7 minute read
NORTH ASIA
Two locations left with sole bidders as operators exit
Wakayama’s IR bid appears to be on the ropes as the Suncity Group has withdrawn from the RFP process.
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This leaves the Wakayama RFP—which has been delayed for what until now had been unclear reasons—with only one remaining applicant. It doesn’t help that the last firm standing, the Clairvest Group, may or may not have presented the prefectural government with a credible proposal.
All that is known is that Clairvest has been seeking for the past year to “quarterback” an IR bid together with other unnamed partners, but the degree to which the Canadian investment firm has succeeded in making strong allies remains to be seen.
The two scenarios which seem to remain are that, like Osaka, Wakayama is now left with a single potential IR consortium against which it has little leverage, or else the prefecture’s bid for an IR license will soon collapse altogether.
Either way, the chances of seeing an IR built at Wakayama’s once-coveted Marina City location are clearly fading.
Before its sudden withdrawal, the Suncity Group had been taking quite a high profile.
The firm opened an office in Wakayama City last September and has been active in cultivating community support. Included among these efforts were a sponsorship deal with the local professional basketball team, the Wakayama Trians, and interaction with the local yachting community.
A statement from Chairman Alvin Chau on the company’s Japanese-language website explains, “After deep consideration, we have made this difficult decision under the enormous impact on the industry due to the spread of the new coronavirus infection. Many companies anticipate a long period of uncertainty, and the IR certification process in Japan appears set to take a lot longer than expected. Many things remain unclear, but we must consider the risks as a business operator.”
However, the decision appears to have come quickly. On May 1, Yoshikatsu Ohara, president of Suncity Group Holdings Japan, publicly promoted the firm’s bid at a general meeting of the Wakayama IR Promotion Council.
The group has been actively focused on Japan as an increasingly popular destination for Chinese travellers, its main client base. In 2019, it said it was buying a plot of land on Miyako island in Okinawa to build a non-gaming resort.
It said it intends to build 40 villas with a pool and a hotel of more than 100 rooms, saying that with the increased number of Chinese visitors traveling to Japan, and newly operated direct flights to Shimojishima Airport, the acquisition represents a good opportunity to expand Suncity’s tourismrelated business and to diversify its focus, from China to the East Asia region.
Suncity’s departure from the IR race probably explains why the Wakayama Prefectural Government has fallen behind its own timeline for naming its IR operator partner.
Attention now must turn to whether Clairvest is declared the winner, or if Wakayama itself withdraws from Japan’s IR race.
The prospect of another Japanese city with just one sole contender for an IR casts further doubt over the whole process.
Osaka, once one of the most sought after destinations, has found itself alone with the MGM Resorts-Orix consortium after other bidders pulled out in favour of the bright lights of Yokohama.
Wynn Resorts has left the bidding altogether, as has Las Vegas Sands, which cited Japan’s less than optimal regulatory and tax requirements.
Authorities in Osaka are said to be concerned they may have lost leverage in negotiations with MGM-Orix, which may be pushing for a scaling back of ambitions due to the poor business environment.
According to the Nikkei newspaper, there is now concern in Osaka that “if we ask the MGM side for strict conditions, they could withdraw,” thus leaving the Yumeshima site with no bidders at all.
Although the central government appears determined to push ahead with the process, at present it appears that only one location -- Nagasaki -- has all its ducks in a row. Osaka and Wakayama only have single bidders, while Yokohama’s problem is unstable politics, with a possibility that a win by an anti-casino candidate in upcoming elections would scupper the bid.
Entertainment key to Inspire Korea
Mohegan Sun is confident that its entertainment-centric business model will help it succeed in South Korea’s notoriously volatile foreigner-only casino market.
The company won a license in 2016 to build an integrated resort in Incheon, next to the international airport and about 30 minutes from the centre of the capital, Seoul. The price tag for Phase 1 was $1.6 billion, with a $5 billion budget overall in multiple phases.
However, progress on Inspire Entertainment Resort has been slow, with Covid adding to the delays.
The group won approval for an extension to its construction timetable in early April from the Ministry of Culture, Sports and Entertainment and now expects to open in the first half of 2023 instead of 2022 as originally planned.
Bobby Soper, a former Mohegan CEO who has now returned to head up the group’s international expansion plans in both Korea and Japan, said the company is comfortable with the new deadline and with the new approvals expects to secure financing to move on with the project before summer.
“We feel really good,” he told Asia Gaming Brief in aFace-to-Face series interview. “We wanted to see how the pandemic evolved and lenders wanted to see the same thing.”
“That’s not just in Korea, it’s everywhere, but I think there’s now a sense that there is light at the end of the tunnel. There’s a sense of optimism on this and based upon that we felt comfortable about moving forward with that extension and wouldn’t have done so without being confident of meeting those deadlines.”
As part of the extension approval, the group was
also permitted to amend its business plan to include more outdoor space and to change the timetable for its second-phase construction.
Soper said the new outdoor amenities will include more family friendly facilities, which will add to other non-gaming attractions at the resort, such as a live indoor arena capable of seating 15,000, a cosmetics and beauty hub and extensive food and beverage outlooks.
“It’s a work in progress but it will be a great opportunity for families,” he said.
The ability to drive revenue from nongaming may be key to the success of the IR. South Koreans are not permitted to gamble and its tourism market has suffered a series of setbacks in recent years, making it one of the most volatile in Asia.
An outbreak of Middle Eastern Respiratory Syndrome shut down tourism in 2015, which was just recovering when tensions flared between Seoul and Beijing over the former’s decision to deploy a U.S. anti-missile defense system on its soil.
China retaliated by banning tour groups to Korea, resulting in a 33 percent decline in visitors from 2017 to 2020. The impact from the Covid crisis is ongoing.
“We went into Korea understanding the potential volatility especially coming from China and that’s one reason our model is what it is, focused on non-gaming,” he said. “We know the risks and expect volatility but we think we’ve mitigated a lot of risk based on the model that we are creating.”
Soper explains Mohegan is an entertainment company first and foremost, well known for its live entertainment, where it expects to be able to excel in South Korea.
“We’ve always thought there is an opportunity to take our expertise for live entertainment and put it on an incredible piece of land next to the airport and 30 minutes from downtown Seoul,” he said, adding the facilities such as the arena and planned giant indoor water park will be unique selling points for the market.
“There will be attractions for gamers who are flying in, but this really is a nongaming driven project. We want to maximise those assets.”
At present, work on the site has slowed, but Soper said there is a lot of planning being done. “Once we finalize the financing you’re going to see a lot more activity on the site.”
The group’s other focus for international expansion is on securing a license for an IR in Nagasaki in Japan. In January this year, Mohegan teamed with Hong Kong-listed Oshidori for its bid after Hokkaido dropped out of the race.
“We think they’re the favourite in Nagasaki and we also feel good with them as partners. They have invested in our Korea project, which shows the type of partnership,” he said.
“They understand the opportunities for the sites to leverage with each other on cross marketing opportunities and database opportunities.”
Soper also said Oshidori is committed to building a “spectacular” project for Nagasaki, though wouldn’t be drawn on further details.
“It’s going to be iconic and something Nagasaki and Japan can be very proud of.”
