Japan has proven one of the last markets where gambling hasn’t been adopted in full and in a way that can provide a significant boost to the local economy. Since the government of Japanese Prime Minister Shinzo Abe passed a law in 2016 to allow the construction of three integrated resorts, much has changed.
Officially, the country will welcome the first of these projects in 2025, building what some industry experts consider as one of the most profitable gambling projects in the world. While the gambling industry is yet to experience a surge, all the tell-tale signs are there that Japan is preparing to become the world’s leader in casino entertainment, surpassing, perhaps even established hubs such as Macau, Las Vegas, and Atlantic City.
How Are Integrated Resorts Possible?
It has been a long process but finally, in 2016, Shinzo Abe’s government passed a law promulgating the construction of three sister resorts, which would host business and entertainment facilities, hotels, outdoor areas and of course, a casino owned by the brand that agrees to build the project.
With the law passed, the next logical step in the development of the project was the introduction of the IR Promotion Headquarters in 2017, designed to attract overseas investors willing to put down a pretty dollar on what would be at least a $10 billion project.
Most forecasts, however, put the actual price closer to $14 billion, not least Las Vegas Sands which recently pulled out of the race for the first of the three integrated resorts to arrive. Most recently, Japan established the Japan Casino Regulatory Commission to begin the regulation process.
Now, the process of applying for an Integrated Resort has begun. Each prefecture in Japan will have to first attract investors – a process that has already begun. Then, every investor, which is usually an overseas casino or hospitality brand, will have to make a proposal.
The prefectures will pick only one candidate and then, in 2021, submit their bid to the central government, which will only then decide which prefecture would be first in building an integrated resort. It may seem like an unnecessary long-winded process, but Japan puts great care on establishing fair regulatory process, which matters.
Why Japan and Why the Big Investment?
The simple answer is, there is a pent-up demand for gambling in the country. Following online habits, Japan is already pretty impressive, and it rivals even more populous countries out there. According to an infographic by OnlinePokerAmerica.com, in terms of which nation’s Internet base brings in the most value, Japan came third with 127 million Internet users who generate $19.2 billion. But why is this important? It indicates that Japan has a lot of potential in generating revenue, and gambling should be no different.
For instance, Bitcoin, one of the most popular cryptocurrencies out there, is traded the most against the US dollar and then the Japanese yen, which gives you a pretty good idea of how keen Japan tends to be. The question is, can we extrapolate that locals will flock to the integrated resorts?
According to one study published by Nikkei Asian Review, some 57% of all visitors to the Integrated Resorts will be locals. Yet, the project doesn’t solely depend on locals. It’s in fact more likely to target high rollers from overseas who are most likely to end up generating the bulk of the revenue Integrated Resorts end up with at the end of the year.
In any event, Japan has proven itself as an important market, which is only now beginning to be appreciated. Despite some problems with the bidding process, and the uncovered alleged bribery that occurred with some of the bidding processes, Japan has had the good fortune to attract the best developers and brands from all over the world.
The interest is justified. Right now, Japan’s pachinko parlors, a type of Japanese slot, generate estimated $190 billion in annual revenue. To put things in perspective, Las Vegas only generates $23.5 billion a year, give or take. This leaves Japan as a land of almost unbridled potential when it comes to the introduction of an Integrated Resort.
Responsible Gaming and Cutting Ties with Organized Crime
One issue that has cropped up repeatedly has been whether Integrated Casinos would lead to return of criminal activity and gambling addiction.
There has been a lot of pressure from media and society to create regulatory mechanisms that specifically allow to avoid addiction or let Yakuza, the moniker used by the Japanese mafia, to have their hands in illicit activities such as money laundering or introducing a sort of junket system whereby vulnerable players will be lend money which they would then have to return.
However, the government has felt confident that can create a product that is regarded with trust by society, especially in the five-year window that it now has until 2025. Despite a recent scandal, involving senior government members who allegedly sought to facilitate a bidding process for a Chinese operator, 500.com, the Integrated Resort has been slowly making its way into the mainstream.
What Will the Integrated Resorts Look Like?
The Integrated Resorts will have many of the qualities of their Western and regional counterparts. The resorts will sprawl on vast areas, equipped with all the amenities and facilities that travelers expect to see. The casino will occupy mere 3% in each of the three sister projects, with the bulk allocated to business spaces, hotels, and other relevant properties.
Ideally, Japan is hoping to attract business people from the Oceania, Southeast Asia, China and even the United States and Europe, to create a veritable international hub that not only boosts the local economy by generating a steady windfall through gambling tax (estimated at 30% right now), but also by hosting a number of high-profile expos, entertainment productions and business meetings.
Japan’s Integrated Resorts may have their focus clearly cut on the casino, but they are hardly just about the casino. The economic windfall from the other activities placed outside of the casino should be equally important to the Japanese economy.