The start of the new “Reiwa” era will also kick off Japan’s IR action. Osaka continues to lead the charge and is aiming for an IR opening in 2024. Already it has called for a public offering of concepts from IR operators around the world starting on 25 April 2019 and running through August, with operator selection to follow in the Fall. What will be the major deciding factors?
April’s unified local government elections closed the Heisei era, and the shape of Japan’s IR industry is vaguely starting to come into view. The Ishin political party swept the Osaka elections, which saw former Governor Ichiro Matsui and Mayor Hirofumi Yoshimura swap roles, so it looks like the route to realization of an Osaka IR will be a smooth one. The opposition lost the governor election in Hokkaido, leaving the possibility of an IR on the northern Japanese island open.
The most likely candidate sites for Japan’s three IRs, where both public and private sectors are working together, seem to be Osaka, Wakayama and Nagasaki, followed by Hokkaido. However, the Kanto area has the great advantage of scale. Yokohama is particularly popular in the industry with a chance to steal the spotlight while Chiba and Tokyo can’t be disregarded as possibilities. This is why the view ahead is still only vague.
Let’s take a look at the schedule going forward. The government will establish the IR approval and supervisory Casino Administration Committee on 1 July. At the same time, a Fundamental Policy necessary for selection of the IR locations will be announced. Items we can expect to be covered include economic effects, tourism promotion and problem gambling countermeasures.
Prefectures and municipalities hoping to attract an IR will use this policy to formulate a business plan in cooperation with their selected operator. The Minister of Land, Infrastructure, Transport and Tourism will evaluate these and certify the IR facility.
Predicting what will happen at this point is near impossible. In the original government proposal the timeline for opening was 2023, but general conjecture is that it will actually happen in 2025.
FOREIGN IR CANDIDATES GATHER
The roadmap leading to the 2025 World Expo in Osaka has been slightly different. An IR is expected to open there in 2024, but with operators saying construction will take three years, for that to happen, certification of the area must be complete by the second half of 2020 and construction underway by 2021. Therefore, the local government started soliciting proposals from operators in April this year.
The project was temporarily put on hold for the election campaign, but Osaka wasted no time after that, announcing its public offering conditions on 24 April 2019. They will accept specific concepts from operators from 25 April until August. Procedures have already begun to establish an Operator Selection Committee, which will be responsible for this task.
The Osaka IR Promotion Office has already received over 200 submissions and questions from operators regarding the conditions for IR business and development. At the “Integrated Resort Industry Expo” to be held on 15 and 16 May at Intex Osaka we will start to see some of the executives of major IR operators making an appearance in Osaka. There will also be no shortage of business opportunities at the Japan Gaming Congress in Tokyo on 16 and 17 May.
MGM A FOREGONE CONCLUSION?
The big question everyone is now asking is: What will be the decisive factor in determining the winning IR bids? It is by now well-known that overseas operators must form a consortium with local businesses to enter any bids.
What the government is looking for in an IR is a “facility with enhanced appeal” and “the ability to pass customers off to local attractions.” Japan is using Singapore as a reference and in that case, these criteria were considered to be of greater significance than the scale of investment itself.
Marina Bay Sands, operated by Las Vegas Sands, and Resorts World Sentosa, operated by Genting Singapore, made successful bids with a tourist facility and business contribution of 40 and 45 points respectively in their tender bids. The facility concept and design comprised 30 and 25 points, making up 70% of the total. It is natural that those involved in Japan’s IRs will assume this is where the victors will be determined
The big players in this battle are MGM Resorts and their local partner Orix. In late March it was revealed that the two had formed a consortium, with MGM now widely considered to be a red hot favorite to win the Osaka bid.
But the real battle starts now. As one industry expert told IAG, “Genting beat out MGM in Singapore, so MGM certainly sees them as a threat. Genting is in a better financial position. This is not MGM’s victory yet – Melco and Galaxy won’t be silent bystanders either.”
Las Vegas Sands also singled out Osaka as its location of choice during the company’s most recent earnings call.
Likely domestic IR players in the future include Sega Sammy, Obayashi Corporation, Daiwa House and Keikyu, among others. Who will partner with who?
In any case, the local government will conclude an agreement with an IR operator, who will be subject to background checks by the Casino Administration Committee. This will be the foundation of the process for gaining a license. Some operators may drop out along the way, but if all goes well, the first IR will open in 2024 – the same time, ironically, that Japan puts its recently revealed new currency design into circulation.
Welcome to Japan’s new era.