inside asian gaming

june 2017 #132 | 30 MOP

JAPAN SPECIAL!

Japan Gaming Congress review

Sourcing Japan’s IR customers

Building a Japanese IR, Part 4

TGG eyes Japanese innovation

Lawrence Ho Going solo

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COVER STORY Contents june 2017

Cover Image: Melco Resorts

INDUSTRY PROFILE Clinton Long

6 Breakfast Briefs

JAPAN SPECIAL

16 Journey to Japan Premium Japanese players no longer abound in the gaming world, so the impact of Japanese IRs will come from luring VIP and mass customers from other Asian destinations.

22 The Japanese Integrated Resort, Part 4 Casino and integrated resort experts Dr Glenn McCartney and Dr Andy Nazarechuk discuss the divisive issue of problem gambling as it relates to Japan.

28 Japanese ingenuity IAG speaks to TGG Interactive co-founder Raymond Chan about the incredible potential Japan offers in regards to creativity and innovation for the gaming industry.

34 Japan on show in Tokyo the Japan Gaming Congress returned to Tokyo in May with the biggest names in the industry coming together to discuss the key issues surrounding Asia’s next gaming hub. Lawrence Ho: INDUSTRY PROFILE 40 Asian persuasion 10 Going solo IAG Deputy Editor Raquel Dias catches up with Scientific Games Sales Director Clinton Long to discuss his love affair with Asia.

In an exclusive interview with TRADE SHOWS IAG, Melco Resorts Chairman 44 Onwards and upwards for G2E Asia and CEO Mr Lawrence Ho G2E Asia saw record numbers gather last month as Macau’s biggest gaming trade show again attracted the eyes discusses recent events and of the industry. what the future holds for the prominent IR operator. 46 Events Calendar Editorial

Some of the O MEDIA team at G2E Asia

Manic month of May marks renewed industry momentum

t has been a long time since we’ve experienced a month IAG Breakfast Briefing, which delivers the very latest news from as busy, as fascinating and as important to the Asian the Asian gaming industry and beyond straight to subscribers’ gaming industry as the one just passed. inboxes at 8am every Macau business day. Although still in May has long been home to G2E Asia, which its infancy, IAG Breakfast Briefing has already proved to be a Iremains the largest annual gaming trade show in the region valuable addition and we thank all of those who have provided and once again smashed previous attendance records in us with such positive feedback. 2017. However, this year saw G2E Asia pre-empted by the G2E Asia 2017 also saw the debut of a new daily show Japan Gaming Congress (JgC) – back for the first time since newspaper, G2E Asia Daily, which was produced by the team here its debut in 2014. at IAG in partnership with G2E Asia organizer Reed Exhibitions. With the Japanese Diet having signed into law its long- Launching a new product is never easy, but we’re pleased with awaited Integrated Resort Promotion Bill last December, the the early results and look forward to G2E Asia Daily returning return of the JgC was met with huge interest from operators bigger and better in 2018. around the globe – all of whom were on hand at Tokyo’s Grand There was certainly plenty for us to cover in both IAG Hyatt to put their name forward and learn a little more about the Breakfast Briefing and G2E Asia Daily at G2E Asia this year. unique Japanese landscape that will shape the nation’s casino Among the special guest speakers to provide their insights industry moving forward. at the G2E Asia Conference was Galaxy Entertainment Group The JgC was also a must-attend event for the world’s gaming Vice Chairman Francis Lui, who gave a passionate 45-minute media and as such Inside Asian Gaming was on hand to hear keynote address in which he discussed a range of issues vital to what the experts had to say. Our Editor-at-Large Muhammed the Macau gaming industry’s short and long-term growth. DICJ Cohen even chaired Day 2 of the conference while our CEO Director Paulo Martins Chan also delivered a keynote address in Andrew W Scott moderated a topical panel on non-gaming which he promised to keep Macau’s operators on their toes by amenities in Japanese IRs. Needless to say, we intend to be continuing the government’s push for diversification. “Johnny-on-the-spot” as Japan’s casino industry develops in The presence of so many gaming heavyweights in both the coming years. Macau and Japan was telling. The story it told this past month The stamps on our passports had barely dried before we is that Asia’s gaming industry, no matter how substantial its found ourselves back in Macau and preparing for G2E Asia 2017 growth may be, must always be vigilant for the next opportunity. – traditionally the biggest week on our editorial calendar and even more so this year given the rapid growth of our company and product range in recent months. Ben Blaschke In April, we launched our brand new daily industry newsletter, We crave your feedback. Please email your comments to [email protected].

