JAPAN

Policy delays give late movers a fighting chance

The decision by the Abe government to drag its feet on issuing more detailed regulations governing the IR industry and to delay the establishment of the Casino Management Board probably changes little about the shape of the national regulatory regime, but it may potentially exercise a profound effect on which local governments get licensed and which IR operators are selected.

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 are 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 that the July House of Councillors elections have passed, this may come at any time.

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, however, may indeed be highly consequential.

The Osaka government, for example, 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.

To be clear, 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, and reports suggest that even many local officials are losing confidence in their timeline.

Beyond Osaka, it has long been a toss-up about which local governments will receive the other two IR licenses. Potentially, the delay might change the lineup of winners and losers, as the early movers see their advantages reduced and the late movers have time that they otherwise would not have had to put together more credible local policies.

The most impactful scenario would be if a late-bloomer like Chiba City decided to fully embrace an IR bid, and this resulted in a second major urban IR in the Kanto region, which otherwise might have missed out on the first round of IR licensing. Not only would such a development deprive a would-have-been regional city of an IR license, but it would sharply increase the overall size of Japan’s IR market once the industry is up and running.

It’s much the same with 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.

Las Vegas Sands, for example, decided during the period of delay to announce its own policy of prioritizing an Osaka bid. This suggests that Sands is now sharply focusing its resources on a Yumeshima bid in a way that was not previously the case.

More generally, 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 launch their RFP processes.

Additionally, 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.

Chiba City launches RFI process

Chiba City has launched an RFI process with an eye to a possible IR bid next to the current Makuhari Messe convention center.

Companies that wish to participate in the RFI need to register between August 8 and 22, and then submit their reports and other information between October 15 and 28.

Hearings with individual companies will be conducted in November. Like the Yokohama RFI held last year, Chiba City is conducting the process without a clear commitment that it intends to follow through and actually make an IR bid.

Mayor Toshihito Kumagai has suggested that the information is being collected to help the city make an assessment of whether or not it should move forward.

Panasonic jumps into IR industry

Electronics and technology giant Panasonic is jumping with both feet into the anticipated IR industry by consolidating on July 1 about thirty of its employees into an “IR Business Promotion Headquarters.”

Panasonic is aiming for deep and wide-ranging involvement in the Japanese IR industry, supplying both products and services including multilanguage translation systems, facial recognition and security systems, and even autonomous electric vehicles.

Some of these technologies Panasonic plans to showcase at the 2020 Olympics, using that event as a springboard to make sales and partnerships with IR consortiums.

Another showcase and development venue for related technologies is the Fujisawa Sustainable Smart Town which began operations in 2014.