Titel: Japan's Casino Industry Re-emerges with Cautious Optimism
Japan plans to restart the process of issuing Integrated Resort (IR) licenses
The Japanese integrated resort (IR) industry is showing promising signs of life once again, following the Japan Casino Regulatory Commission's announcement to reopen the application process for the remaining two IR licenses.
After a one-year hiatus, the commission, which awarded only one license in 2023, is set to resume the bidding process in the near future, potentially rekindling interest from potential operators who had previously withdrawn their bids or held back their investments.
Japan first approved legal resort complexes in 2018, with initial projections pointing towards an annual market revenue of up to $40 billion. However, the Covid-19 pandemic, combined with the complicated bidding process and onerous regulatory structure, led to waning investor interest.
In 2023, an $8.9 billion development by MGM Resorts and its Japanese partner Orix Corp was the sole recipient of a license, with construction for MGM Osaka breaking ground on Yumeshima Island last month. Expected to open in 2030, MGM Osaka serves as Japan's first approved IR project.
A Fresh Start?
Hopes for a new bidding process were revived in December 2023, when the Diet approved the appointment of new gaming commissioners. Among the new members is former prosecutor, Takafumi Sato, who played a key role in developing the regulatory framework for Japan's IRs, along with psychiatrist Michiko Watari, who was also reappointed as commissioner.
Despite some operators like Las Vegas Sands Corp and Wynn Resorts walking away from bidding in Yokohama, due to unfavorable local politics, there is still a reported interest from several prefectures, including Hokkaido[1].
Tokyo could prove to be a particularly attractive market, given its large population and its history of attracting both international and domestic tourists. With over 20 million international and more than 540 million domestic visitors in 2023, Tokyo presents a significant opportunity for future IR developers[2].
The Path Ahead
Steve Gallaway, managing partner at Global Market Advisors, emphasizes that investor interest will largely rely on the performance of MGM Osaka. Should the IR succeed, this could lead to a push for additional development projects throughout Japan[3].
In his analysis for financial news website Seeking Alpha, gaming analyst Howard Jay Klein stated that future operators in Japan should model themselves after the MGM Osaka approach. The sprawling complex, with its three hotels, numerous dining options, shopping mall, spa, and convention space, is being viewed as "the first true mega 'city within a city' property" that can compete with online betting platforms[3].
Although the gaming area takes up only 3% of the total complex, this translates to a mammoth gaming floor encompassing approximately 69,700 square meters. This gaming area will host over 6,400 slot machines and 470 table games[4].
First Mover Advantage
MGM President of Global Development, Ed Bowers, recently stated at the G2E Asia conference in Macau that the MGM Osaka project will serve as an economic boon to Osaka, generating an estimated $1.1 billion annually through taxes and entry fees. He also expects it to contribute around three-quarters of a billion US dollars for Japan's national government[3].
MGM's first mover advantage, as the only approved IR in Japan for the next five years, is expected to significantly impact future developments and increased investor interest in the market[3].
[1] Hokkaido Shimbun [https://www.hokkaidoshimbun.co.jp/]
[2] Japan National Tourism Organization [https://www.jnuto.go.jp/en/]
[3] Seeking Alpha [https://seekingalpha.com/]
[4] Global Market Advisors [https://globalmarketadvisors.com/]
- The second round of bidding for the remaining two IR licenses in Japan, spearheaded by the Japan Casino Regulatory Commission, might offer a fresh opportunity for potential operators who had previously withdrawn their bids, especially in prefectures like Hokkaido.
- Amidst growing optimism, the success of MGM Osaka on Yumeshima Island could play a pivotal role in attracting more resort developers in the future, potentially boosting Japan's IR industry.
- As Tokyo presents a significant opportunity with its large population and high tourist traffic, future operators of Integrated Resorts might wish to emulate the MGM Osaka approach, offering various amenities such as hotels, dining options, shopping malls, spas, and convention spaces, along with a substantial gaming area.
