IAG JANUARY 2017 WEB - page 9

Cover Story
MasaharuMiyachi, Alex Poon, Thomas Allen and Xi Jin Ling notes
that 26% of Japan’s 23.5 million tourist arrivals in the 12 months
to October 2016 came frommainland China. If those 6.2 million
Chinese visitors yielded the same averagemassmarket revenue per
Chinese visitor to Macau, it would amount to revenue of US$4.4
billion, in linewithaUS$20billionmarket that’s split evenlybetween
VIP andmass, foreign anddomestic.
The report also indicates another 47% of visitors came from
South Korea, Taiwan andHong Kong, relatively wealthy places with
either noneor one casinoopen to locals.
“The success of the Japanese opportunity is primarily
dependent on the local population and influx of tourism to Japan
today,” Mr Gallaway says. “While I don’t expect the Chinese VIP
player to be a significant part of proponents’ business plans
for success, the Chinese will travel to Japan and will gamble
there.However, thiswill be an additional outlet where theChinese
will gamble andwill grow the overall Chinese gambling pie rather
than cannibalize existing locations.
“The only jurisdiction that could potentially be impacted is
Korea,”Mr Gallaway adds. “I suspect that many of those proposed
developments are feasible on the margin only. In addition, given
the proximity of Korea to Japan, it is likely that part of these IRs’
business plans are contingent on Japanese patronage. As such, with
casinos now located in Japan, this could prove negative for Korean
Wells Fargo Securities Senior Analyst Cameron McKnight pegs
Japan’s potential gaming revenue for two or three large IRs at US$5
billioneach,withEBITDAup toUS$1.5billion.MrBrombergbelieves
the first twoor three Japan IRs could eachproduce the samegaming
revenueasSingapore’s two IRs, roughlyUS$4.8billion in2015. CLSA
TokyoAnalyst JayDefibaugh estimates gaming revenue from two IRs
inTokyo,Osakaand/or Yokohama could “exceedUS$10billion”with
US$2.5 billion inEBITDA.One IR in eachof Japan’s 11 regionswould
bring gaming revenue toUS$30 billion, down fromCLSA’s estimate
ofUS$40billion inFebruary2014– thehighwatermark foroptimism
about Japan IRs andgaming inAsiaoverall.
How big the market will be and whether the current rising tide
of optimism surpasses the 2014 peak depends largely on the IR
Implementation Bill, the next step in the legalization process.
That legislation, which also must be approved by both houses of
the Diet, will establish key parameters including the number of IR
licensesandpotential locations, gaming tax rates, rules for locals to
play, junket regulations, local ownership requirement and problem
gambling amelioration.
Making those decisions and writing them into legislation is
expected to take 12 to 24 months, though Morgan Stanley Asia
Pacific notes that a task force has been working on these issues
for more than a year, which could reduce the wait to as little as six
months, setting the stage for IRs to open as soon as late 2021. On
the other hand, Sanford Bernstein Senior Analyst Vitaly Umansky
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