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4 inside asian gaming June 2017 EDITORIAL Dr Glenn McCartney DISTRIBUTION I Nelson Rose Chief Content Officer Distribution Supervisor Evelyn Chan Still photography Emily Vong Danomad Kuan Managing Editor Wilson Li Distribution Officers Ben Blaschke Dave Aglosolos Anson Ip Peng Cheang Editor at Large Video Producer Mak Man Wah Muhammad Cohen Danomad Kuan Hoi Hou Wai

Deputy Editor Raquel Dias SALES & MARKETING CORPORATE

Journalist and Social Media SVP Sales and Marketing Group CEO Joseff Musa Semon Cheung Andrew W Scott

Director of Digital Media VP of Marketing Chief of Staff and Analytics Derrick Tran Michael Mariakis Kevin Sam Associate Director Sales Director and Administrator Founder and Adviser and Business Development Cynthia Cheang Kareem Jalal Jadeson Ho Administration Manager Graphic Design Hong Kong Sales Maria Madden Rui Gomes Angel Wong Administration Assistant Contributors Client Relationship Manager Suie Ng Paul Doocey Daphne Hong Dr Brian To Executive Transportation Officers Steve Karoul Dave Aglosolos Rui Pinto Proença Gary Hong

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Galaxy Entertainment Group enough for it to be an attraction to come to President Mike Mecca has talked down the Japan. And that’s a single operator.” potential for an “Osaka Strip” of Integrated Mr Mecca also noted that while the Resorts being built on Yumeshima Island relevant piece of land on Yumeshima Island in Osaka. would be difficult for a single operator to The concept was touted in a recent develop, it wasn’t out of the question. study by Global Market Advisors “It is certainly a very significant piece titled White Paper: Japan Integrated of land and for one IR company to develop Resorts, which suggests, “The greatest that entire property would be a bit of a opportunity to increase tourism would be challenge,” he said. “There would have the creation of the ‘Osaka Strip’ that could to be different components, whether they host multiple IRs developed by several are entertainment components, sports quality operators.” components, shopping components, But in an exclusive interview with Inside so there could be one IR company that Asian Gaming, Mr Mecca said he was unaware developed that particular piece of land. of any such moves by Japanese officials. “I haven’t heard anything from the “In all of our conversations over an government that the ‘Osaka Strip’ concept extended period of time, the concept is definitely the way Osaka plans to go. has been that they would like to develop “We’ve met with the IR committee in iconic IRs in a number of cities in Japan Osaka a number of times and that would to promote tourism,” he said. “They want be something brand new to discuss with to create IRs that are special enough and them, but we have not heard that directly that the scope of the resort is significant from the IR committee.”

US operators stack up “very favorably” in Japan: Freeman

The proven track record of major US proven track record of building world class and the Venetian Macao couldn’t be more operators such as Las Vegas Sands and facilities in highly competitive markets that different from one another,” he said. “And MGM Resorts will see them positioned “very are regulated to the extreme,” Freeman that’s just one example of these companies favorably” to win a Japan casino license, said when asked what US operators must with a proven track record building according to American Gaming Association do to win favor. “And those experiences I something that is specific to the clientele, President and CEO Geoff Freeman. believe position them very favorably in the specific to the culture and specific to the Speaking to Inside Asian Japanese market. It all but guarantees that goals of the government. I think that’s Gaming during G2E Asia 2017, Mr if some of them are chosen, they will build exactly what they will do with Japan. Freeman rejected suggestions that Japan extraordinary investment products for Japan “A lot of people can build a successful might look closer to home once regulation to enjoy for years to come.” integrated resort in a monopoly market passes through the Diet later this year, Mr Freeman pointed to Sands China but these guys – Sands and MGM and pointing to the regional success of Las as perhaps the greatest example of a US also Wynn Resorts who have expressed Vegas Sands and MGM Resorts as hugely company demonstrating its ability to an interest – are operating in a highly attractive to Japanese officials. provide world class facilities developed competitive market and finding ways to “I think our operators in most instances, specifically for the local market. excel. I think that’s what Japan should be particularly when looking at Japan, have a “Marina Bay Sands (in Singapore) and hopefully will be most interested in.”

6 inside asian gaming June 2017 Hotel supply a threat MGM Cotai to feature high-tech theater to Macau’s future and huge central plaza

