Wakayama Governor Yoshinobu Nisaka called it a “bitter blow”: the decision last week by the Japanese prefectural assembly to reject an integrated resort (IR) development with casino. A special committee to review the proposal voted against the plan, 10-5. Then the prefectural assembly also said no, in a 22-18 vote against the IR, dooming a Wakayama IR.
Nisaka had supported the bid as a way to revitalize local business, introduce new industry and attract more international tourists. According to GGRAsia, he said an IR could have been the “ultimate jumpstart” for the economy of the city and the prefecture as a whole.
Lawmakers first approved a Japanese casino industry in 2016, pushed by then-Prime Minister Shinzo Abe and his Liberal Democratic Party (LDP) as a way to raise the country’s profile as a global destination. At the time, enthusiastic analysts called Japan “the next Holy Grail” of gaming, and projected revenues in the $40 billion range per year at maturity. They later ratcheted down that figure to about $25 billion a year, but still expected a crowd of global operators to vie for a piece of the new market.
But soon operators backed away from the opportunity, due to what they considered overly strict regulations, such as limits on gaming floor size and entry fees for locals, which could have slashed profitability, along with demands that the IRs should represent a $10 billion investment. Would-be contenders including the Las Vegas Sands Corp. and Wynn Resorts passed. Then came the pandemic, which caused severe contractions in gaming jurisdictions around the world and caused many businesses to suspend or cancel development plans.
Wakayama was still in, however, choosing a 40-hectare (98.8-acre) artificial island known as Marina City to host the JPY470 billion (US $3.7 billion) complex. According to projections from the IR District Development Plan, the resort was expected to attract about 6.5 million visitors annually, with an estimated economic impact of around JPY350 billion (US$2.7 billion).
The sticking point was the funding, reported GGRAsia. Local lawmakers repeatedly asked for greater clarity on capitalization from Wakayama’s private-sector partner, Clairvest Neem Ventures KK, led by Canada’s Clairvest Group. Under the rules, “commitment letters” were required for certain funding elements rather than letters of intent that had been offered by some unidentified parties.
Nisaka insisted that a major international bank would arrange the funding: “If you prove the creditworthiness of Credit Suisse and the financial strength and seriousness of the lending institution that Credit Suisse arranges, you can pass” the national government’s “examination” of the local plan, he said. Former Las Vegas Sands Corp. executive Bill Weidner and United States-based casino operator Caesars Entertainment Inc. were identified as part of the consortium in an announcement by Caesars last September.
However, Clairvest was not the favored bidder. During the selection process in March, its proposal scored 656 points out of 1,000, while its rival in the race at that time, Suncity Group, scored 720 points. Suncity abruptly pulled out of the race in May.
AGB reported that the Clairvest consortium may not have “done enough to prepare the groundwork and establish support with the local community.” The group has changed members since the outset and its leaders are not well-known in Japan, a source said.
Another complicating factor is the election of Prime Minister Fumio Kishida, who is now head of the LDP, and the changing of the guard that removed LDP Secretary General Toshihiro Nikai from his position. Nikai is a pro-IR politician from Wakayama who was expected to play a key role in the administration.
Daniel Cheng, formerly senior vice president of development for Hard Rock International said, “All I can say for Wakayama Prefecture is the abrupt end spared Governor Nisaka further anguish in a very spotty campaign to begin with, and which dimmed even further with Toshihiro Nikai’s fall from grace following the last LDP leadership contest.”
The deadline for IR applications to the central government is April 28, and in a statement after the vote, Nisaka acknowledged that it is “no longer possible to form an engine” that can boost Wakayama’s fortunes as an IR might have.
After the no vote in Wakayama, Japanese national government spokesman Hirokazu Matsuno said he would “refrain from commenting on the situation of individual local governments,” adding that “IRs are an important initiative for Japan to become a developed tourist destination.”
The Osaka government approved a partnership between MGM Resorts and Orix Inc. to build a resort on Yumeshima Island. But even there, warnings that the island is susceptible to severe flooding have spurred calls for studies to determine if it is an acceptable site.
And last week the final draft of a regional development plan for Nagasaki’s integrated resort (IR) bid has been approved by the Sasebo City Council. Only one council member vote against the plan, which must be submitted to the central government by April 28. The prefectural assembly has also OK’d the proposal.
Per the plan, Kyushu Resorts Japan, a special purpose entity led by Casinos Austria International Japan (CAIJ) will invest about JPY 440 billion (US$3.5 billion) to develop the hotel and MICE facilities, which is expected to open in the third quarter of 2027. Annual sales are estimated to reach JPY 218 billion (US$1.72 billion) by the fifth year of business and attract 6.73 million annual visitors, with an economic ripple effect of JPY 323 billion (US$2.56 billion).
According to Inside Asian Gaming, CAIJ and Nagasaki Prefecture claim that, with the support of American commercial real estate services and investment firm CBRE Group, they have already obtained letters of commitment pledging investment exceeding the planned JPY 440 billion in development costs from domestic companies. The names of the investing companies have not yet been disclosed, but CBRE Group Inc, an American commercial real estate services and investment firm, would have some involvement in the funding.
The government planned to license up to three operators in the first phase of the new industry, but now has only two bidding entities. Some analysts think the central government may license just one operating group and location. But Ben Lee, managing partner of IGamiX Management & Consulting, still thinks two licenses will be awarded.
“They will likely be Japanese-led and controlled with foreigners included predominantly as management operators, with minority stakes,” he said.
Speaking with IAG shortly after the vote, a Wakayama government source said, “At this time there are no plans to take further action before the 28 April deadline. At this rate it is likely the plan will be abandoned.”
Cheng, meanwhile, believes the national government should hit the reset button and give other markets like Tokyo more time to bid. But along with Wayakama, other prefectures have dropped out of the IR race including Hokkaido and Yokohama.
