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Manila stops issuing new casino licenses

Early investors protected amid fears of oversupply

Gamblers try their luck with Okada Manila's roulette machines in Manila. (Photo by Akira Kodaka)

MANILA The Philippines will not issue any more casino licenses in the capital for five years; the industry regulator is heeding oversupply concerns among existing investors.

Andrea Domingo, chair of the Philippine Amusement and Gaming Corporation (Pagcor), said the four licensees from Manila's Entertainment City filed a position paper last month calling for the moratorium.

"We are looking at protecting those who have taken a risk earlier, who have invested a lot of money," said Domingo at gaming form on March 21. She revealed that Pagcor recently denied a U.S. company's bid for a gaming license in Metropolitan Manila even though it offered to exceed the $1 billion minimum investment requirement for integrated resorts at Entertainment City. "We don't want too [much] proliferation of casinos," she said.

SUFFERING A GLUT Bloomberry Resorts led the way when it opened its Solaire casino in Entertainment City in March 2013. Tiger Resort Leisure and Entertainment, owned by Japan's Universal Entertainment, started operating the Okada Manila integrated resort last December. Executives from both companies have warned of oversupply in the dedicated gaming district, and the likely damage to margins.

The two other licensees there are Melco Crown (Philippines) Resorts, which opened City of Dreams Manila in December 2014, and Travellers International Hotel Group, a joint venture between local businessman Andrew Tan's Alliance Global Group and Malaysia's Genting, which plans to open Westside City Resorts World by 2021.

The four licensees are each allowed to open facilities in two locations, subject to clearance from Pagcor and the local government concerned. In 2009, Travellers opened the Resorts World Manila, the country's first integrated resort and casino, in front of Terminal 3 of Manila's Ninoy Aquino International Airport.

The opening of the $2.4 billion Okada Manila with 3,000 gaming machines and 500 tables is expected to hurt gross gaming revenue growth at the first three mega-casinos.

RCBC Securities, a local brokerage, expects growth at Solaire, City of Dreams Manila, and Resorts World Manila to slow by 8% this year, from 17% last year.

Okada's opening should nevertheless add to overall industry revenues. Domingo said Pagcor expects 155-160 billion pesos ($3.07 billion to $3.17 billion) in gross gaming revenue this year, a 30% increase on 2016's internal target, but only 7% above the 149 billion pesos in actual gross gaming revenue for the year.

Because of the Entertainment City glut, Bloomberry is planning to use an existing license to build a smaller casino in northern Manila with an investment of 20 billion pesos.

The freeze on mega-casinos may encourage investors to look elsewhere. Russia and Vietnam are both interested in developing their gaming industries, and Japan recently moved to legalize casinos.

The moratorium is also influenced by Philippine President Rodrigo Duterte's policy to promote business outside Manila. Domingo said she has approved two integrated resort applications on the central island of Cebu, one of the most populous provinces. Cebu offers direct air services to regional destinations like South Korea and Japan.

BIG BETS According to Domingo, a local company will bet $500 million on Cebu and Hong Kong investors plan a $300 million property there. Both integrated resorts are expected to launch operations in 2019.

She added that Pagcor has issued 35 "Philippine offshore gaming operator" licenses for online casinos that exclusively cater to customers overseas. The licensing of these operators was launched last year when Duterte also ordered the closure of nearly 300 e-gaming cafes run by PhilWeb for violating zoning rules prohibiting such establishments near schools and churches.

Domingo said Duterte's efforts to revitalize relations with China and Southeast Asia will boost regional tourism and foreign gamer arrivals. Bloomberry Chairman Enrique Razon earlier reported that visitors from China to Solaire doubled in October and November year on year. That followed Duterte's visit to China, when he announced a national "separation" from the U.S.

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