Macau may put its core Chinese customer MGM China’s new Cotai integrated resort base at risk unless it significantly will feature a high-tech theater, celebrity increases its hotel room count, according chefs and a central plaza three times the to Galaxy Entertainment Group Vice size of MGM Macau’s Grande Praça when Chairman Francis Lui. it opens in late 2017, according to the Presenting the keynote address to company’s Chief Operating Officer (Gaming) launch G2E Asia 2017 at the Venetian Macao John Shigley. on Tuesday, Mr Lui said he was entirely Speaking at a panel titled “Content and supportive of the government’s push to amenities for the mass market” at G2E Asia, increase the city’s non-gaming offerings Mr Shigley said MGM Cotai aimed to provide but warned the undersupply of hotel rooms “something for everybody” with the theater and threatened to hold the city back. plaza set to be its key attractions. “Macau needs more hotel rooms to “The most exciting thing about our new support its tourism industry,” Mr Lui said. property will be our theater,” he said. “It “North America averages 100,000 to will be a high-tech theater with at least eight 115,000 hotel rooms in its major tourism different seating layouts that we can offer and centres. Macau has 36,000.” will include everything from a performance While nine months of consecutive theater to a trade show floor. GGR growth and an expanding mass “It has been developed in partnership market were promising signs, Mr Lui said with the same people who developed the early that limited supply – with Galaxy boasting theaters of ‘The House of Dancing Water’ (the 97% occupancy across its five hotels in resident show at City of Dreams). 1Q17 – threatened the long-term health of “We expect to have three resident shows the city’s tourism industry. so we are committing to a fantastic diversified “China is not only Macau’s number offering. There will be something for one tourism source, it is the number one everybody and something really tailored to the tourism source for the world,” he said. Chinese culture. “The US$261 billion spent by Chinese “We will also have a common area that is tourists in 2016 represented a 161% increase three times the size of the Grande Praça and in just five years. Macau must be protective will feature custom video displays on LED of its Chinese tourism market – particularly walls. We are developing content for local with China so under-penetrated.” customers here and that’s a big offering.”

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June 2017 inside asian gaming 7 DICJ boss warns Macau operators to continue diversification push

Director of Macau’s Gaming and credited the DICJ’s persistence in Inspection Coordination Bureau (DICJ), pushing for diversification for helping Paulo Martins Chan, has warned Macau’s turn the industry’s fortunes around. concessionaires that the government “When I was here in May last year, the will continue to keep a close eye on their Macau gaming sector was experiencing diversification efforts, despite praising their turbulence,” he said. “Gaming revenue performance so far. had been declining … and Macau was Delivering his keynote address at facing competition from many gaming G2E Asia last month, Mr Chan said it jurisdictions across the globe. Even was vital to the “integrity and quality” of with so many challenges, Macau had an Macau’s gaming industry that the DICJ opportunity for change and transformation. ensured the ongoing provision of non- “Thereafter Macau focused on gaming amenities. optimizing diversification by actively “We will continue to monitor closely the encouraging gaming operators to develop ongoing operations of the different gaming more non-gaming elements while operators and any changes to the external promoting integrity and quality in the gaming environment,” he said. gaming industry. This would be the core “We are committed to promoting quality that would distinguish the gaming integrity and quality in gaming but also sector in the marketplace and allow us to strengthening our regulatory oversight of weather any storm that came along. the industry. “A year has now passed and with joint “By supporting more infrastructure collaboration and persistent effort by the which includes hotels, theme parks and a long way over the past 12 months, Macau government and gaming operators, shopping malls, Macau is positioned to overcoming 26 consecutive months I can say that our persistence in promoting attract a wider range of tourists.” of decline to now ride a wave of nine economic diversification is keeping Macau Mr Chan said Macau had come straight months of growth. And he on the right track.”

Record quarter at Solaire sees Bloomberry soar

Record VIP volume, mass table drop and Group GGR reached Php10.7 on-year in 1Q17 to post a new all-time high, electronic gaming machine (EGM) coin- billion (US$215.6 million) for the quarter, while VIP GGR grew 60% to its second- in at its flagship Solaire Resort & Casino with Bloomberry Chairman and CEO highest level since 2Q16. in Manila has helped Bloomberry Resorts Enrique Razon Jr stating, “We are very Mass table drop and EGM coin-in Corporation record a 40% year-on-year pleased that the turnaround and headway generated year-on-year growth rates of 24% increase in gross gaming revenue for the we experienced in 2016 continued to be felt and 26% respectively, also new quarterly highs. first three months of 2017. in the first quarter of the year. Bloomberry’s Jeju Sun property in Bloomberry’s unaudited financial “We are convinced that this trending Korea saw GGR rise 153% year-on-year from results included a massive Php3.31 billion will go on for the rest of the year. Our Php23 million to Php59 million (US$1.2 (US$66.7 million) year-on-year swing to programs on fund management, cost million), although this constituted just 1% profitability, with the company reporting net containment and customer engagement of company GGR. profit of Php2.15 billion (US$43.3 million) across the entire organization are reverting Bloomberg’s EBITDA rose 161% year- following a loss Php1.16 billion (US$23.4 to us with winning points.” on-year and 17% sequentially to Php3.2 million) in 1Q16. Solaire’s VIP volume grew 35% year- billion (US$64.5 million).

8 inside asian gaming June 2017 Macau tax rate not a Sands China priority Sands China President and Chief Operating Officer Dr Wilfred Wong says Macau’s operators have a “social obligation” to contribute to the city’s revenue stream. His comments followed a keynote address by Galaxy Entertainment Group Vice Chairman Mr Francis Lui in which he highlighted the current 39% tax rate as an issue for operators trying to remain competitive in the face of growing regional competition from a number of jurisdictions offering considerably lower taxation. But Dr Wong said it is important for operators to recognize the privileged position they are in. “As an operator, the tax rate obviously impacts on our bottom line and Macau is not known for a low tax regime in this respect, but we must remember that we are concessions,” he said during a G2E Asia conference panel. “We are given a concession as operators unlike in Las Vegas where you can apply (for a license) and there is really no limit on the number of operators. “We’re privileged to have a concession here. We know we have social obligations because Macau still relies very heavily on the gaming industry and it is still a very significant source of revenue for the government, so it’s up to the government to really look at this … obviously we would not advocate for any increase in gaming tax.”

