No consensus on what Japan gaming means for Macau

The integrated resort potential of Japan once again featured heavily at this year’s Global Gaming Expo (G2E) Asia, which yesterday held back-to-back sessions on the long-anticipated but still-untapped market.

The consensus: there is still no consensus on what Japan gaming will mean for Macau.

It has taken two decades for Japan to arrive at a place where integrated resorts are a matter of when and not if – and yet there is still a long way to go. The slow pace of development contrasts with that of Singapore, another highly regulated market and likely model for Japan, where the integrated resort concept began in 2002. Eight years later, Marina Bay Sands and Resorts World Sentosa both opened to the public.

Integrated resorts are seen as an integral component of Japan’s tourism objective: to double the number of annual visitors to 60 million by 2030.

The three integrated resorts will likely find homes in or nearby major cities, such as Osaka or Tokyo, because it is precisely these locations that have the infrastructure to support such projects. These cities are also reassuring ‘safe bets’ for license bidders faced with multi-billion- dollar investments and, as Koji Ishikaw of Greenberg Traurig Tokyo Law Offices described yesterday, a hefty “gaming tax of 30 percent [that] is not going to be very popular with foreign casino operators.”

The debate on whether to treat Japanese casinos as a threat to the Macau market has long burned in the Special Administrative Region. It was a topic touched upon again during yesterday’s back-to-back panel sessions.

Although no single Asian gambling destination is thought capable of siphoning away Macau’s 300-billion- pataca gaming market, there are concerns about the role certain jurisdictions could play in chipping away at the SAR’s core segments. For example, Japan might exert pressure by presenting itself as a viable mass market alternative for the gambler who wants more than a casino vacation, while discreet Cambodian properties might offer VIP high-rollers more of the privacy they are said to crave.

For Niall Murray, Chairman of Murray International Group, “the impact of Japan casinos on the mass market in Macau will be negligible.”

He said during yesterday’s panel that Macau enjoys a special relationship with the mainland that makes the city an attractive destination for Chinese tourists.

But Chinese visitors to Japan are growing. Official figures show the number of Chinese tourists has increased four-fold from 1.4 million in 2012 to 7.4 million in 2017, overtaking South Korea as the biggest source market. Last year, they numbered more than 8.3 million.

David Bonnet, a former casino executive who held senior roles at Sands China, Galaxy Entertainment Group and The 13 Holdings said that this visitor market will be key to the success of the integrated resort model in Japan.

“In order for these Japanese integrated resorts to be successful, they are going to need to attract the Chinese customer,” he said, citing the various restrictions expected to be implemented on the domestic market. That will be necessary to justify the USD5 billion or more investment, he said.

“These Chinese customers could be VIP, or mass or premium mass – these are all things we need to consider. But the Chinese customer is going to be critical for Japanese integrated resorts, in addition to Japanese gamblers.”

Japan may also find specialization and success in the meetings, incentives, conferences and exhibition (MICE) space; an area coveted in recent years by the Macau government.

“MICE is going to be a very important component in the Japanese integrated resort model,” said Ayako Nakayama, Representative Director at the Japan IR Association, which organizes sessions with Japanese Diet members and officials from the national government. “Singapore is number one in Asia right now for MICE, but there is potential to develop Japan into a world-class location for these activities.”