Inside Asian Gaming

INSIDE ASIAN GAMING MAY 2018 26 NEW KID ON THE BLOCK: JAPAN After a flurry of activity since early April, the realization of the long- awaited dream that is a Japanese casino and integrated resort industry is now closer than ever. There has been plenty of uncertainty and many more delays since the passing of the IR Promotion Bill in December 2016, but we now know that Japan will host three integrated resorts in the first round with likely opening dates somewhere around 2025. We also know that the number of casino licenses issued can be revisited after the initial seven-year period, reduced from an originally planned 10-year moratorium. The three operators lucky enough to win one of the three licenses will pay a flat tax rate of 30% on gaming revenue, also reduced from a previously discussed plan to impose a sliding tax rate of between 30% and 50% depending on revenue levels. As expected, the size of the casino will be limited to 3% of total IR floor space, however a prior proposal to limit the IR size to 15,000 square meters has been scrapped. Instead, most restrictions will center around visitation by locals, with Japan residents allowed a maximum of three visits per week and 10 per month as part of the country’s measures to curb problem gambling. Perhaps most controversial of all is the decision to impose a ¥6,000 entry fee for all residents – equivalent to US$54 – within each 24-hour period. The figure falls slightly below the ¥8,000 fee that coalition partner Komeito had been pushing for but is well above the ruling Liberal Democratic Party’s preferred ¥2,000. Nevertheless, the combined regulations have been generally well received by the industry with Morgan Stanley analysts labelling them “better than feared.” The financial services firm also estimates that Japan’s casino market will be worth around US$15 billion annually now that the scenario has been made somewhat clearer, of which Tokyo would comprise around 40% of GGR (roughly US$6 billion in 2025) and 50% of foreigner spend assuming it hosts one of the three licenses on offer. Osaka, widely considered the strongest contender of all Japanese cities to win a license, would comprise 30% of foreign spend with a market size of just under US$4 billion annually. Little wonder there is universal interest among operators for a slice of that pie. Exactly what the bidding process in Japan entails remains to be seen. The LDP was due to submit its IR Implementation Bill to Japan’s Diet right around the time IAG went to print, with the goal of pushing it through before the end of the current Diet session on 20 June. Even then, the job is only just beginning. “We know that once legislation is passed, there’s a long process of setting everything up,” said Wynn Resorts CEO Matt Maddox late last year, before circumstances saw him take over his company’s top job. “So we’re monitoring it carefully and spending time there and developing relationships. Over the next couple of years we’ll understand the potential opportunity.” In reality, however, the race to win a coveted Japan license began long ago. Most operators have now opened a Japan office, setting up a base from which to establish relationships with local business leaders and lawmakers. Last August, MGM Resorts appointed former Charge d’Affaires at the United States Embassy Tokyo, Jason Hyland, as Representative Officer and President of MGM Resorts Japan. Genting Singapore – which sold off its stake in Korea’s Jeju Shinhwa World in early 2017 to focus on Japan – announced in October that it was raising ¥20 billion (US$177 million) via publicly-offered Japanese yen-denominated bonds to be used “for working capital and general corporate purposes” in pursuit of a Japanese IR. Melco Resorts stated recently that it planned to spend “more than US$10 billion” on its IR should it be granted a license. In fact, Melco more than any other operator has exhibited by its actions just what lengths it is willing to go to in order to appeal to Japan’s decision makers, who will certainly place problem gambling measures at the top of the list when it comes to deciding who gets the nod. Having already promised to move the entire company headquarters to Japan if he wins, Lawrence Ho and his Japan team unveiled in January a biometrics-based casino security system, MelGuard, which would verify the identity of all guests via fingerprint and facial recognition technology before allowing entry. The system would ensure the early detection of anyone excluded as a result of problem gambling or known criminal links. “This proprietary technology demonstrates our deep commitment to developing and implementing practical solutions for the government’s ongoing consideration of how to uphold socially safe integrated resorts,” explained Melco Japan President Ako Shiraogawa at the time. Clearly, winning a Japanese integrated resort license will be no walk in the park. COVER STORY Melco Resorts Chairman and CEO Lawrence Ho is going all out on his Japan IR bid