Choudhary: Three $3B IRs better than one at $10B
In a novel take on the emerging Japan casino industry, Praveen Choudhary, Morgan Stanley’s managing director in Hong Kong, said the country would be better off licensing three clusters of three smaller resorts than going for one $10 billion resort in a given jurisdiction.
Speaking at the Japan Gaming Congress in May, Choudhary said casinos with no competition have no incentive to be competitive. And that could mean Japan won’t get the successful industry it expects. With three US$3 billion IRs in an area instead of one, “You’d get more non-gaming and more variety,” Choudhary said.
Global Market Advisors Director of Government Affairs Brendan Bussmann agreed, saying, “The level of investment and tourism draw would increase significantly if multiple operators would come together on a single large site such as Yumeshima Island in Osaka to form an Osaka Strip or in the Tokyo/Yokohama area.
“As opposed to one operator that may be willing to contribute $10 billion to a single IR, if you could bring together multiple operators while still staying within the 3 percent casino size, you are likely to see a number well north of the $10 billion,” he said. Both Sheldon Adelson, chairman and CEO of the Las Vegas Sands Corp. and Lawrence Ho, chairman and CEO of Melco Resorts & Entertainment have said they would be willing to invest $10 billion to nab one of the first three Japan casino licenses.
According to Forbes, Wynn Development President Chris Gordon told conference attendees that Wynn Resorts wants to create “an entertainment district, not one building,” but did not endorse multiple IRs in one market. Noted casino architect Paul Steelman said he’d like to see a Japanese version of Las Vegas’s Fremont Street, with smaller and mid-sized businesses anchored by a centrally located integrated resort.
But that scenario is unlikely, according to Toru Mihara, a member of the government’s expert panel on IR. He told Forbes that the legislation rules out groups of casinos in one district or any kind of sublicensing. “Hence the bill intends to create three gaming licenses only, giving quasi-regional monopoly for the operators involved,” said Mihara, a professor of comparative public policy at Osaka University of Commerce.
“The whole idea is never to create a gaming hub like Macau or Las Vegas but strictly limit numbers of IR zones and casinos from the beginning,” he continued. “A gaming hub concept is judged to be not appropriate in this market, where gaming competition is considered to increase unintended risk of increasing speculative spirits instead of creating social/economic benefits. This fundamental policy, fixed by and among legislators, shall never change.”
Meanwhile, the IR Implementation Bill, passed by the Lower House in June, awaits review by the Upper House in a Diet session that has been extended through July 22. Throughout the session, opponents of casinos in Japan will continue to make their case; Yukio Edano, the country’s top opposition leader, told an audience in Saitama City that bringing IRs to Japan is the same as “selling the country” to foreign investors.
“There is no restriction on capital investment,” he said. “This will be a business about know-how from foreign countries. American casino companies will make the decisions through their local subsidiaries.”
He pointed to a credit plan authorized in the IR Implementation Bill, and said, “The Japan Racing Association cannot lend money to those who want to buy horse racing tickets. That is natural, isn’t it? But casino operators will be allowed to lend money. They are creating an exception to the Money Lending Business Act. Is this a law meant to utilize casinos to destroy people?” And Chairman Yukio Fujiki of the Yokohama Harbor Transport Association said he is determined not to “hand over Yamashita Pier to the international finance mafia.”
As the legislation continues to be weighed, Inside Asian Gaming reports that Japanese lawmakers may consider taxing the money won by some foreign visitors. According to the Asahi Shimbun, visiting gamblers may be subject to the tax treaty agreed to by their home nation and Japan. Of the 123 states and regions it currently has tax treaties with, Japan can charge income tax on casino winnings to visitors from China, India and Singapore among others. Those from countries with no Japan tax treaty are also liable may also be compelled to pay income tax on casino winnings, reported IAG.
The United States, South Korea and most European nations are exempt.
