Every major casino resort company in the world is eyeing the potential opening of the Japanese market and seeing dollar signs. Estimates of Japan's casino-gaming market range from $25 billion to $40 billion, which would make it the No. 1 or No. 2 market out of the gates. Given the potential, casino companies are pulling out all the stops to win a license, promising to spend up to $10 billion in the region.
Melco Resorts (NASDAQ: MLCO) is the latest to make its interest in Japan known publicly. CEO Lawrence Ho announced that Melco has established a division in Japan and has said it will move its headquarters to the country if it wins rights to build there. But it'll have to face competition from Las Vegas Sands (NYSE: LVS), MGM Resorts (NYSE: MGM), Wynn Resorts (NASDAQ: WYNN), and Genting, which all have established casino resorts in Asia.
Melco Resorts's Japan play
Ho's initial quote in Melco Resorts' press release shows how he views a resort in Japan:
It's not a surprise that local partners, entertainment, and an integrated resort are part of the plans. That's par for the course in the industry at this point. What's notable is the "state-of-the-art technology" aspect of Melco Resorts' plans.
Ho said that "The City of The Future," as the Japan project is currently known, will include a biometric intelligence system that will track players and safeguard against "potential gaming-related social issues." He has also offered to give the Japanese government "back-end access to and data-sharing with these systems free-of-charge," a nod to the unease some citizens and lawmakers have about allowing casino gambling in Japan. The access would be unprecedented, but if it's what it takes to win a bid potentially worth $10 billion or more to a casino operator, it could be worth it.
A lot of work ahead in Japan
It's likely Japan will license resorts in the country in the next year, given the current legislative trajectory, but there are also a lot of unanswered questions. Companies don't know how many licenses will be allowed initially -- current speculation is two, with resorts in Osaka and Yokohama -- and we don't know what rules or financial structure will surround a resort. If locals are limited to a certain number of visits or tax rates on gambling are too high, it could reduce the financial opportunity. But those rules aren't even written right now, so there's no point in speculating what the economics would look like.
What we do know is that every casino resort company is serious about Japan's potential as a gambling market. Melco Resorts is willing to move its headquarters there, and Las Vegas Sands has said it will spend $10 billion or more to build in Japan. MGM and Wynn Resorts have also made their intentions to build in Japan clear. This could be the biggest battle over a casino gaming license the industry has seen since Singapore opened up to gambling in 2010. Las Vegas Sands and Genting were the two winners and have incredibly profitable resorts operating there. Japan could be an even more sought-after opportunity than Singapore was.
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