In the third and final part of our deep dive into the Japan IR licensing process, we examine the remaining 16 operator candidates – some big, some small, some highly experienced, some not, some cashed up, some less so – but all desperate to win the most coveted item on the planet for the world’s casino operators.
* IAG examined the four operators in Tier 1 – MGM Resorts, Galaxy Entertainment Group, Las Vegas Sands and Genting Singapore – in part 2 of this series.
TIER 2: ALMOST FAMOUS
Serious and major players not quite in the top echelon globally, but not far from it.
WYNN
PROS
- Reputation for luxury
- Has enjoyed success in key global markets of Las Vegas and Macau
- Famous brand name
CONS
- Potential reputational damage from Steve Wynn scandal
- Was previously linked with disgraced Japanese businessman Kazuo Okada
It is perhaps a little unfair to bump Wynn down into the second tier as it could lay claim to being a gorilla, but maybe just a 500 pound one rather than the full 800 pounds. A darling brand name with a reputation for uber-luxuriousness with players, the Wynn brand has never quite held the same mystique for industry types, or indeed market cap for that matter. Founder Steve Wynn was always a 10 figures type of guy, whereas his counterparts in Tier 1 hit 11 figures. Wynn loves to tell the world it “invented the integrated resort”, but we’ve now entered the third decade of this century. The opening of the Mirage was a long time ago.
Wynn Resorts Japan President Chris Gordon has his work cut out for him. To be successful he will need to do six things. First, prove the company has moved on from the scandals (plural) of the past and has genuinely turned over a new leaf. Second, demonstrate Wynn can construct something that isn’t a copy-pasted golden brown building with a curve for a roof line and a squiggly signature on top, with that same red floral carpet. Third, that Wynn can play nice in a Japanese consortium, possibly even with a minority interest. Fourth, that a very American company can delicately negotiate the nuances of Japanese business and government culture. Fifth, find the financing it will need for what will be a very capital intensive undertaking. And last of all, that he can build an authentic messaging and communications strategy to convey points one to five above – something that Wynn Resorts has struggled to do for decades.
MELCO RESORTS & ENTERTAINMENT
PROS
- Was first to declare official “Yokohama First” policy
- Operations in Macau, Philippines, Cyprus and Australia (via Crown Resorts)
- Has listings on Hong Kong and US stock markets
CONS
- May be seen as a Chinese company
- Perception of business ties to Dr Stanley Ho needs to be explained
- Crown Resorts currently involved in suitability inquiry in Australia
If licenses were awarded purely for enthusiasm, Melco’s Chairman and CEO Lawrence Ho would already have it in the bag. Many of his speeches begin with something like, “This is my 500th trip to Japan, I first came here as a five-year-old, and I simply love Japan.” Ho is not being disingenuous – his adoration of the country is plain to see. He even installed Japanese style toilets in every guest room at Morpheus, the latest addition to Melco’s City of Dreams flagship IR in Macau.
Now into his 40s, the fit and sprightly Ho still comes across as young and exuberant, but has matured greatly in recent years. He has taken Melco to new heights, firmly claimed the number 3 spot on the IAG Power 50 list since 2017, and consolidated his international credentials with expansions into the Philippines, Cyprus and Australia. He famously once said he would do “whatever it takes” to win a license in Japan, a statement he might now regret, as this was widely interpreted as Melco placing no limit on their potential capital investment. Ho has even vowed to headquarter Melco in Japan should it win a license.
This following is meant in the most respectful of ways, but having the famous Dr Stanley Ho as a father is both a blessing and a curse, and the younger Ho will have to convince the powers that be in Japan there is no business connection, given decades old rumors which continue to circulate. This is unfair given that Dr Ho is 98 years old, widely known to be in poor health, and clearly has not had any influence over his son’s business for at least a decade, and possibly a good deal longer.
