New dawn for Japan, Asia-Pacific casino biz in 2018?

Dec 29, 2017 Newsdesk Features, Latest News  

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It could be 2024 before a casino resort is opened in Japan, but a key goal prior to launch should be for the authorities to apply evidence-based, critical thinking regarding how to run and oversee the industry. Such thinking will be key to making the Japanese casino industry a success in terms of the public good of stimulating economic development, and for regional competitiveness, suggest respectively several consultants tracking Japan’s legislative process.

In other developments, 2018 could be a breakthrough year for meaningful diversification of casino product in some established Asia-Pacific jurisdictions – including Macau – away from high-stakes baccarat played on credit.

One route that has long been touted by industry commentators – in-casino sports betting books focused on professional live sports, in the manner of Las Vegas – has the potential for causing political problems in Asia, where many governments – including that of mainland China – are concerned about the proliferation of cross-border online sports betting that the authorities are unable either to regulate or tax.

One possibly less contentious route currently being suggested for casino entertainment diversification is betting on so-called e-Sports: competitive video games played either online or offline. E-Sports tournaments could help to attract to casinos a new generation of consumers, known in marketing circles as the “millennials”, and spark their interest in wagering on such events.

In Japan, a country well known for early adoption of new consumer technology, entire years have come and gone without the final legislative moves toward establishing Japan’s promised casino industry.

The year 2018 could be significant if the governing coalition of the Liberal Democratic Party and Komeito can secure parliamentary passage of an anti-gambling addiction measure known as the “Basic Bill on Gambling Addiction Countermeasures”. It is widely regarded by commentators as the precursor to the Integrated Resorts (IR) Implementation Bill, a key step on the path to Japanese casino licences eventually being conditionally issued and projects then being built.

First Japan venue 2024?

“In 2019, the race for one of these coveted licences will in likelihood occur with the goal of opening the first integrated resort in Japan in late 2024,” said Brendan Bussmann, vice president of government affairs for consultancy Global Market Advisors LLC, in comments to GGRAsia.

Spectrum Gaming Group – a research and professional services firm that does work including due diligence on behalf of casino sector investors, operators and regulators – said in its 2018 lookahead published in late November, that it expected a “battle” lasting up to two years to determine the respective recipients of possibly three Japan casino licences; even after that country’s IR Implementation Bill is in likelihood passed next year.

GMA’s Mr Bussmann said regarding the licensing process, which is expected to include a request for concept phase and a request for proposal phase: “The groundwork is already forming for this process as prefectures across the country have started RFIs [requests for information] such as those in Sasebo and Hokkaido in 2017 with other jurisdictions starting similar processes in 2018.”

Regarding a narrative within Japan about perceived industry negatives, including the risk of some consumers developing problems with gambling, he stated: “Japan should continue to look at evidence-based research as well as jurisdictions like the United States and Singapore for resources on how to establish solid responsible gaming programmes for the small percentage that develop a problem with gaming.”

Jane Tsai, chief executive of JCT Holdings, a casino industry consultancy teaching integrated resort finance in Japan, told GGRAsia that Japanese legislators supporting the integrated resorts policy faced a “very difficult” challenge.

“It is about trying to be ‘fair’ to all by taking into account the preferences of all vested interests, versus forcing through much-needed measures or legislation to stimulate the economy,” she told GGRAsia.

“The hard part is that you can’t make everyone happy, so the challenge will be where to draw the line and who wields enough power to draw said line,” Ms Tsai added.

Mr Bussmann noted: “GMA still believes that the responsible gambling bill will be debated by all parties with the ruling parties’ bill serving as the initial framework. It is still on track to pass in the first portion of the 2018 ordinary session.” The latter was a reference to the Japanese parliament’s first sitting of 2018, due to start on January 22 and run through to June 20.

Japan legislative timetable

The GMA representative added: “The IR Implementation Bill, which was delayed by the snap election this past fall [autumn], will begin to form early in the year and be released officially around March 2018. It is likely to pass toward the end of the ordinary session (June) or a fall extraordinary [parliamentary] session in 2018.”

Commenting on the legislative process, Ms Tsai said: “The current pro-integrated resorts legislators have pledged their commitment to getting all legislation done on time. But if they are serious about drafting a fully-comprehensive IR Implementation Bill, it is imperative they appoint external parties with real, tangible, hands-on, IR/gaming industry experience to their advisory board, to supplement the knowledge of the current panel of experts that consists of people who have studied IRs and gaming on an academic basis.”