June 2017 inside asian gaming 9 Cover Story

Lawrence Ho Going solo

By Muhammad Cohen | Editor at large In an exclusive interview conducted shortly after Melco Resorts & Muhammad Cohen also blogs for Entertainment announced the sale of Forbes on gaming Crown Resorts’ last remaining shares throughout Asia and wrote Hong Kong On in the former Melco Crown joint Air, a novel set during the 1997 handover venture, IAG’s Muhammad Cohen about TV news, love, betrayal, high finance spoke with Melco Resorts Chairman and cheap lingerie. and CEO, Mr Lawrence Ho, about recent events and what the future holds for the prominent IR operator.

10 insideinside asianasian gaminggaming JuneJune 2017 Cover Story

Muhammad Cohen: Thanks for granting us this exclusive senior executive team because I totally agree with you. You wrote interview, Mr Ho. Firstly, what was behind the decision to that we have these great parts but they never add up to the sum finalize the split with Crown now? of the company. I couldn’t agree with you more. Why haven’t we Lawrence Ho: Ultimately it’s the accumulation of the last 12 been able to crack that? We have these great attractions, great months. Melco Resorts bought back shares from Crown starting hotels, the most Michelin star restaurants in Macau, the most from May last year. The biggest transaction was last December. Forbes five-star hotels, yet our valuation is never near the top of As part of our 10th anniversary of listing on NASDAQ, Melco our competitors. International – which is the parent company – bought majority Everything we do, we compare ourselves to the relative set. control from Crown. Crown had a remaining bit. So this is really a We do very well, but from the enterprise value, EBITDA ratio cleanup trade. It’s not so much Melco Resorts selling shares; it’s perspective it’s never near Las Vegas Sands or Wynn – and we’re kind of a pass through transaction. Crown sold its shares and we very comparable companies. The focus of this transaction has been helped them sell it. The underwriters took the whole block. to simplify, to bring down the board (Crown’s board member left as For us, we’re very excited. The timing of it worked out perfectly. part of the sale), remove bureaucracy. A year ago I felt the market was hitting the bottom in Macau. I was also very excited about the opportunities ahead. That’s why we made the maneuver to start this transaction. At the same time, I think it worked out really well for James [Packer, Crown Resorts’ controlling shareholder and Melco Crown’s “I think it worked out really former co-Chairman], because James and Crown wanted more liquidity and to focus on their Australian domestic assets. We’ve well for James [Packer] because been great partners for over 12 years. In our press release, we talked about the world’s most successful gaming partnership, which was James and Crown wanted more true, because if you look at gaming partnerships, they usually don’t end well and they’re never long. Both parties have been happy with liquidity and to focus on their it and we’re still great friends. Australian domestic assets. MC: Why not keep Crown as a shareholder? We’ve been great partners for LH: For Melco Resorts, this year is about simplifying. One of the articles you wrote about us is a kind of rallying point within the over 12 years.”

Long-time hotel brands Hard Rock and Crown will no longer form part of Macau’s City of Dreams

JuneJune 2017 insideinside asasianian gaminggaming 11 Cover Story

We’ve always been a very agile company. We’ve been able to MC: Talking about simplifying, the next logical step maneuver and change our strategies when we have needed to. So would seem to be merging Melco Resorts and Melco when the market changes, if we’ve been underperforming in DIP International. [direct international premium], if we’ve been underperforming in LH: We’ve looked into it. Melco International is Hong Kong mass, we’ve always made changes. This now allows us to make even listed. Melco Resorts is NASDAQ listed. But we are significantly quicker changes. simplifying our operations. The focus is at the Melco International And again, the reason for the transaction was ultimately, I was level to become a pure holding company for Melco Resorts. So all a huge believer in Macau, in Asian gaming and more importantly the gaming assets, we will try to move them into Melco Resorts, the growing middle class globally. If you look globally, the next 15 subject to regulatory and shareholders’ approvals. The goal is to years, there’s going to be 2.5 billion more people in the middle class have all of the gaming activities at Melco Resorts and for Melco globally, 85% of those – 2.1 billion people – coming from Asia. My International to just be a holding company. thesis all along is: how do we capture more of them? So in Macau, the Philippines and hopefully in Japan, our goal is to really focus on MC: The split with Crown puts you forward more than ever the consumption power of this middle class. as the face of the company. Does that change your role? To answer your question: why now? Because if you look at the LH: To be honest, it really doesn’t. The Crown guys were instrumental transaction over the last 12 months, we bought the Melco Resorts in the beginning. I wanted an international partner because I felt that shares between US$15.50 and US$18. I don’t look at share prices back in 2004 there just wasn’t the expertize in Macau. But the last 10 that often, but I think we’re US$22 or US$23 now. So I think the years, it’s really been my team that’s been running it. The Crown guys confidence in the market, the confidence in our management team, participated at the board level and were very involved in that. Anything has manifested in some pretty significant value creation. in the operations was really left to the team at Melco Resorts.

