In this regular feature in IAG to celebrate 17 years covering the Asian gaming and leisure industry, we look back at our cover story from exactly 10 years ago, “Next stop Japan,” to rediscover what was making the news in March 2012!
Hindsight can be a wonderful thing. In early 2012, CLSA Asia-Pacific Markets and Credit Agricole Securities (USA) published a report examining the Japan integrated resort opportunity, which became the subject of Inside Asian Gaming’s March 2012 cover story.
Titled “Asia’s wonderland – Integrated resorts bring the magic to Japan,” the 40-page report described Japan as a potential gold mine given the population’s love of both gaming, as evidenced by pachinko, and theme parks.
Throw into the mix a surge of interest from overseas visitors if casinos were added to the offering and Japan could “potentially have one of the biggest and most dynamic casino resort industries in the world,” the report explained.
“In light of Macau and Singapore’s success, we believe the Japanese market offers huge potential to become the biggest IR nation globally,” it said.
“Assuming two large scale IRs [integrated resorts] are approved in Tokyo and Osaka with a similar industry framework as that of Singapore, gaming revenue could comfortably exceed US$10 billion, especially considering that two IRs in Singapore generate about US$6 billion in revenue on a population of just 5 million compared to Japan’s 128 million.
“Given the number of favorable gaming factors in Japan, we believe IR operators could spend as much as US$7 billion to US$8 billion on each resort compared to US$5 billion to US$6 billion in Singapore. If we assume 30% margin on a US$10 billion market, the ROIC for each IR would be 20%; and if we assume the [Japanese] gaming market size is US$15 billion, the ROIC would be above 30%, in line with the ROIC seen in Singapore and Macau.”
There is no doubt that the world’s leading IR operators recognized a similar opportunity, as evidenced by the flurry of interest that followed passage of Japan’s IR Promotion Act in late 2016. Such was their confidence in the market that many even bandied about investments exceeding US$10 billion.
But as the rigidity of Japan’s regulatory regime became evident in the years that followed – and all but a handful of jurisdictions withdrew initial interest in welcoming IR development – much of Japan’s attractiveness has since waned. Today, Osaka remains the only major city in Japan to maintain interest in an IR, and MGM Resorts the only major globally recognized IR operator keeping the IR dream alive.
The CLSA/Credit Agricole Securities (USA) report suggested Japan’s IR opportunity “could be significant for operators such as Las Vegas Sands, MGM, Wynn and Genting Singapore, potentially adding 20% to 115% to EBITDA and offering 15% to 100% upside to current share prices.”
No doubt they are all looking back on those figures and thinking, “If only.”
