Philippines opens up air travel, but will politics threaten casino business?

TAGs: China, entertainment city, Macau, Philippines, taiwan

philippines-china-taiwan-macauThe governments of Macau and the Philippines recently signed a new air services agreement that will boost seat entitlements between Macau and Manila from 3,500 per week to 4,500 a week. The deal also allows for unlimited seats between Macau and all other Philippine international airports outside Manila, where the previous limit had been 10k per week.

Changes in air traffic aren’t all favorable. The Philippines’ AirAsia carrier recently announced it’s cutting back on flights between Clark International Airport and Hong Kong, Taipei, Kuala Lumpur and Singapore. Analysts at Union Gaming Group suggested the reductions were due to “declining demand in the face of ongoing tensions and travel warnings.” On May 15, Taiwan slapped an ‘inappropriate to travel’ warning on the Philippines, and Taiwanese travel agents face fines if they continue to organize tours to the Philippines while the ‘red’ warning is in effect.

Taiwan and the Philippines have been locked in a diplomatic spat over the Philippine Coast Guard’s shooting of a Taiwanese fisherman last month. The Philippines is also locked in a territorial tiff with China over disputed ownership of islands in the South China Sea. On Thursday, the Philippines’ National Security Council deputy chief told reporters the country has “contingency plans” for dealing with encroachments onto its territory. The statement came one day after President Benigno Aquino warned that the Phlippines wouldn’t “back down from any challenge.” Considering China is the world’s number one source of gambling whales, any further escalation of tensions could have significant impact on the Philippines’ ability to attract its share of China’s high-rollers.

Union Gaming warned that such regional disputes “could hamper mass market visitation” to Manila’s Entertainment City integrated resort-casino hub. The Clark airport – known as Clark Field back when it was a US military airbase – is located 40 miles outside Manila, and the extra commute allowed AirAsia to serve as a low-cost alternative to airlines landing right in Manila and thus would have been a preferred option among the mass-market set.

Apparently, Standard & Poor’s Ratings Service (S&P) didn’t get Union Gaming’s memo, because they issued a report on Thursday saying the Philippines’ gaming industry would outperform the growth in the country’s gross domestic product levels in 2013. S&P had previously shied away from hard number estimates and they’re still not breaking things down in terms of dollars and pesos, but gross gaming revenue growth should increase “well above” the expected 6.5% GDP growth.

However, S&P warned that the raft of new casinos set to open in the next few years “could intensify competition in the region, particularly for the VIP market, which is yet to be tested in the Philippines.” As new Entertainment City properties open their doors, S&P warns of “increased earnings volatility as the market adjusts to the rapid increase in new supply,” similar to the phenomenon witnessed when Singapore’s two casinos opened their doors three years ago.


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