By Andrew W Scott
Gaming executives and analysts are becoming increasingly concerned that the rules of the game being mooted for Japanese IRs will render them unattractive, even unviable, for international operators.
In a note released late Monday, Union Gaming analyst Grant Govertsen commented, “The framework seems to become more restrictive by the day, and when coupled with what are likely to be astronomical project costs, could result in some of the biggest operators sitting this one out.”
“Japan is on the verge of one-upping the failed gaming expansions of Korea and Vietnam by moving forward with a gaming construct that can’t fulfill the stated goal of Japan’s IR development – tourism growth, and is so poorly designed that ROIs shrink to a level that makes participation on the part of the global IR developers much less likely.”
While the two IR developments in Singapore, Marina Bay Sands and Resorts World Sentosa, put Singapore on the map as an international tourism destination, Govertsen challenged the suitability of the model for Japan.
“Clearly the powers-that-be in Japan are hyper-focused on the Singapore model,” he said. “Singapore’s IRs have been wildly successful … we can certainly understand using Singapore’s IR framework as a starting point for Japan’s IR legislation.
“However, we are becoming increasingly concerned that the government of Japan is also using Singapore as the end point. For example, limiting the size of gaming floors to the exact same limit in Singapore, or 15,000 square meters – despite the fact that the local populations of Tokyo or Osaka are many multiples that of Singapore and despite the fact that Japan would like to see an even greater influx of incremental tourists than Singapore saw post IR opening. The math just doesn’t work with such a size constraint.”
Union Gaming expects the regulations for local players to be “among the most restrictive on the planet outside of barring locals completely.”
Japanese pachinko regulations have increasingly tightened in recent years, giving cause for concern the same may happen with IRs. The cost of land, construction and operations in Japan will be high – with Sands Chairman and CEO Sheldon Adelson famously tossing out a number of US$10 billion.
Govertsen’s final conclusion: “We question the ROI prospects of an IR in Japan.”
Japan’s IR Implementation Bill is due to be passed by December this year, but is likely to be delayed.
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