The success of casino gambling in Macau and Singapore has spurred envious attempts to replicate those successes. Macau and Singapore have been used to develop models in other places. The most notable until this year has been Japan. As early as 2013, lobbyists were seeking casino legislation in Japan with Macau and Singapore in their mind’s eye. The estimated gaming revenue from casinos in Japan was then put at $10 billion annually, more than Singapore’s.
It was not until 2018 when actual integrated casino resort (IR) legislation was passed in Japan. The new law was broad in scope and short on details, but it caught the eye of stock analysts and gaming operators. The estimated revenue had soared to as much as $40 billion in just five years. Casino operators lined up for a chunk of that $40 billion. Wynn Resorts, Las Vegas Sands, Caesars Entertainment, Genting Berhad, MGM Resorts International, and Melco Resorts & Entertainment were among the more recognizable names signing up to participate. They rented offices, hired lobbyists, and created elaborate and expensive architectural designs and operating plans. Wynn and Sands promised $8 billion to $10 billion investments. Each company courted a different city. But the process turned out to not be as simple and straightforward as advocates imagined.
Several things went wrong. COVID stalled the process as it stalled most everything else in Japan and the rest of the world. The regulations and requirements became more and more complicated and onerous, including limiting access to Japanese citizens. At the time, the Japanese were losing $400 million a year in pachinko games and wagering $22 billion a year on horse races. It has been estimated that over 60 percent of Japanese gamble. That gambling population represented a significant portion of the potential revenue. Finally, the site-selection process became too complicated and expensive. In the end, most of the casino operators threw in the towel, laid off staff, closed offices, and went elsewhere seeking opportunity.
Only MGM is still in the game, investing $10 billion to build a resort on Yumeshima Island in Osaka Bay. The resort is expected to open in 2030, over 10 years after MGM had hoped to open, a very long time to wait for a return on an investment. There is still a possibility that other licenses will be issued, but that is remote at the moment. The new prime minister may support the concept, but he is busy trying to right the ship of state and retain control to bother himself with the fate of IRs.
The gambling climate in Asia has changed a great deal since 2013. The most important change is in attitude and policy in Mainland China. It has tightened the reins on Chinese citizens wishing to gamble outside of China. Government policy has also reduced the once-vibrant VIP gambling segment to a tiny fragment of what it was prior to 2016. In addition, Cambodia, Laos, the Philippines, and Vietnam have ramped up their efforts to capture Chinese gamblers still roaming the seas. Without locals, resorts in Japan would be competing against the other Asian countries with casinos, plus Macau and Singapore for Chinese gamblers.
Until Thailand put in its bid to be the next Asian gambling center, the picture for expansion in Asia was bleak. Thailand would like to get more tourism, including a larger share of the increasingly affluent Chinese middle class. In that spirit, casino resorts are being explored. The Thai government has commissioned several studies. The reports indicate that casino resorts would be very successful in Thailand. They would draw new tourism, produce significant tax revenues, stimulate billions of dollars in capital investment, and create a vibrant job market. The revenue estimates are already approaching $10 billion.
Prime Minister Paetongtarn Shinawatra is on board. His secretary was quoted last week as saying that enabling legislation would be passed sometime in 2025. Analysts are touting Thailand as being bigger than Singapore, behind only Macau and Las Vegas on the world’s list of top casino-resort jurisdictions. The same cast of casino-company characters that were in line in Japan a few years ago are expressing interest in Thailand, some more enthusiastically than others. However, none has run up the caution flag. They should; like the early days in Japan, there are still too many unknowns.
An IR in Thailand would surely be popular, successful, and profitable; Thailand is already a very popular tourist destination. The profitable part is the unknown. If a casino could not open for 10 years and cost more than any other resort in the world, would it be profitable? Further, if it had a restriction on marketing to Thais, faced more intense competition, and fewer Chinese gamblers than currently exist, profit might be hard to come by. Thailand is not Japan, but for investors, Japan should serve as a cautionary tale. The potential is there, but as always, the devil is in the details.
