Inside Asian Gaming

INSIDE ASIAN GAMING | April 2013 10 and quarterly EBITDA from $17.9 million to $59.6 million. The effect was to open investors’ eyes and those of the industry to the existence of a domestic market that is way more substantial both in numbers and in wherewithal than almost anyone was prepared to believe. “I know they’re here. We’ve talked to them,” said Mr French. “They don’t like to play [in the Philippines] because they don’t like what’s available. If you’ve been to my competitors you see what I mean.” The fact is, they were always there. Even in the years prior to Resorts World, total win per unit, tables and slots combined, always outstripped what were generally sluggish increases in total supply, by about two and half times between 2002 and 2008, compounded annually. Then came the dramatic increase in supply with Resorts World—mass tables increased by 26% between 2008 and 2010, slots by 17%—and Filipinos responded with alacrity. Mass- market win per unit shot up 22%, slots by a whopping 127%. “We view the Philippines as having a potentially larger domestic market in the high-margin mass segment compared to other Asian gaming hubs,” Credit Suisse said in initiating coverage of the local industry about three weeks before Solaire opened. Mr French’s implication, of course, is that Resorts World Manila no longer has that market largely to itself. “It’s a good thing,” said Mr Stone, “a good thing for all of us. I want to have good competitors, good properties that are going to help me out. It’s synergistic. And there’s enough money to go around for everybody we believe.” Analysts agree. Credit Suisse is forecasting gaming revenue to grow at an annual rate of 28% through 2018, which is about double the rate for most of the Macau scenarios out there.The firmparticularly likes the country’s “favorable demographics”— the sizable population (12th largest in the world) and the youth of it (27 is the average age, versus 28-41 elsewhere in the region), and the fact that it’s growing to working age faster than any emerging Asian economy’s. It’s also a workforce hailed worldwide for its friendliness and its service orientation, its high degree of adult literacy (96%), and the large component of it that speaks English. Forecasts this year call for the national economy to grow at around 6.5%, which is especially meaningful for the gaming industry because it’s growth that is driven overwhelmingly by private consumption, which accounts for 70% of GDP. (In China, by way of contrast, it accounts for less than half.) Citigroup gaming analyst Michael Beer calls it a “phenomenal domestic consumption story”. Remittances by Filipinos working abroad will account for a significant portion of it. They comprise about 9% of the total economy and last year they hit a record US$23.8 billion, an increase of 6.4% year on year. This year they are expected to grow another 5%. In its analysis of how this trickles down to businesses like casinos, CLSA notes that Philippine households that would be characterized as middle-class, defined as annual disposable incomes of more than $5,000, are growing the fastest among all income brackets, and as per capita GDP has risen (by about 30% in the 10 years through 2011), so, too, has discretionary leisure expenditure as a percentage of total consumer spend—from 5.9% in 2001 to 6.7% in 2011. Philippines Gaming Revenue: 2002—2015 Source: Pagcor, CLSA Asia-Pacific Markets The 18,500-square-meter Solaire casino is constructed on two levels, VIP above, main floor below. It features 1,200 of the latest slot machines and 295 table games, 95 of them VIP. COVER STORY