olaire’s parent company Bloomberry Resorts released this month its full year results for 2013, as did its current main rival, Resorts World Manila, whose ownership also holds a license for an Entertainment City IR. But the results sow doubts about building more IRs in the Philippines.
Bloomberry reported a loss in Philippine pesos for the year equivalent to US$29 million. For Solaire’s nine and a half months of operations, the loss was nearly US$6 million. Bloomberry blamed the red ink largely on “mistakes and inefficiencies” by consultant Global Gaming Asset Management (GGAM), headed by former Las Vegas Sands LVS -2.12% president and chief operating officer William Weidner.
Bloomberry fired GGAM in September, with charges and countercharges following. The breakup is now in arbitration in Singapore, and Bloomberry obtained a Philippine court order to stop GGAM’s US$166 million deal to sell its 8.7% stake in the Manila-trading company until arbitrators issue their decision, which will likely take years.
After dismissing GGAM, Bloomberry hired former Marina Bay Sands CEO Thomas Arasi as its president and chief operating officer. Sources say Solaire’s CEO and principal owner, billionaire ports tycoon Enrique RazonJr, is also taking a more active role in management of the resort.
Solaire contends it has built momentum since September. For the full year, gross gaming revenue (GGR), the house win from tables and machines, came in at a disappointing $333 million, about three weeks’ take at Venetian Macao. However, the fourth quarter GGR of US$125 million nearly matched that of Resorts World Manila (RWM), which opened in 2009 as the Philippines’ first integrated resort and was credited with doubling the Philippine gaming market.
The 2013 numbers from Resorts World Manila’s parent company, Travellers International Hotel Group, a joint venture between Philippine tycoon Andrew Tan and Genting Hong Kong, an arm of Malaysia’s Genting Group, are a great example of what’s happening in the Philippine market thanks to year-on-year comparisons.
RWM operating profit fell 38.1% and net profit fell 59.3%. Net revenues rose 5% (in Philippine peso terms) to $690 million, thanks to a 6.9% rise in gaming revenue to US$671 million. The company says a low win rate crimped growth, but the real story is in the promotional allowances line which rose by more than 50% to $57 million in the face of competition with Solaire.
To add an incremental $32.6 million in revenue, RWM spent an extra US$18.9 million on promotions. As the new kid on the block, Solaire spent $76 million in promotions for its $276 million in revenue. Knowledgeable sources say Solaire reoriented its focus to the local market after getting limited uptake from overseas players. The promotion numbers suggest a Philippine market nearing the saturation point.
Philippine total GGR rose 8.6% in 2012, ahead of the country’s 7.2% GDP growth, to about $2.15 billion. Government owned Pagcor reported revenue at its 12 casinos plus two dozen slot machine parlors and mini-casinos throughout the archipelago fell 8.9%. Last year it closed one of its casinos in Manila and plans to close another next month.
That will leave Pagcor, which stands for Philippine Amusement and Gaming Corporation and also regulates the industry, with just two full fledged casinos in the capital city. Its Casino Filipino outlets call themselves “Asia’s Friendliest” but aren’t nearly as elegant as Solaire, designed by superstar casino architect Paul Steelman and built to Las Vegas and Macau standards.
RWM occupies a middle ground on the posh scale between Solaire and Pagcor.In a way, the numbers make the case for Entertainment City, which Philippine officials envision putting Manila on the international gaming map and boosting tourism. Although the Philippines has a number of attractive island destinations mainly reached via Manila, the capital city, largely leveled during World War II, it has few tourist attractions.
Solaire is a casino hotel that brings a new level of elegance to the gaming sector with many of its integrated resort elements and much of its $1.2 billion investment still to come. Phase 1A, scheduled to open late this year, will include a shopping mall, theater, and big time nightclub plus 300 more rooms to bring its total to 800 and make it a true integrated resort. Sources of the firm say that Resorts World Manila already has all of that, plus more rooms in more price ranges and a better location, near the airport and well integrated into the local highway network.