One could never accuse Melco of not being prepared to take risks. They can dazzle an audience with their ideas or proposals, but they do sometimes find themselves being accused of favoring style over substance. To win in Japan, they will need both.
SJM
PROS
- Long-standing history of operating in Asia
- Deep connection with Chinese players
CONS
- Arguably the world’s most “Chinese” casino operator
- No global exposure outside of Macau
Were SJM not to make a bid for Japan, they would be the only of Macau’s six concessionaires to elect not to do so. So it seems almost mandatory for the company co-founded by none other than Dr Stanley Ho himself to throw their hat in the ring. SJM’s bid is being spearheaded by Director and Assistant COO Arnaldo Ho, the late 20s son of Co-Chairman and Executive Director Angela Leong.
Working against (and arguably for) SJM are their extremely deep Chinese ties – Dr Ho held the gaming monopoly in Macau from 1960 to 2000 (effectively 2004). Also working against them is the widely held belief they were pursuing a property in Hokkaido, a location which has publicly announced it is no longer pursuing a bid.
BLOOMBERRY
PROS
- Operates Philippines IR market leader Solaire Resort & Casino
- Chairman and CEO Enrique K Razon Jr has strong global business ties
CONS
- Only casino outside Philippines, located in South Korea, is not profitable
- Currently focused on second Manila casino, cruise port developments
The Philippines IR market has grown stupendously over the last five years, and now rivals that of Singapore for the title of Asia’s second largest gaming market (a title which in due course should be lost to Japan). Solaire is the undisputed leader of the pack at Manila’s Entertainment City – at least it is for now until Okada Manila, which is still ramping up, comes knocking.
Solaire’s Chairman and CEO, Enrique Razon Jr, is no stranger to international investment. Named the fourth richest person in the Philippines in 2019, Razon controls a string of ports around the world, as well as interests in mining, electricity, oil and gas. In January he told IAG his interest in a Japan IR only extends to a regional IR “in the US$3 billion to US$4 billion range”. Solaire is widely known to be interested in Wakayama as a potential location.
SUNCITY
PROS
- Strong cash reserves
- Access to huge VIP database
- Provider of luxury services
CONS
- Very much a Chinese company
- History as a junket operator may cause issues with Japan authorities
VIP Gaming Promoters (often referred to as “junkets”) have been the lifeblood of Macau and much of the gaming industry across Asia – providing the lion’s share of Macau’s mind-blowing gaming revenues each year. Once representing as much as 75% of Macau gaming revenue, this proportion was down to around 50% in 2019 as the mass market continued to grow, but that 50% still represented nearly US$20 billion in gaming revenue.
The undisputed king of all VIP Gaming Promoters in Asia is Suncity. The company is so ubiquitous, it operates VIP rooms in all of Macau’s major IRs across all six Macau concessionaires, as well as bringing action to the Philippines and elsewhere across the continent. Suncity is so dominant it controls over 45% of the VIP market – almost as much as every other VIP promoter combined.
The ironic thing is that it has become clear in recent years that Suncity’s Chairman and CEO Alvin Chau would love nothing more than to change hats and become an IR operator. He has made strides to do so in numerous ways, such as developing the Hoiana IR in Vietnam, which will see some facilities ready this year, and taking control of Tigre de Cristal in Vladivostok, both under Hong Kong-listed Suncity Group Holdings Limited (HKEx: 1383). Suncity Group Holdings Limited has also become partners with Korean operator Paradise in Busan and most notably signed agreements to develop and operate the casino and hotel at Manila’s Westside City Resorts World in Manila, currently scheduled to open at Entertainment City in late 2022.
Suncity will be looking to promote the diversification of its business arms as a major advantage in fulfilling the government’s goal of driving more tourism to Japan. Via Sun Entertainment Culture Limited the company produces and distributes TV and film productions as well as organizing live concerts.
Through Sun Food and Beverage it owns and operates multiple restaurants in Macau and mainland China, and is an “Executive Member of the Council of the Chengdu City of Gastronomy Association.”
