse racing, cockfighting and jueteng, among others.
Nine years ago, Pagcor unveiled its plan called the Bagong Nayon Pilipino-Entertainment City, an integrated resort and casino expected to have four major players. Again, it was called by many other names like Boulevard 2000. It is now called Entertainment City, or sometimes Pagcor City.
Nayong Pilipino was the cultural park previously located near the international airport in Pasay City. In 2002 President Gloria Macapagal-Arroyo ordered the park closed but ordered its transfer in a reclaimed area, the 15-hectare property owned by the Philippine Reclamation Authority in Parañaque City. The Nayong Pilipino park now sits right smack in the middle of the Entertainment City, the gambling site using the integrated resort complex.
Junket players
UNDER the concept that’s relatively new to the Philippines but has been in practice in gambling meccas all over the world, the casino is integrated with a resort property development and the huge entertainment infrastructure surrounding the locale.
The integrated resort also called for so-called junket players. These are foreign passport-holding players especially brought into the Philippines by the licensee or its third-party chip-washing or junket operator. These VIPs are flown in to play in junket rooms and areas reserved for them inside the casino.
To accomplish this, Pagcor required huge casino operators to follow a certain ratio of gaming table per hotel room.
The gaming capacity ratio for gaming tables is one gaming table for every four standard rooms or its equivalent. Meanwhile, there should be three electronic table game terminals for every two standard rooms or its equivalent. Casino operators cannot start doing business without at least having an 800-room hotel.
However, Pagcor wanted more than just that. The regulator also required operators to spend at least $1 billion for their facilities for each of the four slots in the Entertainment City.
Such was an eye-popping amount for the country’s fledgling gambling market, as it needed to put in place luxury hotels and high-end entertainment facilities. In Macau or Singapore, for instance, a single operator would need to spend at least $4 billion to put up just one integrated resort.
Major players
NONETHELESS, the gambling regulator was able to attract four major players with deep pockets to operate in the Entertainment City.
These were billionaire Enrique Razon Jr. along with Las Vegas-based Global Gaming Asset Management Llc. (GGAM); businessman Andrew Tan in partnership with Genting Hong Kong Ltd.; Belle Corp., which later on was majority-acquired by the SM Group; and Japanese gambling magnate Kazuo Okada.
Razon’s group was given 16 hectares of land fronting Manila Bay, while Tan’s group received some 30.5 hectares located inland. The SM Group was given 6.2 hectares, also inland, and Okada had the biggest at 44 hectares, a swath of property facing the Manila Bay.
There were many tweaks along the way.
Razon, who created his own resort brand under Solaire Resorts and Casino, fired the GGAM months after Solaire opened in 2013. An arbitration case has been filed in a court in Singapore.
The SM Group, meanwhile, had to change the name of its casino from Belle Grande to City of Dreams Manila (CDM) after it partnered with Macau gambling tycoon Lawrence Ho with its Melco Crown Entertainment Ltd. The CDM opened in 2014.
Today, Melco’s Philippines unit operates CDM and pays rent to both Belle and Premium Leisure Corp., the entity that now holds the casino license and the other gambling assets of the SM Group.
Partners’ talks
MEANWHILE, the opening of Okada’s project, the biggest among the other locators, has been delayed for several times. It was also accused of its partner Wynn Resorts, a Macau casino operator, of bribing Philippine officials for the coveted license.
Okada’s previous local partner for the development, the Gokongweis’ Robinsons Land Inc., also backed out from the residential and commercial segment of the project.
Okada, meanwhile, also spurned the group of Ambassador Jose Antonio of the Century Properties Group Inc. as replacement for Robinsons Land as local partner. Okada tapped instead businessman Antonio Cojuangco Jr.
Tan, meanwhile, had to rebrand its Bayshore Resorts World to Westside City Resorts World, which is still under construction.
As discussion on the Entertainment City casino projects was going on, Tan had an ace up his sleeve. He was also already talking to Genting for the development of Resorts World Manila, a 12-hectare property that sits right in front of the Terminal 3 of the Ninoy Aquino International Airport.
In 2009 Tan opened Resorts World Manila, undercutting the other players in Entertainment City. While his investment was relatively smaller compared to other players in the Entertainment City, Tan still had to follow the basic gaming table-to-hotel room ratio.
Raising funds
WITH such huge investments needed to bankroll Entertainment City projects, money did flow in the system. Aside from private placements, these major players tapped various sources of raising funds from the capital markets.
Razon’s Bloomberry raised funds through the Philippine Stock Exchange, via a backdoor entry using Active Alliance Alliance Inc.
Melco Crown (Philippines) Resorts Corp. also made its backdoor entry using Interphil Laboratories Inc. Okada, on the other hand, has been busy raising funds in Japan to bankroll its $2.4-billion project.
