Will 1,000 hotel rooms be too much for Entertainment City?

Posted at 01/24/13 11:33 AM

MANILA, Philippines - Two new hotel and casino resorts will open this year in Pagcor's Entertainment City - Solaire Manila with at least 500 rooms and Belle Grande Manila Bay with up to 800 rooms.

This will mark the beginning of what many hope will be a Philippine gaming boom. 

But are all those hotel rooms too much for the Philippines?

Property consultant CBRE Philippines says integrated casino resorts have an average occupancy rate of just 70%.

But that's not a cause for concern. 

"You bring the tourist because they want to play but for them to come here you need the hospitality. They work hand in hand. You can't do the gaming floor without the hospitality...The hotel itself is just a lost leader of the entire development but they benefit from the operation of the F&B, entertainment and casino," Victor Asuncion, CBRE executive director, said. 

Enrique Razon's Solaire Manila says filling its hotel rooms with guests won't be a problem. It says the hotel-casino resort business defies the common formula that demand creates supply. It says it's the other way around. 

"We're creating a reason to come so it's not just hoping the demand in the area fills the rooms," Michael French, COO of Solaire Resort & Casino, said. 

But many of those rooms are not revenue-generating. 

"We are the consumers of our own rooms in many ways... A lot of our rooms, we use just by bringing customers in and a highly likely a high percentage of our rooms would go to complimentaries," Bradley Stone, president of Global Gaming Asset Management, said. 

If many hotel rooms in casino resorts are given as rewards, why are developers like the Gokongwei's Robinsons Land getting into this business?

"There's an opportunity for them to bring in brands and operate the business with casino as a major driver. There are other businesses that can be taken like MICE (meetings, incentives, conferences and exhibitions)... But ultimately, their bread and butter is the casino operations," Asuncion said.

How important is the casino to an integrated resort?

"It's a chicken and egg. The better resorts are there because there's an engine called casinos to fund expenditures. The best resorts in the world as far as amenities and attractions are there because there's a casino to fuel it," Stone said. 

"These buildings are expensive. By the time we open Phase 1-A we'll have made $1.1 billion in investment, so we exceed the governmental minimum. But the engine that fuels that expenditure is the casino," he added. 

Las Vegas was built decades ago in the desert, with only its founder rightly believing if you build it they will come. Most of Pagcor's Entertainment City will be built in two years. Until then, investors can only hope they made the right bet.