In the final instalment of their five part series on the development of Japanese integrated resorts, casino and integrated resort experts Dr Glenn McCartney and Dr Andy Nazarechuk examine the many elements authorities and operators must get right to ensure an IRs long-term success.
By Dr Glenn McCartney and Dr Andy Nazarechuk
Over our past four articles we have discussed a broad range of topics regarding the Japanese IR product mix, covering everything from sumo wrestling to sushi, social and economic impacts, tourism development and policy and compliance issues in our attempts to generate an overall understanding of the complexity of developing a quality integrated resort. Ultimately the IR should become a “destination” showing a grand scale of appeal. There is a wide range of opinions regarding what it means to create an IR that will not only be profitable, but will also stand the test of time and provide a sense of pride for the community. We believe there are fundamentals that provide a foundation for any IR development and that the governing authorities of any jurisdiction must review before commitments are made. We highlight a few that should feature strongly in IR assessment.
Integrity – To ensure that all parties involved in an IR act properly, there must be a comprehensive regulatory policy. However, some governments have created severely restrictive policies that inhibit operations and can cause challenges for an IR. The worst case scenario for any government developing an IR is to become entwined with corruption or collusion and to lose the trust of the local community. Transparency is the best way to assure the community and community leaders that the goal is to improve the local economy, create new forms of entertainment and mitigate future risks that can arise – one being social costs such as problem gambling and criminal activities. Transparency, perhaps through a public consultation process, should let all stakeholders know and understand what policies are being created and the rationale behind those policies. Not everyone will agree, but everyone will know the facts. When the public can contest, question and make recommendations on policy development, then policies will be stronger and the community will support those policies.
The regulatory framework provided will guide the IRs and influence perceptions of integrity and image. Singapore has created an excellent model for its regulatory system using Las Vegas as an example and adapting policies to meet their jurisdiction’s needs. There is no need to recreate the entire regulatory system. The best method is to start with policies that already work and adjust those policies to align to the needs and culture of the local jurisdiction in Japan.
Public-private partnership – The IR introduction must be thoroughly master planned into the future. We have seen a lack of public-private collaboration with IR introduction and expansion in other markets, leading to inadequate infrastructure, a lack of economic and tourism diversification beyond gaming, diminishing transparency and insufficient legislation and direction dealing with labour laws, tourism strategy, environmental protection and casino oversight. There will be different reasons and objectives for those involved in IR development and each stakeholder will bring varying levels of resources, power and authority. It serves little purpose, we have found, if there is limited equitable cooperation. Yes, the IRs will operate, but the question will always be whether things could have been better from the outset.
In Las Vegas, there is close cooperation between operators and regulators that results in a positive image of the industry and the destination – now a leading convention, leisure and entertainment city. This has been demonstrated by the numerous times Las Vegas IRs have self-reported variations from established policies. Las Vegas IRs have paid millions in fines over the years but have also benefited from the overall positive image that has made Las Vegas one of the top tourism destinations in the world.
Entertainment options – The types of entertainment provided will be vital to the overall success of the Japanese IR. Of course, gaming is the featured type of entertainment. However, to entice repeat visits, loyalty and a broader segment of visitors from locals to regional and international leisure and business travellers there must be a wide variety of ever-changing entertainment and event opportunities.
There will be an expectation that some have a Japanese flavour. Large showrooms allow for world-class Broadway plays, custom-made productions and performances by top entertainers. These types of activities allow casino patrons, tourists and the local community to enjoy these performances at the same time. There is also a need for smaller lounges that can showcase visiting or local performers in a more intimate setting. Lounges provide a fun haven for locals who can return repeatedly for an entertaining evening out. Shopping, swimming pools, theme parks, cinemas, bowling, golf and karaoke lounges must be all factored into the entertainment mix, depending on the size, location and type of IR constructed.
The life cycle of IR entertainment can be short lived. Audiences can bore quickly with the content, particularly repeat visitors. Las Vegas has focused on the need to create and recreate new entertainment opportunities since its inception. Las Vegas is known as the “Entertainment Capital of the World” because IR operators understand the importance of entertainment and celebrity events as a means of attracting the mass and high-end travel market to its destination. In some Las Vegas IRs there are two showrooms – one for its featured production such as “Cirque du Soleil” and the second for an ever-changing list of top performers who appeal to various markets throughout the year.
