The rules haven’t been written yet, but the race to win a Japanese casino license has begun.
In the past week:
• Las Vegas Sands CEO Sheldon Adelson made headlines by saying he could invest $10 billion into a Japanese casino.
• MGM Resorts CEO Jim Murren likewise said he could invest $10 billion. MGM is also increasing its staff in Japan to 15 people within 30 days.
• Melco Crown released conceptual pictures of what its casino might look like.
• Genting Singapore expressed interest, suggesting it is the Genting subsidiary that will carry the ball in Japan.
• Hard Rock International CEO Jim Allen said he already has a list of up to 30 prospective Japanese partners ranging from manufacturers to financial firms to landowners. Hard Rock expects it would own 40 to 60 percent of the project.
The prize, as everybody knows by now, is a casino market estimated at up to $40 billion in gaming revenues.
What is not known are the important components of enabling legislation to be enacted later this year: How many casinos? Where? Tax rate? How much and what kind of local ownership will be required?
For years, casino companies have talked about maybe just two or three destination resorts in the biggest cities, like Tokyo and Osaka. That would be fine for the big operators, allowing them to have a Singapore-like oligarchy.
But the political reality in Japan is that smaller metropolitan areas will argue that they should get a piece of the pie, especially if the intention is economic development. Their rationale is that prosperous Tokyo and Osaka don’t need the help, but the declining regional metros do.
Local participation is a given. The question will be in what form. Will Japan require local companies as equity partners? Will they require Japanese investors to be 50 percent or even majority owners? Will they settle for a Macau model where parent companies create publicly traded subsidiaries?
Until the rules are written, it is too early to handicap the winners, but when they are written, we might get some insight as to the favorites. For example, if Japan adopts the Singapore approach, that could be seen as favoring Las Vegas Sands, which has lobbied for that model.
Here’s what we know, or think we can infer, so far:
• Las Vegas Sands is discussed by U.S. analysts as the front runner. We’re not so sure about that. A strong-willed entrepreneurial leader like Sheldon Adelson might not fit well into the cooperative, even insular, Japanese corporate culture. And if there is a requirement for 50 percent or majority Japanese ownership, he might not want to try.
However, there is no question that Las Vegas Sands is the master of the convention, shopping, tourist-driven integrated resort, and has to be considered a favorite.
• Wynn is also discussed in the U.S. as a strong candidate, and certainly the exquisite resorts developed by Steve Wynn would have a powerful appeal. However, to date, Wynn has not developed a resort with as broad a business model as Las Vegas Sands.
• MGM Resorts is often mentioned after LVS and WYNN. But MGM might be the best positioned of all.
Jim Murren would be a more collegial American partner. The company has experience with joint ventures, and MGM offers the same broad business model as Las Vegas Sands.
And then there is the power of the MGM brand based, not the casino company, but on the movie studio, which provided much of the post-World War II entertainment for Japanese citizens.
• Boyd Gaming. If you want a dark horse, Boyd could be it. As mentioned, there will be strong political pressure to allow one or more regional casinos in secondary metropolitan areas, which could fit right into Boyd’s wheelhouse.
• Hard Rock International, like MGM, has an internationally known brand.
• Melco Crown. Genting Singapore. SJM. Galaxy Entertainment. There is some thought that Japan might want some Asian involvement. However, it is worth noting that Japan is its own culture, not necessarily Asian, just like another island nation, Britain, isn’t quite European.
There is also some belief that Japan might see itself as a competitor to Macau and might not be enthusiastic about awarding licenses to strictly Macau operators.
Given those considerations, Genting might be the favorite from Asia as it has the financial heft and, like LVS and MGM, the broad integrated resort experience.
• Others. Once the rules are written, a number of other companies could dive in. Caesars Entertainment, Tokyo-listed Universal Entertainment, NagaCorp, Crown and Star out of Australia. Even Penn National and Red Rock if regional casinos are approved. One of the big Hong Kong-based real estate developers. Philippine developer Ricky Razon.
• Japanese partners. It is likely that everyone from Konami to Universal Entertainment to Sega Sammy to pachinko operators to industrial conglomerates will want in on the action.
Konami is already actively pursuing interest. SegaSammy is already getting into the casino side of the business with Korean partner Paradise Gaming in a project near Seoul. Universal CEO Kazuo Okada will have casino experience with his new self-named casino property in Manila, though he might be too controversial for the Japanese to risk one of a very small number of licenses.
So, lots of players and lots of possibilities. For now, we’d say LVS and MGM are well positioned and that WYNN and Genting Singapore have also checked off all the boxes, to use the currently popular phrase.
