The Philippine gaming market is in a transitional phase, with licensed casinos facing challenges, while domestic online gambling has seen unprecedented growth.
But one thing remains unchanged—Philippines is still the most attractive market in Asia.
Two years after emerging from the pandemic, and a year after sitting atop Asian gaming growth with record revenues and massive development channels, the Philippines finds itself at a crossroads.
Manila Bay Entertainment City, recognized as the core zone of the country's brick-and-mortar casino industry, hosts top-tier integrated resorts such as City of Dreams Manila, Resorts World Manila, Okada Manila, and Solaire Resort and Casino. However, the area's revenue is declining due to lower-than-expected international tourist visits and a significant absence of Chinese VIP clients.
Before the opening of the fifth Entertainment City integrated resort, LET X (a $1.1 billion hotel and casino project) planned for the end of 2025 in the Westside City area, the existing four operators reported a year-on-year revenue decline in 2024. According to official data from the Philippine Amusement and Gaming Corporation (PAGCOR), the first six months saw a 13% drop, although the third quarter recorded a 2% year-on-year decrease and a 4% quarterly increase.
But it's not all bad news, as the online segment is experiencing rapid growth!
In November, data released by PAGCOR showed that the industry's total gaming revenue (Gross Gaming Revenues) for the third quarter of 2024 reached 94.6 billion Philippine pesos ($1.61 billion), a 37.5% increase from the same period in 2023, and a 6% increase from the second quarter.
Despite the year-on-year decline in revenue from licensed casinos, this significant growth primarily comes from the emerging online gaming (eGames) sector, including online bingo (eBingo), online gambling, specialty games, and sports betting, with online gaming total revenue reaching 35.7 billion pesos ($609 million) in the third quarter, compared to just 6.32 billion pesos ($108 million) in the same period in 2023.
For traditional brick-and-mortar operators in areas like Entertainment City, Clark, and Cebu, this represents both a challenge (gradual loss of table game customers) and an opportunity. With the growing market of Philippine Inland Gaming Operators (PIGOs), these operators can now offer online gambling services to domestic customers.
"On the surface, the Philippine market's revenue growth appears very robust, but a deeper analysis of the sources of revenue reveals some concerns for traditional brick-and-mortar casinos," explained Scott Feeney, Executive Director of GCG Gaming Advisory Services.
"We may be approaching a critical moment where resorts need to focus more on their overall hotel, retail, event, and dining products and services, which are increasingly becoming the core of revenue, rather than relying solely on traditional casino areas. The revenue structure is being tested, and new revenue models are gradually taking shape.
Like Macau, the Philippines' VIP junket business is stagnating, replaced by a broader range of on-site and online product offerings."
"PAGCOR's online products showcase the market's potential trends. Customers who used to frequent brick-and-mortar casinos are increasingly accustomed to forgoing this experience, especially for projects like Solaire Resort and Casino and Resorts World Manila that have been offered for over a decade.
The market is gradually losing its novelty, and the commute to physical casinos can no longer become more convenient or quicker. In contrast, the appeal of online products is more prominent."
A recent report by Maybank Securities expressed concerns about the current growth path of the Entertainment City area integrated resorts.
The report downgraded the net income forecasts for Bloomberry Resorts Corp, the operator of Solaire Resort, for 2024 and 2025 by 12%, mainly due to the weak total gaming revenue in Entertainment City.
Regarding the overall slowdown in Entertainment City, Maybank analyst Raffy Mendoza stated that it is mainly due to "the reduction of high-end VIP clients from China," but he also noted that the newly opened North Wing of Solaire Resort in Quezon City remains a positive signal for the company's development in the long run.
The absence of Chinese VIP clients remains a major challenge faced by Manila operators and reflects broader issues in the Philippine tourism industry. In 2019, Chinese tourists totaled 1.74 million, making them the second-largest source market after South Korea (1.99 million).
However, last year, China fell to fifth place in the Philippine source market rankings, with only 263,836 arrivals, equivalent to 15% of the pre-pandemic level. In contrast, South Korea maintained the top spot last year with 1.44 million arrivals, recovering to 72% of the pre-pandemic level. As of the end of October 2024, China ranked fourth in the source market, with 280,301 arrivals, while South Korea led with 1.32 million arrivals, far ahead of other countries.
"I don't think Chinese tourists will return to pre-pandemic levels," Scott Feeney said. "The return of Chinese tourists is very slow. Even if there is significant growth in the next few years, once Thailand's casino projects open, this growth may quickly disappear. Thailand is more geographically attractive, and its integrated resort projects will undoubtedly be outstanding."
This makes PAGCOR's decision to regulate domestic online gambling during the pandemic seem far-sighted. Compared to the controversial and soon-to-be phased-out Philippine Offshore Gaming Operator (POGO) industry, inland gaming operators offer a form of remote gambling, meaning the games they provide must be connected to actual gaming tables or slot machines inside physical casinos.
Therefore, these "remote gambling" platforms are operated by major operators located in Manila, such as Solaire, Okada Manila, Resorts World Manila, as well as Clark's Hann Resorts and Casino Plus, and Cebu's NUSTAR Resort & Casino.
