Japan tie-ups await second casino bill: Caesars exec
It is unlikely that casino operators and local Japanese partners will announce tie-ups for casino licence bids in that country until after the passage of an implementation bill for the industry.
So said Steven Tight (pictured), president of international development for U.S.-based casino group Caesars Entertainment Corp, in comments to GGRAsia on Wednesday.
He was speaking on the sidelines at the first day of the Japan Gaming Congress in Tokyo. The conference about the nascent Japanese casino sector has been organised by Clarion Events Ltd.
“At this point in time no Japanese consortium has formalised an agreement with any of the operators, so we are all in a ‘dating game’ so-to-speak,” Mr Tight told GGRAsia.
“Once the implementation bill is passed and the legislation is clear about how the regulations will be drafted and how they will be implemented, I think then you will start to see the consortia pull together and start to solidify: where you will have the investors, the operator, the locations, all come together.”
The second piece of legislation will detail the specifics for the casino industry in Japan: how casinos are administered and regulated; the taxation regime to be applied to them; their location; and the number of licences to be issued.
Global Market Advisors LLC – a U.S.-based consultant to the casino gaming, hotel and airline industries – estimated in a recent white paper that the Japanese parliament, also known as the Diet, could approve the implementation bill by the end of this year.
The consultancy estimates Japan’s process for deciding on the location of resorts will be completed by the third quarter of 2018. This would be followed by the request for proposal stage, with the winners chosen by the third quarter of 2019, it said.
Following the passage on December 14 of an enabling bill to legalise casinos in Japan, a number of investment analysts have mentioned the possibility that foreign firms with expertise in casino operations might link – in likelihood as minority partners – with Japanese firms looking for new growth opportunities at home, in order to bid jointly for a Japanese casino licence.
Dateline 2021
Banking group Morgan Stanley said in a December 15 note that any casino venue or venues in Japan might only open after the year 2021, noting the second piece of legislation was necessary to establish the administrative framework of the industry.
GGRAsia asked Mr Tight how much the Caesars group might be willing to invest with partners.
He told us: “Until the tax rate’s set, until the rules… around things like credit and junkets and everything else [are set], no operator can effectively estimate the returns and therefore the supportable investment. So it’s just too early to throw out numbers. Ultimately it’s going to be the consortia – and the winning consortia – … that are going to determine what the supportable investment would be.”
In February Caesars Entertainment reported a full-year 2016 net loss of US$2.7 billion for its “Continuing CEC” unit.
Caesars Entertainment Operating Co Inc (CEOC) – constituted as an operating unit of Caesars Entertainment – sought protection from bankruptcy via the U.S. courts in January 2015, weighed by a US$18-billion debt load. It was part of a plan to cut group debt by approximately US$10 billion. In January this year, a U.S. Bankruptcy Court in Illinois approved the operating unit’s reorganisation plan, which Caesars Entertainment said would allow for a “successful conclusion to CEOC’s bankruptcy in 2017”.
On Wednesday, Mr Tight told GGRAsia that access to cash for a Japan project “wouldn’t be an issue”.
“I know that Caesars is coming out of a restructuring where our balance sheet is going to be extremely strong: we have several billion [U.S.] dollars of cash – and so if we are successful in securing a licence it won’t be an issue.”
Property portfolio
He noted that because Caesars Entertainment currently had 47 properties – in locations ranging from ski resorts to beachfronts as well as major gaming hubs – across six countries, it had the potential to compete for a licence in a large city or in one of Japan’s non-metropolitian regions.
Investment analysts have mentioned the likelihood of a phased issuing of several Japanese casino licences, in likelihood starting with metropolitan areas and then extending to several regional locations.
“We are interested in a number of sites still, because it’s just too early to rule anything out,” stated the executive to GGRAsia.
Earlier in his conference presentation, Mr Tight had said that what he referred to as a “JER” or “Japanese entertainment resort,” should be “uniquely Japanese”.
“We don’t want Japan to be a replica of what you find in Las Vegas or Macau or Singapore, or any of the other IRs [integrated resorts] of the past,” Mr Tight suggested.
He added: “A JER should be iconic. It should really be that postcard shot that best reflects the community in which we are developing and operating the resort. This is I think quintessential to driving international tourism, one of the economic benefits that integrated resorts generate.”
The executive stated that an important factor differentiating Caesars Entertainment from the competition was its leadership in responsible gambling practices – a topic area often mentioned by Japanese lawmakers.
“We are recognised for our developments in responsible gaming and gaming addiction: we were one of the first to identify the issue, develop programmes and now fund programmes to try and address gaming addiction,” said Mr Tight.
“We invested US$3.2 million recently in technology to take it to the next level – the next generation – of gaming addiction control. And we look at ongoing training opportunities where every single one of our employees is adequately trained.”
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