She further stated: “Adding gaming experts to the panel will also ensure Japan’s new IRs are regionally competitive rather than being caught up in a narrative regarding some locals’ fears about the industry. Gaming experts can help clarify any concerns raised, and more quickly propose viable solutions that are socially responsible as well as commercially viable for the casino industry.”

GMA’s Mr Bussmann noted regarding Japan: “Some believe that a casino [entry] levy can be implemented as a deterrent for locals to gambling. This should be left up to the regulatory body to address any levies and should be viewed as a cost of entertainment, not a deterrent to gaming. Singapore’s most recent casino entry levy numbers show that there is not a direct correlation. It is a tax and not a deterrent and should be treated as such.”

Macau in 2018

In the Macau market, there was a near hiatus in 2017 in terms of large-scale new casino properties and new infrastructure; a notable exception being the low-key launch on June 1 of the new Taipa Maritime Terminal for ferry services at Pac On, serving the Cotai market.

The past year gave few clues as to the role in the Macau market as a whole – or not – of the current six casino operators when their current rights expire on various dates in either 2020 or 2022.

But in early November, Macau’s Chief Executive, Fernando Chui Sai On, said that mid-2018 would be an “appropriate” time to provide more details regarding any extension of gaming rights for Macau’s current gaming concessions and sub-concessions.

Two Macau government-commissioned academic studies into the possible development path of the city’s casino industry between the years 2020 and 203 are due “to be completed by the third quarter of 2018,” the Economic Bureau told GGRAsia earlier this month.

Early in 2018 there will be a big event all but guaranteed – the opening of the HKD27-billion (US$3.46-billion) MGM Cotai property, which had been due on January 29, just before Chinese New Year, but has now been postponed to an unspecified date in February.

Banking group Morgan Stanley said in a late November note that the new venue’s promoter, MGM China Holdings Ltd, was likely to see during 2018 the highest growth in earnings before interest, taxation, depreciation and amortisation (EBITDA) among Macau’s six casino licensees and might also outperform the market in that regard during 2019.

There will also be plenty of changes early in 2018 at properties operated by Melco Resorts and Entertainment Ltd. The Crown Towers hotel tower at its City of Dreams Macau and City of Dreams Manila casino resorts will each respectively be rebranded “Nüwa” from mid-January.

Another accommodation facility at City of Dreams Macau – the former Hard Rock Hotel, currently operated under the name “The Countdown“ – is due to get a new branding from March 2018.

Also due to open in the first half of 2018 is the US$1-billion, 780-room, Morpheus hotel tower at City of Dreams Macau. The tower is likely to have premium mass gambling facilities, Melco Resorts’ chairman, Lawrence Ho Yau Lung, has previously stated.

New projects

Macau casino resort operator SJM Holdings Ltd is still publicly saying that its HKD36-billion Cotai scheme Grand Lisboa Palace is due to be completed “by the end of 2018” and “on budget”, according to the company’s unaudited third-quarter results highlights filed to the Hong Kong bourse on October 31.

Brokerage Sanford C. Bernstein Ltd had suggested in an October 31 note that Grand Lisboa Palace would launch only in 2019, one calendar year before the company’s current Macau casino concession is due to expire.

At the time this story went online there was no confirmed opening date for The 13, a Macau hotel scheme on the border of Cotai and Coloane. In late October, the venue promoter had said it intended to open The 13 hotel “on or before” March 31, 2018, after securing new funding to complete the scheme. At that time the firm mentioned its intention of having gaming operations at the property “as soon as practicable”.

The coming year is additionally due to see the opening to traffic of the Hong Kong-Zhuhai-Macau (HKZM) Bridge. The 55-kilometre (34.2-mile) structure – that spans the Pearl River Delta – will offer an alternative link between the major regional hub of Hong Kong International Airport and Macau’s casino and events market, compared to the current ferry journey from Hong Kong or long road trip via mainland China.

Some investment analysts expect the bridge to boost the number of tourists to Macau, although there need not be a direct correlation between the aggregate of tourists to the city and the size or expansion of Macau’s annual gross gaming revenue. China’s central government has still to announce a launch date for the bridge.

