Global Gaming Business magazine, the leading monthly gaming trade magazine that focuses solely on the international casino gaming industry features ECG Chairman Efraim C. Genuino and PAGCOR President & COO Rafael “Butch” Francisco in its March 2009 issue.

PAGCOR Chairman Genuino and President Francisco pose on the cover of the latest issue of the magazine. The cover story presents the history of Philippine gaming which reflects primarily the history of PAGCOR as the Philippine regulator of all games of chance particularly casino. It also enumerates PAGCOR beneficiaries as mandated by various Philippine laws and the sources of Philippine gaming revenues. With PAGCOR’s paradigm shift from purely gaming to world class entertainment.

The Butterfly Is Ready To Emerge From The Cocoon

Just prior to the onset of the financial crises, the Philippines was on the cusp of being a target-rich gaming development opportunity ready to emerge from the cocoon of its first life to be something more resplendent in its second.
The first to recognize the dormant, raw upside potential were those closest to it, PAGCOR. In fact, in PAGCOR’s 2006 annual report, Chairman Efraim C. Genuino said it perhaps best when he stated that PAGCOR “must undertake a paradigm shift from purely gaming to world-class entertainment.”

The gauntlet was laid down, the trial period was over and with the confidence of the start-up years, the government and PAGCOR were now both willing to more aggressively develop its gaming product to better serve the domestic as well as the international tourist and high-limit player. As part of this paradigm shift, PAGCOR began updating its existing casinos to modern standards, building new free-standing, purpose-built casinos under their complete control and, in all, better fulfilling the broader range of gaming, food, beverage and entertainment needs of the marketplace.

The second half of the PAGCOR chairman’s announcement clearly set the scene for the Philippines to compete internationally, “… so the company may dovetail with what the Bayong Nayong Pilipino-Manila Bay Integrated City would have to offer.”

The Manila Bay Integrated City is an epoch new meta-entertainment, resort and lifestyle development that could not only be transforming for PAGCOR and Manila, but also allow Philippine gaming to compete among the best-of-the best in Asia and the world.

At full build-out, estimates are for a total of $15 billion to be invested in this meta-project spread across 2,000 acres (800 hectares) of reclaimed land along Manila Bay in Paranaque City, not far away from the international airport and the central business district of Manila. A true entertainment, leisure, resort and lifestyle destination, only a small portion of the massive development is to be devoted to casino-centric integrated resorts, with the remainder containing a cornucopia of hotels, a theme park, residential condominiums, office developments, commercial center, retirement village and wellness center, plus an array of other minor leisure/entertainment activities.

The stated goals for Manila Bay Integrated City are to: (1) boost tourism, (2) generate employment, and (3) increase earnings for the national government. PAGCOR estimates that when fully built out, the Manila Bay Integrated City project could boost tourism from the current 5 million annual goal to 10 million; directly employ 40,000 Filipinos and create another 150,000 additional indirect jobs; and triple the income generated by PAGCOR from $500 million today to $1.5 billion.

Each casino developer must commit to a total investment of $1 billion and a minimum Phase 1 investment of $400 million. Genuino announced three committed private casino developers enraptured by his vision:

• Travelers International: A joint venture between Alliance Global, a Philippine investment company; and Star Cruises, a subsidiary of Genting Bhd. The project is tentatively planned to include a casino, hotels and a theme park. The first phase is projected to open in mid-2010.

• Aruze Corporation: A major Japanese company known best for its pachinko and slot machines as well as its partnership with Steve Wynn in Wynn Resorts (although Wynn is not involved in this investment). This project is planned to tentatively include a casino, hotel, sports arena and a “Manila Eye” mimicking the famous giant ferris wheel known as the London Eye in London. It is projected to open its first phase in 2010.

• SM Investments: The largest corporation in the Philippines involved in retail and tourism. They are also owners/operators of the nearby Mall of Asia, a retail and entertainment mall containing over 4.4 million square feet (410,000 square meters) that already attracts over 200,000 visitors per day.