Entertainment is continuously evolving as shown by the growth of “night clubs” and “pool parties” that offer current music trends and modern facilities that appeal to the millennial crowd. Nearly 70% of revenue generated in Las Vegas is from non-gaming. In Macau it is 10%. The Japanese authorities, in awarding IR concessions, will need to emphasise their economic and tourism expectations for gaming versus non-gaming growth.
Dining – There is no doubt that food must be carefully considered when developing a Japanese IR. Renowned for its quality, taste and variety, domestic and international tourism to Japan will look at Japanese food and drink as part of the travel experience. Global audiences have become increasingly aware of Japanese food and etiquette with the opening of Japanese restaurants in their towns and cities. Japanese restaurant brands have opened in Asian and western locations, some featuring celebrity Japanese chefs. Dining expectations are therefore created through a Japanese IR visit. The choice should be famous chefs, themed restaurants displaying ethnic Japanese dishes and food preparation techniques, as well as buffets and food court offerings reflecting price points and encouraging local enterprise and eateries.
In the early days of Las Vegas, cheap food was seen as a way to attract customers – “All you can eat at a low price.” This was one of the value propositions that made Las Vegas famous. Today, it seems that every famous celebrity chef must have a restaurant in Las Vegas to confirm their celebrity status. Macau’s IRs have brought in restaurants and chefs from various parts of China given the large Chinese visitation and the importance of the high-end Chinese casino patron. However, the restaurant mix also includes brands from Hong Kong, Japan, Korea, Taiwan, India and some western style concepts to enrich the dining experience and growing consumer base from other destinations. The patron might wish to enjoy a luxury meal with friends or at another time a simple bowl of quality noodles. The Japanese IR needs to carefully assess.
Shopping and retail development – Visitors to Japan are attracted by the ability to shop for Japanese brands. These have the attributes of quality and uniqueness. A distinct retail area allows everyone to find the latest fashion trends and provides players an opportunity to spend money or be rewarded with souvenirs from their IR visit.
An IR’s shopping precinct is more than a “mall” – it comes with enhanced expectations through design features or entertainment. It is no secret that tourists spend more money shopping on their vacations so they can bring home memories and gifts from their travels. Luxury shopping meets the needs of the high-end casino patron or those who like extravagant shopping opportunities. There also needs to be mid-level retail opportunities so everyone can share in the shopping experience. The retail area provides an opportunity for local retailers and suppliers to be involved, creating numerous job opportunities in the process.
Importantly, retail and dining present opportunities for the IR to tailor property-wide or bespoke events. While Japan’s IRs will have an array of non-gaming choices, an effective communication, social media and product packaging strategy will propel an IR into a market leadership position compared to its rival IRs. Japanese authorities should not overlook the marketing prowess of the IR operator.
Design – A Japanese IR must have an iconic design that makes it stand out from the rest of the skyline. Some operators may build a box, install gaming tables, add a couple of restaurants and label it an IR. But a true IR must be a destination in itself.
When someone enters an IR they must already know they will have multiple leisure and entertainment experiences. Design can incorporate themes and well known brands, be it hotels, restaurants, nightclubs or events. Strategic brand partnerships can hasten IR awareness and visitation decisions. IR visitors want to spend time in an IR so the IR must create these special reasons.
Marina Bay Sands in Singapore is an example of an IR offering everything needed for a memorable experience, whether that experience is for a high roller who wants to play, a tourist seeking a few days of excitement or a local who just wants a fun night out. Its unique design, widely used in Singapore tourism imagery, shows the importance of IR design in a destination’s tourist image and branding formation.
MCE – A large IR will feature meeting space. Las Vegas is renowned for its yearly mega conventions and exhibitions. The unlikely mix of gambling and MCE (meetings, conventions, exhibitions) has been seen to work. In the 1990s, Las Vegas operations that had traditionally focused on the gaming business and complimentary player incentive policies recognized that MCE business could fill and pay for rooms on weekdays, with guests paying for meals and meeting space. Downtime could be spent gambling, shopping and enjoying other leisure activities. This also brings new economic opportunities to local communities, as they have the chance to participate in meetings, supply products, be trained in the industry or display at exhibitions without the expense of traveling to distant facilities. As well as being a high yield travel market, destinations globally wish to attract MCE to enhance the destination image and bring additional trade opportunities.
