Inside Asian Gaming

inside asian gaming January 2017 12 Cover Story those [bidders] who choose local partners as part of their team would have a better chance of winning.” Most observers expect trading group conglomerates such as Mitsubishi or Mitsui to be the preferred local partners. A CLSA report by Mr Defibaugh in Tokyo and Jon Oh in New York explains that “leading trading companies can boast strong networks, blue-chip status and experience with project finance,” adding that real estate and construction companies could also take stakes in projects. The CLSA report also states that Japan IRs represent “opportunities for a step-change in earnings” for other potential Japanese partners including tourist services specialist HIS and gaming machine companies, specifically naming Konami and Sega Sammy, a partner in an Incheon IR opening later this year in partnership with Korean casino operator Paradise Group. Beverage maker Suntory Holdings CEO Takeshi Niinami attended an October meeting on IRs that included MGM’s Mr Murren. Requiring Japanese ownership in an IR could change how international operators approach bidding, and a mandate for Japanese majority ownership would substantially reshape the field of applicants. Wells Fargo estimates that foreign operators would wind up with a 25 to 40% share of an IR, basing its financial projections on a 25% ownership share, below consensus but entirely plausible. Japanese ownership mandates may help win political support for IRs. A survey released last month from public broadcaster NHK indicated only 12% of the public supports casino legalization, 44% were opposed and the rest were undecided. Sources in Japan say LDP legislative ploys to pass the IR bill, including the lower house limiting debate, further eroded public support. “The pro group needs to have a PR campaign explaining the benefits of IRs,” Mr Bromberg says. A 2015 survey by advertising and public relations firm Dentsu found that even in relatively cosmopolitan Tokyo, most people had no direct experience with IRs and limited, often flawed knowledge of what they are. That study also indicated learning more about IRs made subjects more favorably disposed toward them. Problem gambling remains a key plank for IR opponents. A 2014 Health Ministry survey found a 5% rate of gambling addiction in Japan’s population, compared with 1% commonly found elsewhere. Mr Bromberg says that in jurisdictions that already have gambling, adding casinos doesn’t increase problem gambling. “The reality is people are gambling anyway,” he says, citing Japan’s massive pachinko business, plus wagering on horse, boat and bicycle races. “Casinos have more safeguards [against problem gambling] in place than a pachinko parlor or an online environment.” “With the passage of the first bill, international gaming companies will now be more active in terms of educating legislators to the benefits of gaming and explaining how the concern of increased problem gambling has been proven to be a myth due to the stringent anti-problem gambling policies that any international company applying for a license would employ,” Mr Gallaway says. “The biggest risk to the gaming bill would be something unforeseen happening to the strength of the Abe administration before the IR bill comes to a vote.” Caesars Entertainment: US bankruptcy disqualifies Caesars. NagaCorp: The Hong Kong listed Phnom Penh resort developer and other Asia-Pacific regional operators, from Donaco International in Vietnam and Cambodia to Australian number two Star (formerly Echo) Entertainment to Genting’s Jeju successor Landing International, which also owns London’s Les Ambassadeurs Club, will look for right-sized Japan markets. It’s alsopossible that, particularlyunder a Japanesemajorityownership requirement, a blue-chip local company seeking casino operations expertise would prefer a smaller partner, elevating its choice into global gaming’s top echelon. That could also be the road to Japan for former LVS President WilliamWeidner’s Global Gaming Asset Management. Chow Tai Fook Enterprises: The late Cheng Yu-tung’s private vehicle, passed to son Henry Cheng, is parlaying its 10% stake in SJM parent company STDM into pieces of gaming projects from Brisbane to the Bahamas with putative investments totaling US$10.5 billion. Chow Tai Fook’s unique assets include databases of 5.7 million high net worth customers, mainly Chinese, from its eponymous jewelry chain and New World Department Stores, plus luxury hotel brand Rosewood, not yet in Japan. Bloomberry: Chairman and CEO Enrique Razon’s main business, International Container Terminal Services, ran port facilities in Okinawa for a decade to 2015. Thomas Arasi, president and COO of Bloomberry’s Solaire Resort and Casino in Manila, gave a presentation in Japanese at a 2014 Tokyo IR conference that still has people talking. One witness insists Bloomberry is a contender for both Okinawa and Hokkaido. Universal Entertainment: Many believe Chairman Kazuo Okada’s decades with Wynn Resorts and new US$2 billion Okada Manila were just practice for his dream of a casino in Japan. But the split with Wynn bloodied all and Okada Manila brought allegations of bribery and fraud. Japanese and foreign sources say the authorities want to separate IRs from pachinko, associated with organized crime and corruption, so Mr Okada, leading pachinko operator Maruhan and machine makers such as Sega Sammy and Konami will have to settle for supplier roles. “But they might get a small percentage ownership,” a source added. Reminded of what they’d just said about separating pachinko and IRs, our source shrugged off the apparent contradiction, saying, “It’s Japan.”