Published On: Thu, Sep 28th, 2017

How will Oversupply Jeopardize the Casino Sector in the Philippines?

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Philippines’ booming casino market

 

The Philippines have always been an alluring region for gamblers after Singapore and Macau. The plush casinos and favorable betting rules make the Philippines one of the largest gambling hubs in the world. The expansion of existing casinos and development of new ones have certainly given a boost to the sector. In fact, the sector has recorded as much as P160 billion as casino revenues in 2016.

 

Given the rising revenues, officials believe that the Philippines is one of the best places for investors. It is even projected that the casino gaming industry in the region will grow at 10% CAGR by the year 2020. The revenue growth in the VIP customer sector is one of the major drivers of the gambling market. But with such a tremendous growth rate comes certain risks that probably most industry players aren’t aware of.

 

The risk of oversupply

 

Overinvestment in the casino sector in the Philippines could become a potential threat, as expressed by Enrique Razon Jr., the Chief Executive Officer of International Container Terminal Services. Another reason why the casino sector in this region may suffer is due to the privatization of casinos in 2018. This could be a potential cause for cannibalization with regards to investments in this region. This doesn’t look like a good sign for businesses in this region.

 

Mr. Razon Jr. believes that this is a result of a continuing process which is concerned with the liquidity levels nowadays, along with comparatively low rates of interests. This creates a financial ecosystem where investors tend to make investments more than they actually imagine, thus creating a situation of overinvestment. This would certainly exercise downward pressure on the industry, even though the Philippines is one of the fastest-growing gambling hubs in Asia.

 

The Philippines is now working on developing the “Entertainment City”, a 100-hectare area that echoes Macau and Las Vegas, two major casino hubs in the world. The new project is expected to attract scores of tourists, giving them an opportunity to have the best time of their life. Other projects that are now open in the Philippines include casinos owned by business magnates Henry Sy, Kazuo Okada and Lawrence Ho. Gross gaming revenue has increased 27 percent owing to the rising demand for proxy betting. However, industry analysts are still assessing the potential impact of privatized casinos on the Philippines’ casino market.

 

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