CasinoCityTimes.com

Gurus
News
Newsletter
Author Home Author Archives Author Books Send to a Friend Search Articles Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Related Links
Related News
Recent Articles
Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Nevada looks towards the Far East

6 February 2012

LAS VEGAS, Nevada -- The race is on to find the next Macau or Singapore.

With the two Asian casino markets about to become the world's No. 1 (Macau with $33.5 billion) and No. 2 (Singapore with an estimated $6 billion) gaming revenue producers, new prospects are being targeted.

Nevada casino company executives are racking up air miles to and from Asia, traveling to Japan, Vietnam, Korea, the Philippines, Thailand and other potential casino destinations.

Many leaders in those countries watched what transpired in Macau and Singapore, and believe their locations can mirror those results.

Nomura Securities gaming analyst Harry Curtis told investors that smart money is riding on Japan, although it might be 2018 before the first casino opens.

Last month, Nomura held a conference call for investors with Takashi Kiso, president of Japan's International Casino Institute, an advocacy group involved in the current legislative debate over casinos there.

It's believed political consensus has been reached for a casino bill. Many Japanese lawmakers hope gaming will stimulate tourism in the wake of last year's earthquake and tsunami. However, a second bill covering details such as the number of casinos, taxation, the bidding process, and licensing could take two years to be approved.

"Longer than we expected," Curtis told investors.

The timing is not stopping Las Vegas Sands Corp., MGM Resorts International and Caesars Entertainment Corp., from expressing interest in Japan.

What Singapore has accomplished with just two casinos -- surpassing the entire Strip in total gaming revenues in less than two years -- provides a road map.

"Officials want to use integrated resorts in Singapore as the development model," Curtis said. "We expect competition will be fierce, given the potential profits involved."

A 2009 study by Osaka University estimated that Japanese casinos could attract $44 billion a year in gaming revenue. There's already gambling on some activities in Japan, such as motor sports and horse racing. Parlors containing pachinko machines, a cross between a slot machine and a pinball game, are popular throughout the country.

Kiso told Numara's clients that two or three casinos in Japan could evolve up to 10 nationwide, with an estimated gaming tax rate of 20 percent to 30 percent. Most believe the investment will be about $4 billion per location. (Las Vegas Sands spent $5.5 billion to open Singapore's Marina Bay Sands in April 2010.)

Gaming in Japan might be a mix between Macau and Singapore with junket operators licensed to provide high-end customers for VIP gaming rooms while locals pay to get on the casino floor.

"While little is priced into the stocks yet, passage of the initial bill could be a catalyst for integrated- resort operators," Curtis said.

Meanwhile, Nevada's large and small gaming companies aren't waiting for Japan to get its act together.

MGM Resorts International and Pinnacle Entertainment invested in the Ho Tram Strip development on the Vietnam coast about 80 miles southwest of Ho Chi Minh City. A 541-room version of the MGM Grand, which includes a casino, is expected to open next year. Pinnacle would follow with a hotel-casino in the second phase.

A timetable has not been set.

MGM Resorts and Caesars Entertainment have launched nongaming luxury hotel developments in efforts to expand their brands in Asia and other markets.

MGM Hospitality has 17 hotels in the pipeline, including locations in China, the Middle East and India. The MGM Grand Sanya on China's Hainan Island is expected to open this year.

Caesars, through Caesars Global Life, plans 25 hotels and resorts in China over the next five years, including the Caesars Palace Longmu Bay, also on Hainan Island.

Analysts aren't certain how to quantify the return on investment for the nongaming hotels.

"MGM has provided limited disclosures into the financials of the business," Credit Suisse gaming analyst Joel Simkins told investors last month. "Relative to the overall size of its core gaming business, we believe the contribution of MGM Hospitality remains fairly insignificant."

In the Philippines, Japan-based Universal Entertainment, which is controlled by Kazuo Okada, Wynn Resorts' unhappy largest investor, broke ground last month on a $2 billion casino resort in Manila.

The development has come up as an issue in Okada's legal fight with Wynn Resorts.

Okada reportedly wanted to Wynn to help build the project, but was rejected because the company thought it would compete with the company's Macau casinos.