MGM’s Murren: “Potential is enormous”
It finally happened. After more than a decade of talk, debate and disappointment, passage of enabling legislation that may bring legal casino gaming to Japan has global operators lining up to get some of the action.
Last week, the upper house of Japan’s parliament or Diet approved the bill, which is the first step toward a legal gaming industry that analysts say could be worth from $20 billion per year to twice that—in which case Japan would easily outpace Macau, now the world’s No. 1 gaming jurisdiction with annual revenues of $27 billion.
The country’s first casino resort is not likely to open anytime soon—2021 seems the be the best and most optimistic bet—but already firms like MGM Resorts International are angling to be part of the industry in Japan.
The Las Vegas-based company issued an immediate statement hailing the bill’s passage. Approval of the enabling bill—to be followed by a second bill in order to legalize integrated resorts—allows MGM “to advance our relationships with key stakeholders and together create a coalition of Japanese business partners who will collectively define a vision for a uniquely Japanese, world-class integrated resort.”
MGM confirmed it already has a full-time development team in Tokyo working on potential deals, according to the Associated Press.
Back in November, MGM CEO Jim Murren said, “The reason why everyone’s spending the time on this is that the potential is absolutely enormous.”
Wynn Resorts also has its eye on Japan; the company said it is “extremely pleased” by the law’s passage.
Tokyo, Osaka, Yokohama and a city on the island of Hokkaido are said to be planning bids for casino licenses, according to ABC News.
“This is a landmark occasion and should be a shot in the arm as it relates to investor sentiment in all gaming names that could be players in Japan,” said Grant Govertsen of Union Gaming Asia Securities.
Currently, gambling in Japan is limited to lotteries, pachinko and wagering on horse, auto, bicycle and powerboat racing. When integrated resorts arrive on the scene, said Govertsen, “It represents the next and perhaps only other large opportunity to develop large-scale integrated resorts in Asia. Some of these companies, their revenues and cash flow are so large today that it would take an opportunity like Japan to move the needle for them.”
Sheldon Adelson has been looking at Japan for at least a few years. In 2014, the head of the Las Vegas Sands Corp. told analysts his company is “willing to commit substantial capital investment to develop large-scale, truly iconic integrated resorts” if Japan legalizes casinos.
But in an editorial, Bloomberg took a stand against the development, saying Asia’s “gambling binge looks fun, but may end in tears.”
For the government, “it’s an appealing prospect,” the editorial stated. “In theory, foreigners will drop their cash, boost the local economy and take their problems home with them. Developers can be prodded to improve local infrastructure and to include space for conferences and exhibitions. This is what Japan has in mind.”
However, the piece continued, “It’s a hard dynamic to sustain,” especially with casinos all around the Asia-Pacific region, including Vietnam, Singapore, Saipan and Vladivostok, with more coming in the Philippines and South Korea—and not to mention Macau, which has dozens of casinos and more in the pipeline.
In addition, the editorial warned, “Many of these new resorts are pursuing the same customer: the Chinese tourist. With China’s economic growth sluggish and the yuan weakening, that’s not the sure bet it once was.” Moreover, the government of Mainland China has discouraged its residents from gambling abroad, and issued stern warnings to companies that would try to poach them on Chinese soil (witness the recent arrests of Crown Resorts employees who allegedly were marketing to high rollers on the mainland).
Japan may not be discouraged. The bill was approved December 14 by the plenary session of the upper house with the backing of Prime Minister Shinzo Abe, his ruling Liberal Democratic Party and a conservative opposition party, reported GGRAsia. Opponents included members of the Buddhist-influenced Komeito party, who are concerned about the social fallout of legal casinos in a country where gambling addiction is said to be rampant.
According to the Japan Times, the LDP proposed a few amendments to the bill, including a commitment to help those with gambling addictions and stipulating that the legislation be reviewed within the first five years of its enactment.
Now the bill goes back to the lower house of parliament for a once-over. Then a second bill, the implementation bill, will detail the specifics of regulation and taxation, the number of licenses to be issued, and the locations.
The New York Times reported that Japan is “looking for money” in its bid to legalize gaming.
“For the investment community, Japan is seen as the crown jewel of Asian gaming development outside of Macau,” said Govertsen. “It would be shocking if Japan doesn’t become the No. 2 market in Asia on an overnight basis.”
Now the dealing begins. Takashi Kiso, chief executive of the International Casino Institute, told the Times that ownership would probably take the form of joint ventures between international gaming operators and Japanese companies. “Looking at the debate in Parliament, there’s a lot of resistance to the idea of 100 percent foreign-owned casinos, so that is probably off the table,” Kiso said.
In the United States, American Gaming Association President and CEO Geoff Freeman said the legislation’s passage “is truly historic.
“After decades of study, it is clear that the expansion of our industry in Japan will produce many of the same results it has in the United States: growth in jobs, tax revenues for community services, increased travel and tourism from domestic and foreign visitors—and vast economic expansion. As progress continues, the American Gaming Association looks forward to providing partnership and support to Japan’s cultural, business and civic leaders.”