The listed group even boasts a travel arm, Sun Travel, organizing high-end tourism services from transport and accommodation to cultural and entertainment experiences.
An IR in Wakayama would be more than icing on the cake for Chau, it would be a whole new cake. Suncity has incorporated Suncity Group Holdings Japan Limited through which to pursue its Japan ambitions, revealing a tentative budget of between HK$30 billion and HK$35 billion (US$3.8 billion to US$4.5 billion) for an IR in Wakayama.
Suncity finds itself in a three-way tussle with Bloomberry (see previous entry) and Barrière (see below) for the right to partner with Wakayama in an IR bid.
TIER 3: PUNCHING ABOVE THEIR WEIGHT
Smaller but established gaming companies that would have to raise themselves to the next level to build a multi-billion US dollar IR in Japan.
HARD ROCK
PROS
- Globally recognized brand name
- Highly respected Japan CEO Ed Tracy has decades of global experience including a stint in Macau as CEO of Sands China Ltd
CONS
- Target destination of Hokkaido has withdrawn from Japan’s IR race
The gaming part of the Hard Rock empire has been keen to expand beyond the US for years. Hard Rock significantly boosted their international credentials in 2017 when they hired the much-admired former CEO of Sands China, Ed Tracy, as CEO of their Japan entity, Hard Rock Japan, and charged him with responsibility for exploring possible global expansion.
Hard Rock had declared its interest in bidding for a Japanese IR in Hokkaido, even going so far as to open an office in Tomakomai, Hokkaido.
Despite Hokkaido Governor Naomichi Suzuki in November last year officially announcing the prefecture’s withdrawal from the race, a Hokkaido-based IR remains a popular concept with local business groups. Rumors of a resurrection of the bid persist, so it might not be time to run a line through Hard Rock’s name just yet. In December Hard Rock Japan President Ado Machida confirmed Hard Rock remained an official partner of the Hokkaido Consadole Sapporo soccer team and would continue their sponsorship of the Sapporo Snow Festival. He also told IAG, “We will continue our efforts for a future IR bid in Hokkaido.”
MOHEGAN GAMING & ENTERTAINMENT
PROS
- Operates Mohegan Sun, one of the USA’s largest tribal casino resorts
- Strong history of operating in regional locations
CONS
- Target destination of Hokkaido has withdrawn from Japan’s IR race
- All current casino operations are located within the US
Currently developing the Inspire IR (scheduled to open 2022) in Korea’s Incheon region in partnership with Korea’s Hanwha Corporation, tribal gaming operator Mohegan Gaming & Entertainment had declared its interest in bidding for a Japanese IR in Hokkaido. Just like Hard Rock, their rivals in the Hokkaido bid, they opened an office in Tomakomai, Hokkaido. In December Mohegan said it was “evaluating its options in Japan.”
NAGACORP
PROS
- Operates hugely successful NagaWorld IR in Cambodia
- Strong cash position
- Developing second casino in Vladivistok, Russia
CONS
- Yet to prove bona fides outside of Cambodia
Listed in Hong Kong, Nagacorp owns and operates the fantastically successful NagaWorld, Phnom Penh’s monopoly casino operator. Taking advantage of low tax rates, a favorable regulatory regime and a surfeit of players from mainland China, founder Dr Chen has parlayed what was originally a small riverboat operation into an operation booking around half a billion US dollars EBITDA annually.
SEGA SAMMY
PROS
- Only Japanese company leading an IR bid
- Deep experience in Japan gaming market
CONS
- Primarily experienced in pachinko
- Minimal experience operating large-scale IR
To claim Sega Sammy is an IR operator is a stretch, with them being the smaller partner in the 45-55 partnership with Korea’s Paradise Co in Korean integrated resort Paradise City. Secondly, it is Paradise Co, not Sega Sammy, that is conducting day to day operations at Paradise City. It also doesn’t help that the property has endured a slow, albeit accelerating, ramp-up that has seen it only occasionally cross into profitability.