While Las Vegas has become the top MCE destination in the United States with the largest convention centre, largest inventory of hotels and an infrastructure to accommodate the needs of this industry sector, Macau has seen MCE progress only marginally, lacking a collaborative framework and stakeholder consensus. Again, Japan’s IR criteria should carefully evaluate the issue of diversification and expectations 10 to 20 years on from the opening of an IR.
Responsible Gaming – This is another area where IR operators and the government need to work closely together in developing a framework to protect the vulnerable and mitigate the risks – an issue we discussed in depth in Part 4. Government agencies seek to reduce the number of visits by a person with a gambling problem to an IR. Issues of education, prevention, risk assessment, enforcement and treatment all become factors to consider. What is a social cost and who pays need to be determined.
If an exclusion programme is implemented the IR must enforce it. If the IR identifies a problem gambler, treatment resources must be provided to that person. Problem gambling is not going to disappear with or without an IR, but it can be managed in a positive way that not only helps those with a gambling problem, but can also create an overall positive sentiment towards the industry by the local community.
Education – One factor often overlooked in the development of an IR is the need for local comprehensive hospitality management programs. After all, who is going to manage the resort to ensure it is operated in a professional way, allowing guests and staff to enjoy a positive experience? These mega “integrated” structures of gaming and non-gaming opportunities have required innovative ways to manage and operate and as such the need for hospitality and tourism education to be provided.
The basics of hospitality education remain true but there must be a serious commitment to adequately ramping up Japan’s hospitality and tourism education and training programmes – particularly where the IR will be built and operated – in order to deliver on the expectations of the IR. Everything from short-term dealer or waiter certification to post-graduate research studies in professional IR management will be required. Reactive piecemeal education and training programmes will not address the medium to long-term service quality needs of the Japanese IR and its location and will prevent it reaching its full potential.
There is now a top hospitality management degree program in Las Vegas, but in the early days it was completely ignored. Originally, the casinos were managed by executives who had years of industry experience, but lacked educational credentials to go along with that experience. Once the industry started to realize that there were young, enthusiastic and educated people who wanted to work in their industry, they started to hire them. As a result, many of the senior executives who run Las Vegas today have degrees in hospitality or other closely related majors. The strategic decisions made by those educated executives over the years have allowed Las Vegas to reach its full potential.
For global IR industry operators expanding east and west, issues such as design, cultural nuisances, marketing and working with local authorities have provided a steep learning curve. But the lessons are there for Japan. As we bring this series of articles to a conclusion, it is appropriate that we share our comments on those global IR operators that not only understand the fundamentals of the business, but also have a proven track record to confirm their positions.
Without a doubt, Las Vegas Sands has established itself as the global leader in IR development. Sheldon Adelson is the pioneer who has molded Macau into what it is today. Marina Bay Sands is a model that exemplifies the fundamentals above.
Steve Wynn has been a visionary for IR development and created The Mirage – the first true IR constructed in Las Vegas. The Mirage was an industry game changer. Wynn properties display a level of quality that is hard to match and his creativity continues.
MGM Resorts is another innovative company that built the largest hotel in the world at a time when everyone said it wouldn’t work because it was too big. Today, MGM owns and operates a majority of the IRs located on the Las Vegas Strip and will open its second Macau property towards the end of 2017.
Genting’s Resorts World is another player in the global market that has developed its own reputation in Malaysia through its exciting property in Singapore. Resorts World partnered with Universal Studios to create a “family-oriented” IR that brings entertainment to its highest level. Melco Resorts in Macau has also been able to blend its long experience in Asia with the operating principles of its former Australian partner Crown Resorts to create a facility that meets the needs of the Asian market. Also in Macau, Galaxy Entertainment Group has focused on Asian values and branding, building on its experience since Macau’s casino liberalization to become a major IR operation.
Which companies will ultimately be selected to develop IRs in Japan? No one knows at this stage of the Japanese IR legalisation process. However, when the final list is eventually presented many of the names above will be on the list. Are there other possible developers interested in an IR in Japan? Yes, there are plenty – Macau had over 20 bids for a casino concession in early 2000. And the reality of IR developments in Macau and Singapore will only instil greater competition.
While the entry into a Japanese IR concession will likely be based on a local partnership, when the time comes to select concessionaires it will be important to choose those who understand the fundamentals of creating a visionary IR – one that is essentially and distinctively Japanese