Operators could “walk away”
Hideaki Omura, governor of Aichi Prefecture in Japan, says he will support Tokoname city’s possible bid for one of the country’s first integrated resort licenses. Tokoname would join other potential bidders including Yokohama and Osaka and possibly Tokyo as well as other smaller cities.
“We aim to become an international tourism capital that can attract international conferences and other events,” said Omura in remarks in July. “If we have an IR, our competitiveness would be enhanced. I want to find out if this is something which can be realized.”
The announcement was made against a backdrop of anxiety about Japan’s unfolding legislative process. Reuters reports that international casino operators who once were enthusiastic about Japan are now pushing back against what they perceive as over-regulation that could reduce the industry’s chances of profitability. According to the Jiji Press, those regulations include limits on how often Japanese nationals can play at the country’s casinos; entry fees for players; stringent identification requirements; a ban on automated teller machines inside gaming halls; limits on gaming floor space; and a rule that would ban Japanese players from using credit cards.
“The current plans risk missing the mark on achieving public policy objectives,” one casino executive told Reuters. “It’s serious enough to halve the maximum investment we’re willing to make.” Casino bigwigs like Sheldon Adelson of the Las Vegas Sands Corp. and Lawrence Ho of Melco Resorts & Entertainment have publicly declared they would invest billions in a Japan IR. Other companies in the potential pool of bidders include Galaxy Entertainment Group, Hard Rock International, MGM Resorts International and Wynn Resorts.
Seth Sulkin, chairman of a task force at the American Chamber of Commerce Japan working on casino resorts told Reuters, “Gaming companies are very rational: they’ll calculate how much revenue they can generate with a 15,000-square-meter casino floor, and they will only invest as appropriate for that, which certainly won’t be $10 billion.”
To take the pulse of the public, which has never warmed to the idea of casinos in the country, the Japanese government will hold hearings across the country from August 17 to 29, convening in Tokyo, Osaka, Hiroshima, Fukuoka, Sendai, Sapporo, Nagoya, Toyama and Takamatsu in Kagawa Prefecture, according to the Japan Times.
All in all, the jubilation that first greeted news of a Japan gaming industry seems to be fading fast. “The framework seems to become more restrictive by the day,” Union Gaming analyst Grant Govertsen has said. “When coupled with what are likely to be astronomical project costs, could result in some of the biggest operators sitting this one out.
“In other words, Japan is on the verge of one-upping the failed gaming expansions of Korea and Vietnam by moving forward with a gaming construct that, one, can’t fulfill the No. 1 stated goal of Japan’s IR development—tourism growth, and two, is so poorly designed that ROIs shrink to a level that makes participation on the part of the global IR developers much less likely.”
The Las Vegas Review-Journal went so far as to say Japan’s plan for resorts with casinos “may collapse.”
“Reports from Japan now indicate lawmakers are embarking on a conservative path that at best won’t make commercial casino operators happy and at worst could result in them walking away from what has been described as one of the greatest financial opportunities the industry had ever seen,” the Review-Journal went on. “Operators were talking about investments of $10 billion, but potential revenue of $25 billion annually.”
“Any of us who are involved in Japan see the potential,” said Alan Feldman, executive vice president of MGM Resorts International, one of the companies vying to build a resort in Japan. “We’ve just got to have legislation that permits that to happen.”
