Inside Asian Gaming

inside asian gaming March 2015 22 Insights “You have to have the product and the service, but certainly the commercial backdrop is important, the tax rates, the prevailing commission structure and commission rates. All those things position the Philippines quite well.” I wake up every day and think about is the growing Asia-Pacific gaming wallet. And that’s simply coming on the back of growing economies, prospering economies, all within a very reasonable flight to the Philippines, to Manila. It’s really a question of positioning ourselves as a strong choice, as one of the prime destinations for the growing Asia- Pacific gaming wallet. We think that with the quality of our property, with the service experience that we can provide, with our very frequent, healthy lift—not even 90 minutes from Hong Kong into Manila—we feel that we ought to be well-positioned to participate in that Asia-Pacific growth. The Philippines’ low gaming tax rate offers advantages, particularly with junket commissions. How is Solaire leveraging that advantage? We have set ourselves the goal—and I think we’re well on the way—of not only positioning ourselves as the top property in the Philippines but in the top echelon of global integrated resorts. I truly believe that our product and our service and, ultimately, our location, are going to make us one of the standouts globally. When people think, “Where do I go for the best VIP experience?”—and that’s a combination of the gaming experience and the time that I’m away from the table—I think Solaire has got the global credentials. We have incredible stickiness, if you will. When VIPs try us, we have a high probability of getting them back for a second and third visit because of what we can offer. That’s the product and the service. You have to have the product and the service, but certainly the commercial backdrop is important, the tax rates, the prevailing commission structure and commission rates. All those things position the Philippines quite well. We’ve got a very competitive tax structure. We’ve got a competitive commission rate structure. We also have an ability to deliver service and build a product at a lower cost than other major gaming destinations. Let me give you a couple of examples: One, we’re looking to expand in other jurisdictions, and we used a consultancy’s information to do a broad estimate of what it would cost to produce the Solaire that you see in three areas—in Japan, in Macau, in Singapore— just as data points. In those three markets, it ranged anywhere from two-and-a-half to more than three times the cost to replicate what you have here in Solaire. Not to make light of a billion dollars, but a billion dollars goes a long way in the Philippines when it comes to developing an integrated resort physically. And then if you look at the payroll compensation figures, we are a relatively small fraction for compensation costs compared to other parts of Asia. The Philippines is definitely not the least expensive compensation environment in Asia-Pacific, but I believe, currently, it’s the least expensive of those that allow major integrated resorts. Why is that important? For example, if I look to open a table, I have a more attainable—read, lower—cost of table gaming staffing to open that table than would be the case if I were in Singapore. So coming all the way back to that VIP experience—and some of these things also translate into mass experience and mass- marketing capability—the Philippines, I believe, is quite well-positioned. Where are your VIP players coming from? How has that changed with the opening of Sky Tower? The single biggest source, but by no means anywhere near where it is in Macau, of any particular foreign country, is China. So we’re encouraged that after a year and a half or so of existence we already have very good participation and good traction in the China market. And we expect in the future that can grow. We have 50 to 60 junkets that we’re currently doing business with, and we expect that to continue to grow. But we also have quite a nice component of what we call premium direct. There are no junkets involved in that business. That is good for us and that is also growing. But certainly at Solaire there’s a place for both. There’s a place for VIPs, there’s a place for premium direct. You mentioned Sky Tower. We did almost double our number of private gaming rooms for VIPs there, and we have increased our table count in VIP in Sky Tower by about 60%. How can you almost double the rooms but increase table count by 60%? The reason is we started out here with several quite large VIP areas in Bay Tower. In Sky Tower, we went for increased flexibility with a number of smaller gaming salons. We’ve taken the lessons learned in Phase 1, and we made this programming change to handle the increase in both the junket and the premium direct. You know, the premium direct, where we get some very large players, they want a smaller place. Sometimes they’ll play two or even three tables by themselves—it’s just a