Wednesday, September 28, 2022

Japan Gaming Congress lays groundwork for IRs

Excitement over the prospects for IR development in Japan was palpable at the just-concluded Japan Gaming Congress. Held at a major hotel in central Tokyo, it drew in a capacity crowd of 450 people, mixing international operators with local Japanese businesses and others who hope to become stakeholders in what is predicted to become a multi-billion dollar industry. More than half a dozen Japanese lawmakers spoke on the opening day of the two-day conference, including Deputy Chief Cabinet Secretary Koichi Hagiuda, a close aide to Prime Minister Shinzo Abe.

Coincident with the conference was a meeting of a government panel, which tentatively agreed that any IR to be licensed would be required to include five types of facilities: a casino, a hotel, a convention center, leisure facilities, and an institution that provides information and assistance for domestic travel.

Speakers at the Japan Gaming Congress agreed that the government was likely to authorize up to three IRs in the first round, with the ultimate number not exceeding ten. These IRs will most likely be required to be consortiums bringing together international operators with deep experience in the global gaming industry and local businesses that can shape and implement strategies appropriate to the specifically Japanese context. Each IR consortium is envisioned to function as a local monopoly.

Masayuki Watanabe, an attorney who is assisting the government in formulating the shape of the forthcoming legislation, revealed that two models for the bidding process for IRs were being considered. One model is that local governments tentatively interested in hosting an IR will first petition the central government. If their bid is successful, the local governments will then go about selecting the international and Japanese national enterprises that will form the consortium. The second model under consideration is that the local governments would partner with international operators and local businesses at the first stage, before the official proposal is made to the central government.

The advantage of the second model, Mr. Watanabe suggested, is that by partnering with businesses right from the start the local governments will become more committed to their own initial proposals, reducing the risk of backsliding and policy reversals at a more advanced stage. On the other hand, this approach invites the possibility, he warned, that many international operators will be annoyed by taking the time and expense of making serious bids and then finding themselves rejected.

Certain themes appeared repeatedly throughout the presentations and panel discussions of the Japan Gaming Congress. One of the most obvious was the keen interest and excitement about what might emerge out of Japan. The establishment of IRs in this East Asian nation is not regarded as a local or regional story, but potentially the most consequential development within the global gaming industry for the next decade. One speaker even quipped that managers of any major casino operator that weren’t at the Tokyo conference deserved to be fired.

Another point made repeatedly is that Japan can expect to benefit from lessons learned in earlier rounds of IR development around the world. In Las Vegas, Macau, Singapore, and elsewhere international operators have had both successes and failures. Now rich with past experience, they are gathering at the gates of Japan.

For Michael Mecca, president of the Galaxy Entertainment Group, a major lesson from this experience is that it is vitally important to ensure that the IRs are themselves tightly integrated into the communities that host them. He tells AGB that he himself walked through the shopping arcade of Yokohama’s Motomachi district in recent weeks meeting in person with the local business owners that adjoin the possible location of one of the largest Japanese IRs under consideration. Should this project go forward and Galaxy is selected as a partner, international guests will be encouraged to spend their time and money not only within the grounds of the IR itself, but also in the surrounding community that deserves to share in the economic benefits.

Several other participants pointed out that technology may become a special theme for some Japanese IRs, including, perhaps, Virtual Reality as a significant component of the leisure facilities. Since these projects remain some years in the future, new possibilities may have appeared by that time.

Yasushi Shigeta, president and CEO of Angel Playing Cards Co. Ltd., emphasizes technology from another perspective. He suggests that Japanese visitors will be put at ease knowing that camera surveillance and other high technology measures are present to ensure their safety and comfort.

A final point that was underlined at the conference is that Japanese IRs must of necessity be specifically Japanese. This is not only to gain acceptance from the domestic audiences, but also because international visitors can be expected to demand authentically Japanese experiences—not something they can find in their home countries or other places which they may have visited in the past.

The Japan Gaming Congress this year was somewhat handicapped by the fact that no one yet knows many of the specifics about the legislation the government is expected to unveil in the late summer or autumn. Until more concrete information is available on the government requirements, it is impossible to make accurate estimates about cost, profitability, and other crucial factors. For now it is little more than a guessing game.

Adequately clear, however, is that the business community is keen to leap upon the opportunities expected to soon be provided by the Japanese market.

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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