• There is one more casino site available for casino development that is currently uncommitted. PAGCOR has held discussions with Melco Crown, MGM Mirage, Harrah’s Entertainment and others, but the site remains available.
Gaming development interest in the Philippines does not stop with the Manila Bay Integrated City, however.
Travelers International also announced plans to open a casino at a 74-acre (30-hectare) mixed-use development near the airport called Newport City. The casino and hotel portion of the development is expected to comprise 25 acres (10 hectares). The opening is expected in 2009.

Elsewhere, Jimei Entertainment, a private casino owner/operator which has already invested $36 million in its Fontana Lesiure Park located at Clark Field, is in the latter stages of investing another $48 million. The facility already includes a casino, golf, guest villas, conference center, restaurants, lounges and water park.

At least two other private green-field casino-resort projects in the $75 million-to-$100 million range have been rumored recently to be in the planning stages at Clark Field. There is room for others. Clark Field has a modern airport served by an ever-increasing number of scheduled and chartered flights. Tourists and players arriving by air can be at the gaming tables literally 10 minutes after departing from the airport, something few other gaming venues in Asia can offer.
Subic Bay is now connected to Clark Field by an expressway and is only 30 to 40 minutes away, and located on the ocean. At one time, two very active casinos operated there, but both closed last year. There is one casino open and operating now. An article appeared regarding a proposed $1 billion casino-centric project ostensibly aligned with Trump Entertainment, but little has been heard about this project since. Subic was the former site of a major U.S. naval base and, like Clark Field, has an airport capable of serving international flights and is only 10 minutes away from the casino-resort area.

Another private owner/operator, Thunderbird Resorts, entered the Philippine market in 2005 and now has two casino-resorts, the first in Rizal and the second in San Fernando at Poro Point. Both began as relatively small resorts with a casino, golf course and boutique hotel, but are pursuing hotel, meeting, restaurant, spa and other resort amenity expansion plans.

Interest by private operators is also being shown in some of the beach and many other exquisite resort areas located throughout the Philippines, albeit small to medium in size. None of these projects seems to have gained sufficient traction to be listed as a viable new project yet.

The Future of Gaming in the Philippines

It is worth noting that three adjunct forms of casino gaming are also permitted, regulated, and/or being tested in the Philippines: online, live video stream, and proxy gaming. The opportunity to complement a bricks-and-mortar casino with an online, online video stream and/or proxy gaming operation could be very attractive for a casino project because they provide the opportunity for marginal revenue and profits.

What might all of this mean to gaming in the Philippines? Well, excluding the Manila Bay Integrated City meta-project and any consideration for online casino gaming and its derivatives, or the current financial crises, one estimate of potential future results is presented below:

Manila Bay Integrated City could, of course, add significantly to PAGCOR’s expected results. For each $1 billion of investment a typical developer would hope to generate $380 million in gaming revenue. Even if only the three announced projects go forward at the minimum investment of $1 billion each, this could lead to over $1 billion in additional gaming revenue, while a fourth casino and/or greater than the minimal investment could lead to $2 billion in gaming revenue.
It is not unreasonable to expect that one of the possible ripple effects of this meta-project could be a greater interest in additional private casino development elsewhere in the Philippines.

To put the future of Philippine gaming into context, Asia and Pacific Rim gaming revenue (including Australia) was estimated at $22 billion in 2007. Pre-financial crises, it was projected to increase to $34 billion in 2010 and exceed $50 billion in 2012. This growth may not occur as fast as thought in 2007, or these limits may not be reached, but this potential still resides within Asia and the Pacific Rim. This potential leaves a large amount of room for the Philippines to earn the relatively small share it needs to achieve the above forecast.

In all, if the stars and the moons align in the Philippines’ favor, gaming revenue in the foreseeable future could reach $2 billion to $3 billion, making the Philippines a major gaming destination in the Asian and world market. Borrowing an oft-used phrase, ultimately reaching these goals is more a matter of “when” than “if.”

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