Bringing down the house

It was a message of sorts when Polaroid announced that they were no longer manufacturing the ubiquitous film that defined an era. It was the first time the world learned the joys of instant gratification. Then the world started shaking their behinds like a Polaroid, to make things faster, better and, okay, faster again.

We are beyond Generation Now. We’re Generation What’s Next?

Mass luxury, the media, telecoms, the Internet, mobiles, cars, advertising, music, and even relationships are affected by the charms of globalization and the dominance of Western marketing and consumerism. We now live in a world of people that look for instant gratification and companies that promise it. Instant gratification is no longer a novelty; it is the status quo.

Aside from a Ferrari, nothing captures the magic of speed quite like a casino. You come in a hopeful bachelor and you may come out a nouveau-riche swinger over a weekend. Or the fates may be against you and drill you even further into the poorhouse. However, as with any man who has kissed a pair of dice before casting it on the table, nothing can determine short-term destiny quite like an evening at the casino.

Total global gambling revenues are estimated to be in excess of over US$200 billion per year. This is an industry larger than Hollywood movies and video games. It is almost as big as the GDP of some very populated and developing nations. Casinos in Macau alone are expected to chalk up over an estimated US$20 billion, slightly larger than Las Vegas.  Gambling, however, is not just an industry of its own; it has a tremendous multiplier effect.

Gamblers also spend on airfare, hotels, food, shopping, transportation and financial services. The real effect and revenues generated are much larger. Assuming each foreign gambler spends US$1,000 per trip, which is very low and conservative, that comes out to be $1 billion in non-gaming revenues for every one million foreign, gambling tourists.

The recent foray of Singapore into the gambling sector is a case to be further studied and cited. According to CLSA, Singapore will generate US$2.1 billion in gambling revenues in 2010 on 9.2 million visitors (local and foreign), and $3.6 billion in 2011 on 15 million visitors. The Singapore Tourism Board has reported that they expect a 30-percent rise in tourists, reaching 17 million tourists by 2015 (70 percent higher than 2008), whose average number of days spent will increase to four days per visit (vs. three days currently, and vs. Macau’s 1.3 days). Singapore’s Changi airport also has close to 38 million visitors per year who transit onto a connecting flight.

The attraction of casinos and resorts could convince a portion of these travelers to spend a night or two in Singapore, further boosting revenues.

Looking at these numbers, clearly, the Singapore government’s gamble on allowing casinos to operate in the city-state is paying off. They recognized gambling as an anchor attraction and built an integrated-resort concept around it. As a result, gambling revenues in Singapore are estimated to be only 30-37 percent of total revenues of the operator vs. Macau, where gambling revenues are easily 60-70 percent of the total.

Singapore carving out such a huge market segment for itself leaves the Philippines with a conundrum. The Philippines has always had the potential to become a major tourist destination but due to a series of bad choices and bad luck, we have never been able to realize our full potential in that area. Our country has less than six million tourists per year, excluding Fil-Ams holding US passports. The more accurate number of true tourists is closer to four million — a far cry from Thailand’s 20 million and slightly lower than even Cambodia, which is starting to overtake us.

While easier said than done, there are a few key things that would allow our tourism sector to take off. I’d like to highlight a few:

• Better infrastructure (starting with the airports).

• A modified open-skies policy that will promote the Philippines as a transit hub but still maintain the route concessions of local carriers. This will serve to increase the number of visitors coming into the country.

• Tax incentives for companies investing in the tourism sector (resorts, hotels, etc.).

• Providing integrity and protection for large foreign investors (investments of $1 billion and above) pouring capital into hotels, casinos and resorts. This could happen by assigning specific courts to dispute resolution, government legal opinions on integrity of the contracts, and a solid commitment at a national and local level, regarding the sustainability of integrity for the life of the project.

The Philippines is blessed with OFW remittances and a flourishing BPO sector. While both are already pillars of the economy, we need to boost the tourism industry so that our economy can begin generating the same kind of multiplier effect that countries like Thailand and Singapore have from tourism. Tourists spend cash on a wide range of activities. This spending goes straight into local businesses. The economic effect is profound. It could be the third pillar of our economy that we have been looking for.

I just finished watching a movie on Blackjack called 21. It is based on a book called Bringing Down the House about a bunch of MIT kids who used their mathematical skills to break Vegas. By working as a team and using a system to count cards, they improved their odds, such that they could beat the house in blackjack table after table.

Beating the system requires you to challenge it and break it. It requires you to create your own, which will disrupt the status quo. This is one of the only ways to get ahead of the others by having an “unfair advantage.”

I remember a quote by former AIG chairman Hank Greenberg, who said, “All I want in life is an unfair advantage.”

For the Philippines to succeed in boosting our share of global tourism we have to beat the system. We need to create an offer so compelling that we are able to bring down the house. I’m hoping this new administration can craft policies and foster an environment that would allow the private sector to make this happen. Singapore has certainly shown the world that it can be done.