E-Sports on rise in Macau?

Regarding the much-discussed and much-debated topic of “diversification” in Macau’s economy – stated aims of the central and local governments – e-Sports has been mentioned by an advisor to the Macau government as one possible route.

Davis Fong Ka Chio, a Macau academic, appointed legislator and advisor to the city’s government on gaming policy matters and economic diversification, told a law conference held in Macau in early December that the inclusion of e-Sports at the city’s casino venues could boost their regional competitiveness, and make the places more attractive to younger generations of consumers.

Such video game tournaments have recently been conducted in casino jurisdictions including Las Vegas, Nevada, in the United States. In Macau, several tournaments have been held in the city, some on casino resorts premises and some outside.

In December, Unikrn, a Seattle, Washington, Internet startup in the United States, that is offering e-Sports betting via digital tokens, said it had a deal with U.S. casino operator MGM Resorts International – parent of Macau casino operator MGM China – to run e-Sports tournaments at the MGM Grand Hotel and Casino in Las Vegas, Nevada. The deal does not cover Macau, Unikrn confirmed to GGRAsia.

Spencer Yang, general manager for Asia at Unikrn, told GGRAsia by email: “We believe that bricks and mortar casinos can benefit from the diversification of entertainment options for patrons… e-Sports attract not only competitive e-Sports gamers, but also fans and socialisers alike. These additional patrons will provide a very lively crowd for the properties.”

He added: “E-Sports events are already being introduced in Macau with events such as MDL Macau, the 2017 China eSports Carnival [held at Galaxy Entertainment Group Ltd’s Broadway Macau property in August], and Girl Gamer 2017 Esports festival [held at Melco Resorts’ Studio City property in late August and early September].”

Unikrn’s Mr Yang further noted: “There are also many offline meetups hosted in the city. Rolling out e-Sports betting in casinos in Asia Pacific such as those in Macau will require casino groups to work closely with established [e-Sports] companies with experience. It will be great to see conversations beginning and trials in 2018.”

“We will likely see many regions such as the Philippines, Cambodia, Singapore, and others hosting more events in their integrated resort locations,” Unikrn’s Mr Yang told us.

Joe Pisano, chief executive and founder of Jade Entertainment and Gaming Technologies Inc, a Manila-based distributor and operator of casino gaming machines, told GGRAsia: “We are currently building the sport book at Okada Manila and we see that there will be huge growth in e-Sports in the future. A recent tournament attracted a large number of spectators and a PHP57-million [US$1.1-million] prize pool.”

Rest of Asia

In other news from the Philippines, it emerged that 2018 might see the sale to private investors of some public-sector casinos run by the country’s casino operator-cum-regulator, the Philippine Amusement and Gaming Corp (Pagcor).

The country might even see a new regulatory body formed, combining all online as well as bricks and mortar licensing, if a bill proposed by the speaker of the lower house of Congress is passed.

In South Korea, Jeju Shinhwa World – a Jeju Island resort that is scheduled to feature a casino – was due to have a “grand opening” on January 18, but subsequently told GGRAsia that it had been postponed, pending local government approval for the gaming facility.

Elsewhere in North Asia, 2018 could offer more clarity on the likely future tax liability of Tigre de Cristal, a casino resort near Vladivostok in the Russian Far East.

On December 18 it was announced that Asian casino investor Lawrence Ho Yau Lung was selling off his stake in Summit Ascent Holdings Ltd, the lead developer of Tigre de Cristal. No reason was given for the sale.

In Southeast Asia, Genting Malaysia mentioned during its third-quarter earnings announcement in November it was “looking forward to the roll out” in 2018 of a 20th Century Fox World Theme Park at its Resorts World Genting casino resort outside the Malaysian capital, Kuala Lumpur, as well as to the opening of a new indoor theme park. The facilities are part of the Genting Integrated Tourism Plan, a revamp for the resort.

In Cambodia, 2018 could be the year that a long-awaited gaming law might finally reaches the statute book, potentially making the country’s casino market more attractive to foreign investors. In Vietnam, the new calendar year might herald a new dawn for the casino sector, via the introduction – on a trial basis – of casino gambling for economically-qualified locals.

(Updated, February 26, 2018, 9.53am)

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