As Japan gears up to choose operators for the country’s first three legal integrated resorts, global firms are jockeying for position on the field.
In August, the Las Vegas Sands Corp. announced it would no longer consider developing an IR in Osaka, but would focus its energies on Tokyo and Yokohama. The same month, Caesars Entertainment dropped out of the race, saying it wants to concentrate on its domestic business, including a multibillion-dollar merger with Eldorado Resorts. Last week, Melco Resorts & Entertainment also withdrew from Osaka, declaring it’s all-in for Yokohama.
While MGM Resorts remains firmly committed to Osaka, Japan’s second largest metropolitan area after Tokyo, it may be hamstrung by its determination to open an IR before the 2025 World Expo, to be held on Yumeshima Island.
The Basics
Here’s a thumbnail version of the basic policy, released by the Japan Tourism Agency and the Ministry of Land, Infrastructure, Transport and Tourism:
An IR proposal must include:
- A high quality, internationally competitive concept, in an easily accessible location with enough space to host large conferences
- Proof of the operational experience and financial stability of the bidder
- A plan to return casino revenue to the local municipalities
- Effective measures to curb the social problems associated with gaming, including problem gambling and crime
Public comment on the complete, 46-page document will be accepted until October 3, with the final version due by early 2020.
GGB News talked to Jane Tsai, industry expert and CEO of gaming consultancy JCT Holdings, about the presumed frontrunners and how they shape up.
Las Vegas Sands Corp. “Do they stand a good chance? Absolutely,” said Tsai. “They have good cash reserves and have experience across multiple global markets. In every market, they’ve done really well, as opposed to some other international operators who have expanded overseas and haven’t fared as well.”
In addition, Japan has made a study of the Singapore market as it looks to its own legal gaming setup. “Everybody in Japan looks at Marina Bay Sands (LVS’ megaresort in Singapore) as sort of the penultimate example” of how to develop and run an IR, said Tsai.
LVS has enjoyed “pretty much a 100 percent batting average” in IR operations worldwide, said Tsai. “They have done it carefully enough and conservatively enough that they know it’s a winner. They don’t have any ‘oops’ out there from a development standpoint.”
The firm’s one drawback could be “their stance that it’s got to be 100 percent ‘us.’ That is culturally insensitive,” said Tsai. “When you are in a foreign country, you are the foreigner.”
Wynn Resorts. Wynn Resorts; strength has always been its brand, said Tsai. But that brand may have been tarnished somewhat with the sexual harassment scandal that drove founder Steve Wynn from his own company.
“I understand Steve Wynn had his fall from grace, but he is a visionary who got so much of the industry to where it is—you cannot ignore his contribution or the huge, huge success of his brand,” said Tsai, lauding his “attention to detail and quality of the products and the developments.”
“This is kind of hard for me to say, but the company is struggling to find direction since Steve Wynn left,” Tsai said. “But if they can maintain the brand and the quality of their physical product, those are their two biggest assets. It will be interesting to see what happens next.”
MGM Resorts International. “Kudos to MGM for continuing their commitment to the Japan market; their ‘Osaka First’ PR campaign it can only serve them well in the long run,” said Tsai, but added it may be difficult for the firm to win a license, develop a concept, complete the permitting process, get in the ground and open by its stated timeline of 2024-25, before the start of the six-month World Expo.
“Purely from a cultural perspective, Japan doesn’t make decisions very fast. It’s very conservative, very calculated, and very safe in its approach,” Tsai said. “Unless there is some way MGM can expedite that process, it’s going to be tough for them.”
Moreover, she said, “MGM is a kind of conglomerate of miscellaneous properties, so it’s hard to identify what their brand niche is.”
Melco Resorts & Entertainment. Tsai said Melco may face an uphill battle to win a berth in Japan, despite Chairman and CEO Lawrence Ho’s pledge that he would spent “whatever it takes” to break into the market.
“Melco is going to struggle, because some of Lawrence’s international developments have not fared so well,” notably Tigre de Cristal, in the Russian port city of Vladivostok, Tsai said; the resort opened in 2015, and in 2017 Ho since divested of his ownership stake.
Ho may also be hampered by the ongoing investigation into his acquisition of a stake in Australian casino operator Crown Resorts, owned by his friend and former partner James Packer.
Under an agreement with the New South Wales gaming regulator, Crown is prohibited from doing business with Lawrence Ho’s father, Macau casino magnate Stanley, or any of his associates. The younger Ho has often publicly distanced himself from his legendary father, who for decades has been linked to Chinese organized crime. With the Japanese public expressing widespread concerns about the potential for increased crime with the advent of gaming, this could be a minus for Ho and Melco.
Genting. The Malaysian-based gaming giant “has a ton of international experience, but is debt-heavy,” said Tsai. Moreover, “The company has taken a three-star position, and Japan will lead from what’s best for their market, which would be a five-star destination.”
Genting is “very strategic” and “has done really well” with its corporate positioning as a three-star developer and operator, she added. “It’s done very well for them; they’ve touched a niche nobody else has touched—they own it. But Genting might have a little of a challenge convincing Japan they can build a five-star resort.”
Galaxy Entertainment Group. Unlike Genting, Galaxy has no debt, said Tsai, “and how can you argue with that? But at the same time they have no international experience, and that is going to be to their detriment.”
Others in the field may be also-rans. “If you look at the other international operators, like Mohegan Sun and Hard Rock, you’re almost getting into almost tier-two level operators. The only ones that may give Wynn, LVS and MGM a run for their money are Melco, Genting and Galaxy.”
At this stage of the game, Tsai said, “it’s still a close race, and I don’t believe any one company has one clear advantage. The Japanese do their homework. They will weigh in not just based on PR and on a property that’s done well in a market, but a whole series of other factors that these operators are bringing to the table.”
Glenn McCartney, hospitality and tourism professor at the University of Macau, agreed that lawmakers and regulators will likely proceed at an unhurried pace, as happened in their model jurisdiction, Singapore.
“These will be huge complexes that need a lot of planning and master planning and governance—a whole shopping list of things. Singapore did it in such a well-planned manner, master-planning the whole livability issue, including residential, a shopping district and natural areas. That is not by accident.”
He added that the well-designed, well-positioned IR has the potential to boost an already robust tourism economy. “The draft policy is really engineered to bring in international tourism. In the last five years the biggest international arrival base is China,” with about 25 percent of arrivals hailing from the mainland. “They are coming not to gamble, but for retail, food—these are tremendous parts of an IR project too, positioning for mainland Chinese, Korean and Taiwanese visitors.
To get it right, he added, “You need a tourism master-plan framework, and that takes time. It’s not just popping down an IR in the middle of a community.”
