Hotel room inventory in the Philippines’ National Capital Region, including Manila (pictured), is expected to grow “by 27 percent in 2019 from the 39,456 rooms in 2014”, driven by large multi-phase casino resort projects such as Resorts World Manila, City of Dreams Manila, and Manila Bay Resorts, says a new report from HVS Asia Pacific, a specialist consultancy to the hotel industry.
Currently, nine out of every 10 tourists in the Philippines are domestic travellers, added HVS.
“International tourists comprise approximately 10 percent of overall tourist arrivals while domestic comprise the remaining 90 percent of the arrivals,” wrote the authors, quoting data from the country’s Department of Tourism, the National Statistical Coordination Board, and proprietary HVS research.
“Growth in both remains strong with 11 percent and 8 percent for international and domestic arrivals, respectively,” said the report produced by analysts Victoria Chan, Feny Sindarta and Shamsher Singh Mann.
Private sector casino investors in the Philippines – and in Manila in particular – are betting billions of U.S. dollars that the country’s tourism market will supply visitors to new gaming resorts they are constructing.
The HVS consultancy said Philippines’ tourism arrivals grew at a compound annual growth rate of 10 percent from 2009 to 2014 while tourism receipts in that period grew by a compound annual growth rate of 17 percent. The Department of Tourism projects a total of 5.5 million international visitors in 2015.
While not all tourists – either domestic or foreign – are casino gamblers, those regional jurisdictions with casinos hope that a general upturn in tourism will funnel extra players to their gaming facilities, boosting the local tax take via levies on gambling, and supporting local employment.
In a July interview, Cristino Naguiat, chairman of the country’s gaming regulator, the Philippine Amusement and Gaming Corp – also known as Pagcor – said there was a “good chance” that casino gross gaming revenue in the Philippines could reach US$3 billion in 2015, up by 20 percent from the previous year.
Pagcor has been coordinating the private sector investment in Manila casino resorts, and is responsible for licensing them.
South Korea is the country’s main source market for tourists from overseas, accounting for nearly 25 percent of such inbound visitors, followed by the U.S., Japan, China and Australia, said the HVS report, quoting official data.
“[South] Koreans are also the highest spenders in the Philippines with an average spending of US$1,190 per capita,” noted the report.
Some investment analysts covering the regional gaming sector however say that – as far as well-heeled Chinese visitors are concerned – the Philippines might be starting to feel the impact of the ongoing anti-corruption crackdown in mainland China.
Brokerage Sanford C. Bernstein Ltd said in a note on August 11: “While regional markets may have some regulatory arbitrage opportunities against Macau (e.g. lower tax rate, more lenient gaming regulation and AML [anti-money laundering] requirement), over the medium-term, we believe that Macau and China authorities may exert pressure on junket operations that aim to lure gamblers into the regional markets.”
The HVS report suggested that poor infrastructure in the Philippines is one of the main barriers to serving increased demand from international tourists and getting them to come back. “Infrastructure challenges would need to be met at the earliest [opportunity] to facilitate tourism growth,” wrote the analysts.
They added: “Soon, airports will require expansion in order to facilitate the incremental demand entering into the country year-on-year.”
In June, the chairman and chief executive of Philippines-based casino operator Bloomberry Resorts Corp, Enrique Razon, said he would be willing to invest in a new international airport in Manila. Mr Razon suggested a new gateway would also bolster the number of tourists that visit Entertainment City, the city’s casino cluster.
A report in January from brokerage CLSA suggested there is likely to be a doubling in the number of Chinese people going on outbound trips from mainland China between now and 2020, from 100 million per year to 200 million per year.
But the economy of China – seen as a major multiplier for the region’s prosperity because of factors including outbound tourist spending – has been slowing recently. Investment analysts say it raises the possibility that China’s neighbours will need to compete more strongly for Chinese tourist spending. Quality of transport infrastructure in the host country could then become a deciding factor for inbound tourists, they added.
HVS noted the Philippines government “has contributed 4 percent of the nation’s GDP to improving its infrastructure and this percentage can be expected to increase next year”.
It added: “Major roads and bridges account for US$3.72 billion out of the total budget of US$4.4 billion for public infrastructure. Other development includes conversion of Mactan-Cebu International Airport into a resort airport…”
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”Assuming that our [Tigre de Cristal] phase two project and the other future operators’ development plans remain on track, we may see the benefits of a ‘cluster’ effect [in the Primorye Integrated Entertainment Zone] as early as 2021”
Summit Ascent, lead developer of Tigre de Cristal