Tuesday, June 28, 2022

Policy delays give late movers a fighting chance

The Abe government's decision to drag its feet on more detailed regulations governing the IR industry and to delay the establishment of the Casino Management Board may exercise an effect on local governments' own development prospects, and which IR operators get selected as their partners.

According to the original schedule, the Casino Management Board (the official English name has yet to be revealed) should already be up and running with almost a hundred staff members, preparing themselves to become the main regulator for each IR’s casino floor. Also, local governments should now be preparing to launch their RFP processes and international IR operators pouring over the details of the published regulations, adjusting their bids and finalizing their strategies.

Instead, many have been trapped in an unexpected holding pattern, preparing as much as they can under the circumstances, but mainly waiting for the central government to come out of its cave and to provide everyone with more concrete information. Now it is expected this will finally come at the end of this year, and by January at the latest.

All accounts suggest that there never was any national policy reason why the delay occurred, but rather it was a political decision to remove the casino controversy from public view so as not to work against the electoral interests of the ruling party. In other words, the delay will probably have little or no consequence for the ultimate shape of the national regulatory regime.

The impact on local governments, especially Osaka, may be highly consequential.

The Osaka government is increasingly panicked that national policy delays will doom the anticipated Yumeshima IR to open its doors only after the 2025 World Expo is concluded. This would signify a tremendous loss of opportunity as millions of visitors who would have seen and experienced the IR will instead not have the chance to do so. It would also deprive the new IR of the potential revenues from some of those visitors, an inflow that might have assisted the operators to more quickly recover their vast investment funds.

The Osaka government has not given up its goal of opening the IR in 2024, but many independent analysts believe this target will prove to be much too ambitious. MGM Chairman and CEO James Murren, however, indicated that he still thinks it can be done if the necessary permits are issued promptly.

The delay may also impacted the chances of the international IR operators.

MGM Resorts, for example, carefully laid the groundwork for its Osaka bid over many years, putting direct effort into building community relations that has not been matched by other operators. It is also the only firm to unveil its main consortium partner, the Orix Corporation. But whereas earlier this year MGM had built up such momentum that they appeared to be well ahead of their rivals, the unanticipated delay may have allowed others to narrow the gap.

Firms such as Galaxy Entertainment used the months of delay to assemble an increasingly large design and development team, suggesting that it will be extremely well prepared when the local governments, including Osaka, launch their RFP processes.

The delay clearly was of benefit to Wynn Resorts as well. Earlier this year its attention was absorbed by its case before the Massachusetts Gaming Commission and the launch of Encore Boston Harbor. Now that these matters are safely behind them, they have opened their Tokyo office and are quickly bulking up an in-country Japan operation.

The early movers maintain that they always expected it to be a long process, and that they remain as committed to Japan as ever. Indeed, with the single exception of the Clairvest Group, there have been no indications that any potential operator has been retrenching. In fact, new players are still making their debuts, especially in the smaller, regional markets.

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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