IT WAS the most promising sector in the Philippine Stock Exchange not too long ago.
Today, however, a cursory glance at the price charts of the country’s largest listed gaming operators would show that the industry has been on a losing streak that has lasted for at least one year now.
Over a 12-month period, the share price of Bloomberry Resorts Corp.— the first among the locators to set up shop at the sprawling Entertainment City complex of the Philippine Amusement and Gaming Corp.—has declined by 57 percent.
During the same period, the price of Melco Crown Philippines—the second operator to open with its City of Dreams development—dropped by a sharp 71 percent.
And the shares of Travellers International Hotel Group—the operator of a casino hotel complex near the Ninoy Aquino International Airport, and set to open its own Entertainment City venture by 2018—was down 65 percent during the same timeframe.
(A fourth Entertainment City locator, Tiger Resorts of Japanese pachinko magnate Kazuo Okada, is not listed on the local bourse.)
All these price declines happened during a period that was admittedly volatile, but tempered by the resilience of Philippine stocks. In fact, over the last 12 months, the Philippine Stock Exchange index was down by only 4.3 percent.
The culprit for the sudden shift in investor sentiment toward gaming stocks, both locally and abroad, is a Chinese government clampdown on corruption which, in turn, has resulted in a sharp reduction in the number of gamers from the mainland going to casinos in Macau, Singapore and the Philippines.
But the local industry is putting up a brave face.
Pagcor chair and CEO Cristino Naguiat Jr. believes the loss of so-called “high rollers” from China would likely be offset by the revenues that gaming operators will bring in, thanks to the other attractions offered by their integrated resorts.
“Revenues from gaming is just a portion of what these companies are supposed to make,” he said, pointing to various offerings available in Entertainment City resorts like retail, dining, accommodations and theme parks.
Early in the conceptualization stage of the 8-square kilometer gaming complex, the country’s gaming regulator had imposed a cap of 40 percent on how much locators could make from gaming, with the balance supposed to come from other sources like their hotel and shopping businesses.
Back then, the mandated ratio was meant to appease skeptics and critics of the $15-billion project, many of whom feared the ill effects a sudden surge in casino activity would have on the broader society.
But given current market developments—specifically the sudden evaporation of the hoped-for Chinese gaming patrons—the Pagcor rule has turned out to be a lifesaver for the industry, on hindsight.
“From the outset, we were never solely focused on gaming,” Naguiat said. “Our offerings were more well rounded. In fact, if you remember early on, we always said we wanted our entertainment offerings to be oriented toward families. We have something for everyone. Gaming is just a small part of that.”
This is a view echoed by new Tiger Resorts CEO Steve Wolstenholme who expressed bullishness about the Philippine market despite the China-induced challenges to the gaming sector’s revenues.
“One thing for certain is that we should not be reliant on any single jurisdiction,” he said in a interview with the Inquirer, referring to the gaming industry’s long love affair with the Chinese market.
“We want to be an entertainment destination, and in order to be an entertainment destination, we’re going to focus on volume rather than focus on specifics,” Wolstenholme added.
Tiger Resorts will be the third operator to set up shop in Entertainment City and its recently help its topping off ceremonies for its main building that will be part of a $2-billion gaming and resort complex once it opens in December 2016.
And despite the dark clouds on the gaming industry’s horizon, Tiger Resorts is pushing ahead with its big plans for the project instead of scaling down its ambitions.
Under its proposed plan, the local unit of Japan’s Universal Entertainment Corp. will have a 30,000-square meter casino floor that will house 500 gaming tables and 3,000 slot machines, making it the largest casino operation among the Entertainment City locators so far.
It will also have hotel rooms ranging from 60-sq m units to 1,400-sq m villas, an expected 25 dining establishments and 30,000-sq m allocated for a retail promenade.
To distinguish the resort from its competitors, Tiger Resorts will allocate close to 40,000 sq m for a fountain area that will be similar to the fountain facilities of the Bellagio in Las Vegas, Wolstenholme said.
Finally, it will also have an indoor beach club that will be able to accommodate as many as 3,000 patrons at any given time.
“So we want to focus on an entertainment experience whether it be for tourists and locals,” he said.
While conceding that profit margins are higher for casino operations, the Tiger Resorts CEO pointed out that revenues from other aspects of the resorts business are significant and should help the industry survive the China-induced market slump.
“The Philippines has so much to offer, and if we can get that message across, I don’t see why the local industry cannot thrive in this environment,” he said.
Indeed, with the dynamics of the gaming market changing rapidly, lessening dependence of gaming and spreading one’s bets may be a strategy that Philippine firms may want to adopt.