At the MGS Macau Leisure Technology Exhibition at the end of 2023, Suat Sirin of Tecnet Asia explained during a discussion session that this is one of the reasons for the growth of the online gambling market, as players trust these platforms.
Suat stated at the time: "As large casino operators enter the online market due to the pandemic, players now interact with brands rather than just casinos or operators. Players know that if they win big, the brand will pay."
Niall Murray, founder and chairman of Murray International Group, described the rise of PIGO as "an exciting development in the Philippine gaming industry."
"The adoption of inland gaming by operators is the result of PAGCOR's willingness to explore new areas and sources of revenue," he said. "Operators adopting inland gaming are experiencing tremendous success and significant revenue growth. PIGO complements the products of physical casinos, offering guests interesting alternatives. The future must continue to build synergies between PIGO and physical casino products, especially in terms of points and rewards programs. Inland gaming, with its mobility, accessibility, and lower operational costs, creates tremendous development opportunities."
Speaking of the tremendous growth of the online gambling business in 2024, Murray added: "One of the keys to the success and growth of online gambling is that global surveys show that Filipinos use their mobile phones very frequently, service costs are relatively cheap, and they spend the most time online. Additionally, the young demographic structure of the Philippines, with an average age of just 24.5 years, collectively promotes the growth of online gambling."
For PAGCOR, the rapid rise of the online gambling industry could not have come at a better time.
Philippine President Marcos Jr. announced plans in June to ban the offshore gambling industry, requiring it to completely cease operations by December 31, thus rapidly eliminating another significant source of revenue.
To seize the opportunity of remote gambling, PAGCOR and its Chairman and CEO Alejandro Tengco have been gradually reducing taxes. The license fee rate for online gambling revenue of domestic integrated resort operators has been reduced from the original 50% to 35%, with plans to further reduce it to just 25% by 2025. Other physical operators' license fees have also been reduced to 30%, down from 50% two years ago.
"By lowering the license fees to levels that meet global industry standards, we hope to attract and retain more investment," Chairman Tengco said in a speech at the IAG Academy Summit held in Manila in September this year.
"This move should also encourage illegal online gambling operators to exit the gray market and hopefully join the mainstream market. PAGCOR will continue to implement reasonable regulatory policies, supervise the compliance of license holders, and strengthen cooperation with other government agencies and law enforcement departments to continuously combat stubborn illegal online gambling activities."
GCG's Scott Feeney pointed out: "The past cumbersome casino registration procedures have been replaced by simple online registration. With the arrival of a younger generation of consumers, this seems to be a trend."
"From the operator's perspective, the efficiency of PIGO's online gaming tables, slot machines, and remote gambling slot machines is higher. Online gambling is very popular in the middle and low-income markets. Lower betting limits are more attractive to most consumers. Although this year's total gaming revenue is expected to reach $6 billion to $7 billion, according to PAGCOR's data, online gambling and online bingo in the first half of 2024 already accounted for nearly 40% of the total gaming revenue."
Despite the strong momentum of the online gambling industry, traditional physical casinos still show great growth opportunities. All eyes are on the fifth integrated resort in Entertainment City, scheduled to open in the fourth quarter of 2025—a $1.1 billion hotel and casino project developed by Hong Kong-listed LET Group (formerly Suncity Group) and its Philippine subsidiary Suntrust Resort Holdings, located in Megaworld's Westside City area. This new project, named LET X, will intensify competition in the Manila market, but it will also enhance Entertainment City's appeal in the Asian gaming market with diverse facilities such as multiple theaters, a large variety hall, and four cinemas.
About an hour's drive north of Manila, Bloomberry is developing the North Manila market, having just opened its second integrated resort—the North Wing of Solaire Resort. This is a $1 billion hotel tower designed for local customers who do not want to spend time traveling through Manila's traffic congestion to reach the resorts in Entertainment City.
The initial operating performance is encouraging, with the North Wing of Solaire Resort generating $63 million in total gaming revenue and $11 million in adjusted EBITDA in its first full operating quarter (third quarter). Maybank estimates that by the end of 2025, the resort will contribute 22% of Bloomberry's total gaming revenue.
The emerging gaming hubs of Clark and the smaller Cebu also show similar potential. Clark, located about two hours north of Manila's Ninoy Aquino International Airport, currently has six licensed casinos, including Hann Casino Resort, Royce Hotel & Casino, D'Heights, Casino Plus, Midori, and Fontana.
More gaming licenses may be approved in the future. Lawrence Ho, chairman of Melco, and his partners at City of Dreams Manila, Belle Corp, have recently expressed strong interest in the region.
Clark's market leader, Hann, completed a $500 million expansion in 2022, including the Philippines' first Swissôtel. Currently, Hann is further expanding its gaming and non-gaming facilities and plans to further enhance its market position through Hann Reserve, a "comprehensive leisure living project" located in New Clark City, covering 450 hectares.
The total investment in Hann Reserve will reach $3 billion, with plans to fully complete the project over the next ten years. The project will include three golf courses, multiple hotels, and a multi-purpose commercial center, retail area, high-end residences, international school, and entertainment venues.
