May 03, 2017 Newsdesk Japan, Latest News, Top of the deck  
The Japanese casino market is likely to feature a sizeable slot machine segment – unlike most other major Asian markets. That is the suggestion in a white paper on Japan’s nascent casino industry produced by Global Market Advisors LLC (GMA) and released on Monday.
“Macau, Singapore, [South] Korea and Saipan allocate a greater percentage of their gaming floors to table games than North American casinos. This is because of the cultural appeal of table games among Chinese gamers,” said the consultancy in the document.
It added: “While table games are expected to be popular [in Japan, we] believe that slot machines will have a far more prominent place in Japanese integrated resorts than other Asian markets.”
GMA noted that Japanese already enjoy and are familiar with electronic gaming, namely via pachinko, pachislot and other forms of gaming. It also noted that the country is home to several slot machine manufacturers – including Aruze Gaming, Konami Holdings Corp and Sega Sammy Holdings Inc – which “already understand the kinds of themes, symbols, music and game math that are appealing to Japanese players”.
In the first quarter of 2017, slot machine revenue as a proportion of all casino gross gaming revenue in Macau stood at 5.1 percent or MOP3.24 billion. At the end of March, there were a total of 6,423 licensed live-dealer gaming tables in the Macau market, and 16,018 slot machines.
Macau casino operators are subject to a cap imposed by the city’s government regarding the number of new-to-market tables. The table cap aims to limit the increase in live-dealer table numbers to 3 percent compound annual expansion until the end of 2022, from a base of 5,485 tables recorded at the end of the fourth quarter in 2012.
Know your player
Legislation making casino gambling legal in Japan came officially into effect on December 26. In April, the Japanese government began work on the second – regulatory – piece of legislation related to casino gaming in the country. The draft statute – referred to as the implementation bill – 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.
Most major global casino operators have expressed an interest in developing an integrated resort – including a casino – in Japan. The list of potential suitors includes Las Vegas Sands Corp, MGM Resorts International, Genting Singapore Plc, Galaxy Entertainment Group Ltd, Wynn Resorts Ltd and Melco Resorts and Entertainment Ltd.
“The single greatest misconception a casino operator can make is to assume that Japanese gamers will play the same games as those players that frequent Macau,” GMA said in its white paper. An executive summary of the document had already been released last month.
The consultancy added: “The Chinese have a table game centric gaming culture and have long embraced baccarat and sic bo. While the Japanese enjoy oicho-kabu [a traditional Japanese card game], they have a long-established history as a machine-centric gaming culture, as they are enthusiastic pachinko players.”
The GMA document forecast casino operators in Japan where likely to initially allocate 45 percent of their gaming floor to slot machine gaming, 5 percent to electronic table games and 50 percent to table games. But it added that slot machines would likely gain floor share at the expense of table games.
“Blackjack is expected to be a popular table game,” the consultancy said. “Baccarat tables, with their large footprint, are not expected to dominate the gaming floor as they do in Macau. Rather, games such as mini-baccarat, whose table footprint matches blackjack, will allow operators to quickly adjust their game mix to match the needs of the market.”
Development process
GMA – a U.S.-based consultant to the casino gaming, hotel and airline industries, with offices in Taiwan and Thailand – estimated in the white paper that the Japanese parliament, also known as 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.
“One of the biggest discussion points will be the number of locations,” GMA said. “While there is no definitive number that has been determined, most discussions have the initial round of integrated resorts between one to three locations.”
The consultancy added: “If there were to be a second round, with the first ‘pilot’ round serving as a true test, one may see an expansion between that to maybe six locations. However, it is viewed that if this were to happen, the second round would not occur until a few years after the first round of integrated resorts had been operational.”
GMA said it was likely that large cities would have a competitive advantage over some of the more regional sites in the initial round of casino development. The consultancy highlighted Osaka, Tokyo and Yokohama as potential host cities for large-scale integrated resorts; and Sasebo, Fukuoka, Hokkaido, Sendai and Wakayama for regional casino resorts.
The consultancy estimated that – based on current circumstances – 2023 would be the earliest that a Japanese gaming resort could open.
“Development may also be delayed because of potential zoning challenges in larger cities like Tokyo, which would push openings back to 2024. GMA believes that the first stable year of revenue will occur in 2025,” the white paper said.
GMA said that the value of a Japanese casino gaming market was estimated to range from US$12.5 billion via two large resorts by the year 2025, to US$24.2 billion for what it termed a “full build out” in six different locations.
Responsible gaming
The consultancy stated that the introduction of responsible gaming measures is likely to be one of the most important issues regarding the establishment of a casino industry in Japan. “it is with almost certainty that operators bidding on a licence will be evaluated on their current responsible gaming initiatives,” GMA said.
It added: “The issue of an entry levy is one that will be debated throughout any discussion in the Diet for the second piece of integrated resort legislation. Current discussions have the rate ranging from a low end of zero or no entry fee to as high as JPY10,000 [US$89].”
A number of Japanese politicians and news outlets in the country have previously referred to a Singapore-style system of safeguards for a casino industry in Japan. Singapore imposes on that city-state’s citizens and permanent residents a statutory entry levy of either SGD100 (US$72) for 24-hour access, or SGD2,000 for a year’s entry; but is content to give foreigners free access. Singapore forbids its two casino resorts from either reimbursing levy fees to players – or offering incentives or complimentary items to locals – in return for customers renewing their yearly permit.
In its white paper, GMA suggested a potential casino entry levy in Japan to be set at JPY2,000.
Clairvest Group Inc, a Toronto, Canada-based private-equity management firm; and U.S.-based casino operator Hard Rock International Inc, sponsored the GMA white paper.
In February, Hard Rock International chairman James Allen said the group was interested in developing a joint venture casino resort project in Japan in collaboration with local partners.
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The daily run-rate of Macau’s casino gross gaming revenue (GGR) for October 1 to October 6 – all within China’s seven-day National Day holiday – was estimated at just above MOP1.08 billion...(Click here for more)
478,634
Aggregate number of visitor arrivals to Macau during the first three days of the holiday season commonly called 'October Golden Week'