But all those “cons” might be wiped out with one significant “pro”: Sega Sammy is a Japanese company. In fact, it is the only Japanese company that can lay any claim, stretch or not, to being an IR operator (we’re ignoring the exceptional case of Okada for the purposes of this discussion).
At the Yokohama IR industry event in late January this year, Sega Sammy’s stand featured renowned local chefs, and created a buzz amongst Japanese attendees in a way their foreign counterparts could not replicate.
TIER 4: IT’S LIFE JIM, BUT NOT AS WE KNOW IT
Companies that, while possibly quite established in their far away home lands, for one reason or another could be said to have no place bidding for a say US$3 billion dollar IR in Japan.
GROUPE BARRIÈRE
PROS
- Long standing history of operating in European holiday markets
- Has stated willingness to be minority partner in Japan IR
CONS
- Lack of experience in Asia
- Lack of experience in operating IRs of this scale
Groupe Barrière opened an office in Wakayama in May last year, and has expressed comfort with being a minority partner in a property with around a US$2.5 billion investment.
RUSH STREET
PROS
- Strong history of operating in regional locations
CONS
- Target destination of Hokkaido has withdrawn from Japan’s IR race
- All current casino operations are located within the US
Rush Street is primarily a real estate development company which got involved in regional casinos in the US around 20 years ago. They’ve expressed interest in a US$2 billion investment in Hokkaido, and mentioned they would be comfortable taking on local partners.
CASINOS AUSTRIA
PROS
- Extensive network of casinos throughout Europe, plus Egypt and Australia
CONS
- Lack of experience in Asia
Casinos Austria announced its interest in bidding for a property in Nagasaki in June last year. The company is 34% owned by the Austrian government. In October, CEO Christoph Zurucker-Burda announced the company would be submitting a business concept for an integrated resort in Nagasaki ahead of the prefecture’s RFC launch on 1 November 2019.
PEERMONT GLOBAL
PROS
- One of South Africa’s largest casino operators, with 10 properties
CONS
- Lack of Asian experience
Peermont has been singularly focused on the Huis Ten Bosch site in Nagasaki for several years.
GET NICE
PROS
- Previously operated casino in Macau
- Has announced partnership with Japan’s Shotoku Rinaldo Corp
CONS
- One target city, Makinorhara, has withdrawn from IR race
- Not currently operating any casinos
Get Nice, which is listed on the Hong Kong stock exchange, were formerly so-called “Party B” revenue share participants with Galaxy Entertainment Group in the Grand Waldo casino in Macau, a property which was eventually sold to Galaxy and transformed into Broadway, contiguous to the wider Galaxy Macau IR. Previously interested in Shizuoka, Get Nice has also expressed interest in Nagasaki.
TIER 5: OPERATORS? REALLY?
Companies that don’t really seem to fit.
CLAIRVEST GROUP
PROS
- Seeking entry as an investor, rather than an operator
CONS
- Target destination of Hokkaido has withdrawn from Japan’s IR race
- Has hinted at maximum investment potential of under US$700 million
Clairvest made an early splash, getting its name out there in the same places operators were. However with the demise of Hokkaido, and an investment budget mooted to be well south of US$1 billion, it’s unclear whether Clairvest can carve out a position for itself in the Japanese IR industry.
CURRENT
PROS
- Local Japanese firm from Nagasaki
- Has proposed total investment budget of JPY550 billion (US$5 billion)
CONS
- No direct casino or IR experience
We’re not quite sure where Current fits in yet. Clearly interested in Nagasaki, and having the advantage of being a local Nagasaki company, they are said to have links both to Get Nice (see earlier entry) and Macau’s Sofitel Hotel at Ponte 16. Current has opened an office in Sasebo to pursue IR development at Huis Ten Bosch in Nagasaki.