More importantly, due to Clark's appeal to Korean tourists, the project will specifically target the Korean market, meaning it relies less on the currently slow-growing Chinese tourist base.
"Clark will be a major growth point in the coming years," Scott Feeney explained, "Currently, multiple operators are focusing on Clark, and Hann's expansion plans are also promising. Once Clark adds one or more integrated resorts, it will put tremendous pressure on the Manila market. The experience here is better, and it only takes a few minutes to travel between each property."
The Cebu market also shows similar potential. The current highlight is NUSTAR Resort, but the overall gaming appeal of the island still depends on whether the stalled Emerald Bay project can be restarted. Travellers International Hotel Group (affiliated with the Philippine Alliance Group), the operator of Resorts World, has also announced plans to open boutique entertainment resort projects in Cebu and Boracay.
Feeney added: "I believe Clark's gaming revenue could reach $1 billion in three to four years, while Cebu may take about ten years."
Although competition among operators will continue to intensify, these new projects represent golden opportunities for industry suppliers. Suppliers still regard the Philippines as the most exciting growth market in Asia.
"Although the total gaming revenue of physical casinos has declined, the revenue from electronic gaming machines (EGM) is growing," explained Lloyd Robson, General Manager of Aristocrat Gaming Asia. "As online gambling grows, the number of slot machine players in the Philippines continues to increase."
"There is still huge growth potential in the mid-market for electronic gaming machines, and we look forward to bringing more innovation to the market."
Consistent with Feeney's view, Robson believes that the diversification of non-gaming facilities is key to the continued growth of Philippine integrated resorts, but he also pointed out that opportunities still exist for operators who can successfully combine the appeal of casinos with diverse facilities.
He stated: "Improvements in infrastructure, diverse accommodation options, and non-gaming entertainment activities, such as concerts or sports events, can diversify revenue sources. We have seen operators exploring these factors, which is very exciting."
"Additionally, innovation is crucial. We are increasingly seeing operators willing to collaborate with manufacturers to create unique and memorable player experiences. For example, the 'Dragon Room' we recently launched at Studio City Macau is a case study that shows how we work with clients to bring innovative gaming experiences to players. Such marketing activities create a differentiated advantage for gaming venues and are an important tool for extending the gaming experience beyond the gaming floor."
"With new integrated resorts like NUSTAR Resort about to open, the future of the Philippines looks very optimistic in terms of growth opportunities."
In addition to licensed casinos, Aristocrat is also one of the suppliers benefiting from PAGCOR's privatization efforts. Along with Light & Wonder, Konami, and Korea's KL Saberi, these suppliers are participating in the process of PAGCOR planning to sell its 43 self-operated Casino Filipino branches by 2028.
A core aspect of privatization is significantly enhancing the image of the Casino Filipino brand, including replacing 3,341 old slot machines and introducing popular models used in Entertainment City and other areas. PAGCOR recently revealed that the first batch of 1,968 new machines was delivered in mid-September.
Whether privatization will be successful remains to be seen—after all, not all Casino Filipino branches are in the same condition. However, Niall Murray is confident that companies willing to invest can tap into potential.
"I think privatization is a very wise move," Murray said. He has extensive experience in property openings and reopenings.
"This will have a disruptive impact on the industry. Now, private investors can inject fresh and exciting ideas into traditional casino operations."
"They clearly need to upgrade existing facilities and add the appeal of non-gaming facilities to attract customers. Many projects will succeed, but some may fail, so properly scaling the property and finding the right product and service mix will be key to success."
"Operations need to be highly efficient, strictly controlled, standardized, and optimized to succeed in an increasingly competitive market. To achieve success, a thorough transformation is necessary."
Murray pointed out that although some short-term challenges still exist, the Philippine gaming industry is in a transitional period and still shows incredible development potential.
"I believe there is significant room for growth in Manila and the entire Philippines," he said. "The key is to continuously improve, expand facilities and services, and attract more local and regional tourists."
"Leading integrated resort operators are investing funds for renovations or expansions and planning new projects. Upgrades at Solaire Resort North Wing, Hann, and Resorts World, as well as the opening of new projects, will inject new vitality into the industry. If operators can renovate facilities and add exciting gaming and non-gaming services, respond to increasingly intense regional competition, and target alternative source markets for VIP and mid-market players, these concerns will be minimized."
Feeney also expressed an optimistic view of the industry's future, especially the development prospects of Manila.
"In terms of the four integrated resorts, the current market is not saturated," he said. "The number of tourists is not a problem; what needs more attention is the quality of players and their gaming consumption. Manila has a sufficient consumer population to support the current four integrated resorts and the upcoming Westside."
"The goal of new businesses should be to renovate existing integrated resorts or build new facility configurations in Westside to meet future market needs. I believe the total foot traffic in Entertainment City will continue to increase. The per capita consumption of traditional gaming may decrease, but if the provided facilities are in place, resort consumption will increase, and online gaming consumption will also rise."
We are witnessing a new shift in the Philippine online gaming industry.
