Inside Asian Gaming

January 2017 inside asian gaming 11 consensus is that the authorities will grant two or three licenses initially. Spectrum’s Paul Bromberg thinks it will be two licenses from among Osaka, where local authorities have exhibited great enthusiasm for an IR, Tokyo, where they’ve been preoccupied with Olympic preparations, and Yokohama across Tokyo Bay. An initial third license would likely go to a tourist destination such as Hokkaido in the north or Okinawa in the south. Union Gaming Head of Asia Equity Research Grant Govertsen believes there could be multiple licenses in the major metropolises. “Given the size of the local population and significant interest from nearly all of the world’s top IR operators, there will be plenty of demand to justify, if not necessitate, at least three IRs from the outset,” Mr Gallaway says. Japan’s regulatory framework is leaning away from Macau and toward Singapore, Mr Bromberg, a specialist in regulatory issues, says. That could mean tight controls on junket promoters and an entry tax for Japan residents, both likely crimping potential profits and thus IR investment. Given Japan’s mountain of government debt, lawmakers may also set a high tax rate, another constraint on profitability. LOCAL TOUCH As Japan’s flirtation with IRs dragged on, sentiment grew for ownership groups to include Japanese partners. “In entering any new jurisdiction, it is advantageous to any bidder to have local partners,” Mr Gallaway says. “I would suspect that Las Vegas Sands: Founder Sheldon Adelson declared LVS would spend a stunning US$10 billion on a Japan IR. Marina Bay Sands President and CEO George Tanasijevich, bombastic Mr Adelson’s polar opposite, spearheaded LVS’s successful Singapore odd coupling and, as the longtime face of LVS Japan efforts, has built relationships with potential local partners. Perhaps only a requirement for Japanese majority IR ownership would derail LVS. Genting Singapore: “LVS and Genting Singapore are Japan frontrunners by a mile,” an industry executive declares. “What they did in Singapore is exactly what Japan wants.” Pulling out of Resorts World Jeju removes a distraction and Resorts World Las Vegas should be substantially completed before any Japan construction would start. A cashed up local partner would be a perfect fit. Wynn Resorts: Wynn has the premium cachet Japan craves and founder Steve Wynn has laid groundwork there as long as anyone. But Wynn Resorts’ ousting of former vice chairman, pachinko mogul Kazuo Okada, likely dooms any bid. “It’s not that people love Okada,” a source declares. “They don’t like how Wynn treated him.” MGM Resorts International: “MGM believes they’ve got Osaka locked up,” a top Western executive in Asia says. A Japanese source also links the two. Chairman and CEO James Murren has tried to overcome questions about MGM’s financial wherewithal by promising to spend up to US$10 billion through a REIT [real estate investment trust] structure. After opening acclaimed National Harbor outside Washington DC, the company’s hopes ride on MGM Cotai. Galaxy Entertainment: The best chance among Macau based operators but still a longshot. A Japanese source insists authorities don’t want companies closely associated with China. Galaxy’s successful Macau relationship with Hotel Okura plus its minority stake in Monte Carlo’s casino are aces in the hole. Melco Crown: The October arrest of Crown employees in mainland China for illegal gambling promotion likely sinks Japan chances for the partnership and Crown individually. Lawrence Ho’s Melco International partnership with Hard Rock on a Cyprus IR could prove its way forward in Japan. SJM Holdings: Patriarch Stanley Ho’s legacy takes SJM out of the running. Paradise Group: Paradise City, a US$1 billion IR developed with Japan’s Sega Sammy, puts South Korea’s top foreigner casino operator in the Japan conversation. Japan’s pachinko parlors turnover more than US$200 billion annually Cover Story >>