“We’ve always been a very agile company. We’ve been able to maneuver and change our strategies when we have needed to. So when the market changes, if we’ve been underperforming in DIP, if we’ve been underperforming in mass, we’ve always made changes.”

Lawrence Ho at the opening of Studio City in 2015

12 inside asian gaming June 2017 Cover Story

Studio City

It will probably [change] in simplifying in terms of having less directors. I’m going for less of everything, less board meetings and “Generally, a customer that more results oriented. likes Studio City is very MC: You don’t have an apparent deputy, no obvious different from a customer that second in command. Will that change? LH: We’ve brought onboard some significant new people [Chief likes City of Dreams. We’ve Marketing and Brand Officer Frederic Winckler, City of Dreams Macau Property President Gabriel Hunterton and Altira Macau and tried to position Studio City Mocha Clubs Property President Andy Choy in January], so I’m quite happy with the set-up we have. It has removed some silos as well. at more the mid-mass level I had a COO, but not everything reported to the COO. It just created a lot of issues. I’m quite happy with the arrangement. We and City of Dreams as being really work as a team. Yes, I have a lot of direct reports, but they the premium mass leader and all sit on my Executive Committee and at that level we talk about everything. Again, we’re a very agile company. We’ll see what works premium mass focused.” well and what doesn’t work well. If something doesn’t work well, I’ll make changes.

MC: Going back to the split with Crown, were the arrests of Crown personnel in China last October a factor? MC: But was it a primary factor for you? Was there any blowback from authorities in Macau, the LH: Not a primary factor. Was it a factor at back of my mind and in Philippines or Japan? Was it a priority to separate from the back of the Crown guys’ minds? I’m sure it was one of them. Crown and escape potential fallout from China? LH: I wouldn’t say that was a primary factor. But I don’t know MC: Without Crown, will Melco Resorts still, as you’ve whether it was a factor for Crown in terms of why they wanted to get said, do “whatever it takes” for an IR in Japan? out. Naturally, the people in China, the 17 [Crown employees] that LH: Oh, absolutely. Even more so now. Previously, with Crown kind have been arrested haven’t been convicted yet, so let’s say they’re of pulling back and focusing on their domestic assets, even I had innocent. Let’s say if they were convicted, then it would raise issues questions about their commitment to Japan. Because Japan, for me, for Japan and for both the [operating jurisdictions] but especially for really is whatever it takes. We’ll go all in. But if we had a strategic Macau, since Macau is part of China. significant shareholder – we had been talking about Japan, they were

June 2017 inside asian gaming 13 Cover Story

scenario where we can take advantage and try to take them out at below market value. For us and New Cotai, the two sides can’t even agree on what’s fair market. We can always have a conversation, but our view is, for now, let’s just focus on operating the business as efficiently and as well as possible. If we do buy them out at a higher valuation somewhere down the road, so be it.

MC: But wouldn’t you rather send a player to City of Dreams because that’s 100% yours, versus Studio City which is only 60% yours? LH: Macau is so competitive. That would have been an ideal scenario in that we can dictate where our players go. But Macau has so many great resorts and so many competitors competing for the same players, that has never worked out. We just let our players pick. What we’re really trying to do is bundle the experience so that players can enjoy both City of Dreams and Studio City. Ultimately, our customers and players have their own preferences. Generally, a customer that likes Studio City is very different from a customer that likes City of Dreams. We’ve tried to position Studio City at more the mid-mass level and City of Dreams as being the premium mass leader and premium mass focused. That has continued to hold true. In the end, we just want to capture as much of the market as possible.