The three other operators said they spent about $1.2 billion each for the establishment of their respective sites in Entertainment City. Tan’s Travellers International Hotel Group Inc. has said it spent P5.9 billion in 2014 for its ongoing second phase and third phase to expand Resorts World Manila.
Tan will still spend more for his integrated resort project.
Getting bigger
ACCORDING to Pagcor data, gross gaming revenues from the current Entertainment City is now bigger than the other gambling sites in the Philippines combined, including its own Casino Filipino.
In 2015, there are about P70.15 billion in gross gaming revenues from Entertainment City, which at that time only had two players—Solaire and City of Dreams Manila. Revenues from other gambling sites totaled at P42.8 billion, Pagcor data revealed.
As of the third quarter of 2016, revenues from Entertainment City reached P63.3 billion compared to the P36.45-billion revenues from other sites.
As of September last year, Pagcor’s Casino Filipino, which is not required to put up its own hotel, still had 565 game tables. Solaire followed at 392 game tables, Resorts World Manila at 314 game tables and City of Dreams Manila at 247 game tables.
This year, Okada Manila started operating, which will add to the number of game tables and hotel rooms.
Westside City, slated to open by 2021, would be the last casino operator in Entertainment City to open, according to Kingson Sian, president and chief executive officer of Travellers International, Tan’s entity that holds most of his gambling and hotel assets.
“By that time, we expect that the integrated casino market is more mature. Hopefully, we can expand the market by attracting tourists here,” Sian said. “The infrastructure projects of the government can help ease infrastructure bottlenecks.”
Market growth
SINCE the concept of an integrated resort is new, many are mum on how big the industry is. Still, most of these players agree that the market is growing and the nationalities of junket players are getting more diverse.
“The market is growing. Pagcor has not given an official figure yet so I can’t give you exact figures,” said Manuel Gana, Belle Corp.’s president and chief executive officer. “But we can tell you as of first quarter this year, total GGR [gross gaming revenues] in the Philippines has growth versus last year. So we expect it to further expand this year.”
Willy Ocier, Belle’s vice chairman, said the gambling industry’s GGR last year reached close to $3 billion. With that positive result to pockets, Belle began to also lobby for visa on arrival to be issued especially for Chinese mainland tourists.
“It hasn’t happened yet but we are constantly lobbying. Hopefully we will get approval soon, a bilateral approval, for Filipinos going to China and as well as Chinese coming here,” Ocier said. “That will obviously improve the traffic coming from China.”
He added that “Taiwan has already approved the easing of travel of Filipinos going to Taiwan.”
“[Taiwan is] already ‘visa-on-arrival. So that’s something that the Philippines can offer,” Ocier explained. “So we’re hoping that barriers can be broken down especially in the Asean [Association of Southeast Asian Nations]”.
Birth pains
THERE are birth pains, however, especially when Entertainment City’s main junket players come from China. However, most are claiming there are also other players in some parts of wealthy Asian nations, such as South Korea and Japan.
The crackdown in China has also not been beneficial to many of the listed Entertainment City operators.
Bloomberry’s share price has been erratic since its opening in 2013, mainly as investors were nervous with China’s crackdown on its citizens’ gambling addiction. The Razon firm’s share price shot up as high as P15.52 per share in late November 2014, but went down to just P3.08 in early 2016. The share price recovered and now is trading on average at P8.37 per share.
Meanwhile, Travellers International’s shares reached as high as P9.90 in September 2014, but went down to P3.19 in September 2015. It has remained struggling to recover until today.
Melco’s shares also took a heavy beating. From as high as P15.12 in late 2014, its shares were sold down heavily to reach P1.33 in early 2016. Gradually, Melco’s shares went up to P6 per share through this year.
The same trajectory was seen with the share price of Belle that traded as high as P5.98 in 2014 but was sold down to reach P2.11 in early 2016. Shares of Premium Leisure also mimicked the same trajectory of its peers.
Operators believe that when another player in the complex starts doing its business, the industry gets bigger and bigger.
“Okada [Manila], which is so big, hopefully will help grow the market,” Razon said.
“This place [Entertainment City], which was just zero how many years ago, has created 25,000 jobs out of thin air and has created an industry of $3 billion in revenue out of thin air,” Razon said, while lifting his palm face down two inches from the top of a table. “So it has been beneficial from zero to this amount of revenue. This is what you call economic value added.”
He added that “every time there’s a property that opens, jobs are increasing [and] the market is also increasing.
“Each of the 25,000 workers supports what, three or four people. And the change continues,” Razon told the BusinessMirror. “This is the kind of investment that the country needs.”
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Editor’s Note: This article was written weeks before violence broke out at Resorts World Manila.
Image credits: Erik Zunec | Dreamstime.com, Maksym Yemelyanov | Dreamstime.com, Yooran Park | Dreamstime.com