GGRAsia – Philippine monetary tweak unlikely to hurt GGR: observers

Philippine monetary tweak unlikely to hurt GGR: observers

Nov 03, 2023 Newsdesk Latest News, Philippines, Top of the deck

The Philippine central bank has adjusted its monetary policy amid an increase in consumer prices, but the move is unlikely to have a negative impact on the country’s casino industry, observers have told GGRAsia.

The institution announced on October 26 an “off-cycle” 25 basis points rate hike, raising its benchmark interest rate to 6.50 percent. The move came after consumer prices rose for a second month in September, mainly on food cost increases.

Nonetheless, the country’s inflation-rate trajectory is likely to have eased last month, the central bank said on October 31, predicting the monthly rate to have fallen to between 5.1 percent and 5.9 percent, below the 6.1-percent rate in September.

The latest monetary policy tightening raised the total hike to over 450 basis points since May 2022. In its most recent update, the central bank said it would “continue to closely monitor developments affecting the outlook for inflation and growth”.

Alexa Carvajal, an analyst at Maybank IBG Research, said in a written reply to GGRAsia that the inflation rate “yielded an insignificant relationship” to casino gross gaming revenue (GGR). The institution covers Bloomberry Resorts Corp, operator of the Solaire Resort and Casino property in the Metro Manila region.

Based on a correlation study of Bloomberry, “it was found that Philippine employment rate has a high correlation with Bloomberry’s GGR (0.8), in contrast with inflation rate which yielded an insignificant relationship with GGR (0.4),” stated Ms Carvajal.

“Hence, we believe that employment rates and tourism … can be more indicative of the Philippine gaming industry’s GGR performance, rather than inflation and interest rates,” she added.

According to the analyst, the average daily visitor tally at Bloomberry’s property in the six months to June 30 “only reached circa 70 percent of pre-pandemic levels, indicating that there is still significant room for foot traffic recovery.”

She added: “Still, the company’s total GGR of PHP21.5 billion [US$382.3 million] in first-half 2023 already exceeded pre-pandemic levels at 116 percent, showing increased spending of players despite the elevated inflation print of over 7.2 percent year-on-year during the period.”

The Philippine Department of Tourism said it is expecting an 85-percent-plus year-on-year growth in tourist numbers for full-year 2023.

Hakan Dagtas, chief operating officer of Newport World Resorts in Manila, told GGRAsia the casino property was seeing more patrons from overseas, thus any tightening of the nation’s monetary policy was not likely to negatively impact the sector.

The country’s gaming industry “deals with locals too, though we are not heavily dependent on locals,” he stated.

“Our international market is quite large, especially in VIP areas” of business, added Mr Dagtas. “Personally, I do not think it will create a major impact on our GGR.”

In a recent note, Maybank IBG Research said it expected the Philippine central bank to keep its policy rate unchanged at 6.50 percent until 2023-end, followed by an “easing to 5.50 percent by year-end 2024”.

“We are not ruling out the possibility of another 25-basis-point rate hike this year, if inflationary pressures continue in coming months,” added the institution.

The country’s casino regulator, the Philippine Amusement and Gaming Corp (Pagcor), said in a July statement that the country’s gaming industry as a whole generated GGR of PHP136.37 billion in the first half of 2023, up 48.7 percent from a year earlier. The figure included revenue from bingo operations and electronic games parlours.

Alejandro Tengco, chairman and chief executive of Pagcor, was quoted in that announcement saying the agency projected the Philippine gaming sector could generate at least PHP272.74 billion in annual GGR for full-year 2023.