City of Dreams Manila MC: What happened with Hard Rock at City of Dreams? Are you still working together in Cyprus? LH: Yes, we’re still working together in Cyprus – us, Hard Rock and our local partner [Cyprus authorities approved the consortium’s casino resort license on 18 May]. still the second largest shareholder and it still involved a significant For Macau, with the Morpheus Tower opening next year, we capital contribution. [Now] it’s even easier for us to go all in and felt that it was time for COD 2.0 – a whole new version of City focus on Japan. of Dreams. You look at City of Dreams today, with all the retail offerings, it’s completely different from before. The new mall, the MC: Overall, are there things Melco Resorts can do now new department store, we’re very excited about it. We wanted to that it couldn’t do with Crown as a shareholder? continue the facelift effectively. The truth is that with City of Dreams’ LH: I don’t think so – other than strategic thinking at the board positioning – we want it to compete with the Wynns of the world level, where it would involve a lot of convincing, hours and hours and the high-end operators – we felt the Hard Rock brand was no of convincing. longer relevant. If you look at our structure, at the local resort level we had This process will continue because it’s no secret that with Crown Crown, which was at one time a 50-50 shareholder and subsequently no longer being a shareholder, we are going to replace the Crown became the second largest shareholder. At Studio City we have a brand as well next year. It’s a big exercise for us, once Morpheus 40% shareholder which is [US investment group] New Cotai. Even opens, to really unveil City of Dreams and the new hotel towers. in Manila we have a significant partner in SM [controlled by that country’s richest man, Henry Sy]. MC: Will you replace Crown at City of Dreams Manila, too? Whenever you have a partner, it involves a lot of convincing. But LH: That is the intention. We have a year on the shareholders’ I don’t think we would have done anything different. Crown, like agreement to figure out what we want. I think they would be us, was committed to quality and, most of the time, committed to open to continuing the use of the brand. But at this stage, the doing what’s best. I don’t think it would have changed that much fact that they are no longer a shareholder, we will offer our own but just more hours in the boardroom. brand going forward.

MC: Would you like to simplify Studio City and buy out MC: Is Morpheus going to be that new luxury brand, your shareholder? replacing Crown? LH: We’ve worked with New Cotai for six years now. It’s clear LH: It will be another brand. Morpheus is for the designer tower. that those guys are very smart and very good at what they do. Our new Chief Marketing Officer [Frederic Winckler], who I hired They’re distressed debt guys so there’s never going to be a from LVMH, he’s kind of super busy on overdrive now.

14 inside asian gaming June 2017 Cover Story

June 2017 inside asian gaming 15 FJapaneature

Journey to Japan

Premium Japanese players no ave you heard the one about the Japanese high roller? Not lately, according to a range of sources longer abound in the gaming in the gaming industry. Even though Japan remains the world’s third largest economy and whales like world, so the impact of Japanese Akio Kashiwagi made casino owners such as Donald Trump sweat as they rolled millions during the 1980s and early 90s, IRs will come from luring VIP HJapanese premium players are little more than a footnote in Asia these days. and mass customers from other If Japan goes ahead with casino legalization, the main impact on other destinations won’t come from Japanese VIPs who stop Asian destinations. gaming overseas, but premium players from other destinations choosing to play in Japan, plus the introduction of another attractive destination with gaming competing for a share of the Asian travel and leisure wallet. By Muhammad Cohen in Tokyo “The Japanese account for around 1% to 3% of a casino’s

16 inside asian gaming June 2017 Japan

total database, depending on the location of the casino,” says The 13 Senior Vice President for VIP Services Lorraine Koo, who has worked with the premium market for properties in Singapore, Manila and Macau. A property president with experience in “If Japan goes ahead with multiple markets puts Japanese at the back end of the premium player top 10, at the level of Thailand or Indonesia – more premium casino legalization, the mass than VIP. “In the old days, Japanese players were bigger and better,” main impact on other Neptune Group CEO and Executive Director Nicholas Niglio adds. Mr Niglio was an executive in Atlantic City during Japan’s economic destinations won’t come boom, when visiting businessmen making deals in New York were from Japanese VIPs who valued patrons. “There have been changes in the [Japanese] economy, changes in how people see themselves and spend their money. In the stop gaming overseas, but 1980s and 90s, Japanese VIPs were being treated like royalty. That’s less important these days to the new money guys.” premium players from other According to a variety of industry sources, Japanese premium players currently scatter across the gaming landscape, most visible destinations choosing to in Macau, Singapore and Manila – where they enjoy a degree of anonymity among the much larger Korean playing population – play in Japan.”

Japanese cities like Osaka look to their unique cultural charm to attract tourists

June 2017 inside asian gaming 17 FJapaneature

“Once Japan starts building mega IRs, invested by global operators, Korean casinos will be in crisis without any economic [and/or] political plans to enhance the current infrastructure.” – Tim Lee

plus Australia, Las Vegas and even Atlantic City. Mr Niglio, whose company stands among the top three junket promoters in Macau, says he doesn’t know of any Macau junkets with Japanese customers, adding that Japanese players usually prefer to deal directly with casinos’ local representative offices. In most Asian destinations, he says, you’ll be hard pressed to find more than one Japanese casino host, if any. Neptune Group WAVE GOODBYE Executive Director The exception in the region is South Korea, where Japanese rank and CEO Nicholas second to Chinese, comprising approximately 20% of visitors to the Niglio says Japanese country’s 16 foreigner-only casinos, according to Daemin Consulting whales are few and far between these days

