Despite bullish expectations from numerous financial firms all over the world, a senior director at Fitch Ratings isn’t as keen on the Philippines’ chances of becoming a player in the casino VIP market.
Citing the country’s poor transportation infrastructure among other challenges, Fitch senior director and gaming, lodging and leisure sector head Michael Paladino expressed skepticism that Philippine casinos can attract foreign VIP clients, a troubling estimate considering that the country’s expansive casino expansion plans was initially green-lighted in large part to cater to the said high-end market.
“The non-gaming price points and table minimums were higher than we expected at Solaire, so the property may take some time to ramp up because it targets a higher-end customer, international VIP business may be deterred by the infrastructure, and the depth of the local premium mass and VIP market is uncertain,” Paladino noted, as quoted by ABS-CBN news.
Another factor that could pose a problem in the country’s attempt to attract foreign gamblers, particularly Chinese high rollers, is geography. Macau is, after all, a stone’s throw away from mainland China compared to the Philippines, which is about two hours away by plane. That and the aforementioned poor transportation infrastructure that could greet foreign gamblers in the country could dissuade them from even making the trip, opting, according to Paladino to head for alternative destinations like Singapore.
And then there’s the huge issue of income tax in the country for casinos, which the Bureau of Internal Revenue recently clarified at 30 percent. “That is potentially a notable detriment to market growth because the relative tax advantage was to be a notable VIP driver,” Paladino commented. “Operators would have been able to use the net margin differential to offer more attractive terms to junkets than other markets, but that could be compromised.”
Despite Pagcor’s earlier estimates that the Philippine gaming industry can generate as much as $2.5 billion in revenue for the year, Paladino was a little more conservative in his numbers, noting that the current annual gaming revenue is estimated to touch anywhere from $1.5 billion to $2 billion before being estimated to double in the next two to three years, or at least as soon as Pagcor’s Entertainment City is all up and running.