five in arrivals, is more about retreats and the beach, plus tropical escapes from the winter cold. Playing the Daemin Consulting Director Tim Lee notes that South Korea attracted more foreign visitors than Japan from 2011 to 2014. After Korea endured the Middle East Respiratory Syndrome (MERS) culture card outbreak in 2015, it rebounded to a record 17.4 million arrivals last year, then fell 11% in the first four months of this year amid a Chinese tourism boycott over installation of a US-made THAAD By Muhammad Cohen missile system. Meanwhile Japan’s visitor arrivals keep rising by double digits. Mr Lee notes that “diplomatic issues with China” and exchange IR legalization in Japan would add another rate movements play a part in visitor numbers, as do visa restrictions. dimension to its tourism rivalry with Korea. Both countries offer After Prime Minister Abe took office in 2012, Japan began to offer unique attractions in fashion, arts and culture and for both, tourists Chinese multiple entry visas, while South Korea gives Chinese visa- from China, Taiwan and Hong Kong comprise more than half of all free entry to Jeju island. arrivals. Japanese and Koreans also each represent a substantial South Korea also drives arrivals with hallyu, the Korean wave portion of arrivals for the other country. The Philippines, another of TV dramas, K-Pop and other cultural products. As a result, more destination with Chinese, Koreans and Japanese among its top than 60% of Asian visitors to South Korea are female, including

18 inside asian gaming June 2017 Japan

Director Tim Lee. Korea also remains the most popular country for investments from big names like Las Vegas Sands and MGM that Japanese to visit. have repeatedly shown interests in both countries.” LVS and Wynn “They are truly important to the Korean tourism and casino Resorts have said they’re interested in Korea, but only if locals are industries,” the Seoul-based consultant says. allowed casino access. “Japanese high rollers used to account for a majority in Korea but have since been overrun by the Chinese,” CLSA analyst in Tokyo Jay CONVENIENCE VISITS Defibaugh says. “The natural disposition for a Japanese is towards If casinos are legalized in Japan, it’s likely that some Japanese players modesty, so they’ll be outshone to an even greater degree.” visiting Korea and beyond will stay home, while others will still play “The bulk of the [Japanese] business, a guy playing US$10,000, overseas, based on the experience of Singapore, according to a casino is going to Korea,” Mr Niglio says. “The US$250,000 player is going executive familiar with that market who asked not to be identified. to the US. For players in between, the US is still very alluring to VIPs are more mobile and may opt for “convenience visits” to local Japanese, especially ones with money.” IRs, while traveling to collect new experiences and change their luck. Adds Mr Lee, “For the gaming industry, Korea is quite ahead of Japan. It has long experience with foreigner-only casinos and has already started building IRs, although not comparable in size to those in Las Vegas, Macau and Singapore.” Paradise City, a US$1.2 billion joint venture between Korea’s top foreigner-only casino operator Paradise Group and Japanese gaming giant Sega Sammy, opened its first phase in April on the If casinos are legalized in fringe of the gateway Incheon International Airport. US operators Caesars Entertainment and Mohegan Sun head partnerships that Japan, it’s likely that some Korean authorities approved to build US$1 billion IRs in the special economic zone near the airport in 2014 and early 2016 respectively. Japanese players visiting Neither has started construction, though both say they expect to begin this year. A fourth Incheon IR license went begging after more Korea and beyond will stay than 30 companies that expressed initial interest didn’t lodge bids. Genting Group sold its interest in an IR on Korea’s resort island home, while others will still Jeju to project partner and mainland China developer Landing International. play overseas, based on the “Once Japan starts building mega IRs, invested by global experience of Singapore. operators,” Mr Lee warns, “Korean casinos will be in crisis without any economic [and/or] political plans to enhance the current infrastructure, while actively competing with Japan to attract foreign

Seoul’s Gangnam District is hugely popular with Chinese tourists 2.1 million more mainland Chinese women than men last year. “Travel agencies target them, especially young, trend-conscious Asian female tourists, often offering tour packages that include cosmetic and luxury shopping, cosmetic surgery (another Korean specialty) and Korean cultural experiences such as K-Pop concerts, meetings with Korean celebrities, food and more,” Mr Lee says. These tour groups frequent Seoul’s Gangnam District, where cosmetic clinics and entertainment agencies abound. On the gaming side, Paradise City, the Incheon integrated resort majority owned by top foreigner-only casino operator Paradise Group, plans to use its “Korea-ness” as a selling point. At last month’s Japan Gaming Congress, JTB Tourism Research and Consulting Chief Researcher Masataka Ota urged Japan to supplement its “wonderful tourism asset base” with better “software,” spotlighting items such as fashion and cosmetics. “IRs should have high-end lifestyle items for high-end visitors,” he says. But Japan’s unique selling proposition may be less luxury cachet than local color.

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Korea’s new Paradise City could be among those hit hardest once Japanese IRs open their doors

“I’m sure any operators impacted by the loss of Japanese players the gaming market in Macau and several other jurisdictions. If Japan would be happy with the decision for Japan to legalize gaming, given allows junkets, those markets may feel some marginal impact. the opportunity that it presents in Japan,” Global Marketing Advisors “It’s clear there will be high value players here,” Spectrum Managing Partner Steve Gallaway says. For premium players from Gaming Managing Director Fred Gushin said at the Japan Gaming outside Japan and tourists throughout the region, IRs expected to be Congress in Tokyo in May. “If they’re coming from China, they’ll come the world’s most expensive and among the most unique, in major from junkets.” cities such as Tokyo or Osaka, would be huge draws. A former New Jersey gaming regulator whose company advised In the VIP segment, the big question is whether Japan will allow Singapore on its regulatory framework, Mr Gushin warned that junket promoters, agents that find high rollers, to facilitate their junkets often raise “serious issues” regarding their ownership, gaming trips and, crucially, provide them with credit. The top casino money laundering and criminal links. He urged Japanese authorities executive requesting anonymity says junket regulations will determine to “do your homework and make a policy decision.” whether Japan’s foreign business is big or enormous, adding, “Junkets “Chinese junkets [are] not part of the model that is necessary for are becoming more, not less, important in Asian gaming.” Japan to be successful,” Mr Gallaway says. Global Market Advisors’ Japanese Prime Minister Shinzo Abe toured Singapore’s IRs on Japan Integrated Resorts White Paper released last month estimates a visit to the city-state in 2014. Since then, Singapore has been seen gaming revenue of US$11 billion to US$24 billion by 2030 for Japan as a model for Japan’s casino legalization, with the Diet even using IRs, depending on their number and locations, with domestic players the Singapore term “integrated resort” for its casino legalization accounting for 53% to 77% of revenue. Every scenario envisions legislation. Others cite Singapore as an example of what Japan hopes Singapore style restrictions on junket promoters, projecting Japan as to achieve with casino legalization. the world’s number one casino market with few if any junkets. Singapore’s casino regulations don’t explicitly bar junkets, “I would suggest that the Diet work with the American Gaming but the embedded regulatory hurdles have meant that only three Association and seasoned international operators to further promoters have been approved, none of them from Macau, which understand junkets and then determine if they want them as part of specializes in players from mainland China, the most lucrative their casino model,” Mr Gallaway adds. source of high rollers. Beijing’s ever-tightening restrictions on moving money overseas and the inability to collect gambling debts VIP AUDITIONS through the mainland China legal system means junkets are virtually In any case, Chinese VIPs will want to try Japan. indispensable for Chinese VIP play. Thus, they’re an integral part of “I’ve found Chinese players will go anywhere once,” Mr Niglio

20 inside asian gaming June 2017 More broadly, IRs are expected to provide new momentum for Japan’s extraordinary growth in tourism, from 8.4 million arrivals in 2012 to 24 million last year – 85% from Asia. The government has a “In the VIP segment, the big goal of 30 million arrivals in 2020, when Tokyo hosts the Summer Olympic Games, and 60 million by 2030. question is whether Japan “Given its history, its cultural, its political and economic will allow junket promoters, standing, Japan is one of the most under-visited places in the world,” a casino property president in the region says. This agents that find high rollers, executive believes that difficulties commonly associated with Japan tourism, such as high prices and lack of foreign language to facilitate their gaming ability, are overstated, while travelers will overlook other issues such as distance from Southeast Asia if the IRs are spectacular trips and, crucially, provide enough. The executive suggests keeping total taxes low and allowing junkets in will let Japan’s IR developers maximize the them with credit.” wow factor and increase tourism. At the Japan Gaming Congress in Tokyo, Bloomberry President and Chief Operating OfficerT homas Arasi, who was CEO for Marina Bay Sands’ debut, recalled employees counting chandelier crystals to meet Singapore requirements that the property be 50.1% complete before opening. Mr Arasi, now running Solaire Resort and Casino in says. “For a return visit, there are a lot of factors: Was it fun? Did they Manila, noted that Las Vegas has no such property restrictions yet win? Did anyone speak their language? Did they have the right food? has the greatest investment in non-gaming attractions and the most Was transportation easy?” revenue from them. On the non-gaming front, Japan will likely emulate Singapore With legislative approval and all the right moves, a half-dozen by using IRs to expand MICE – meetings, incentives, conventions, years down the road Japan could be a strong number two gaming exhibitions. market in Asia. “The MICE market is terribly underdeveloped in Japan,” Mr “Macau will remain the spectacular center of the gaming Defibaugh says. “Perhaps there will be a bit of chipping away at the universe for a long time to come,” Mr Niglio says. “Operators international MICE market, but I don’t know who the incremental are doing a magnificent job of fine tuning resorts to mainland loser would be.” China appetites.”

Rival Asian destinations like Macau and Manila will be eager to see if Japan allows junkets to bring customers to its IRs

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In the penultimate instalment (Mis)calculating of their five part series on the development of Japanese social costs and integrated resorts, casino and consequences integrated resort experts Dr Glenn McCartney and Dr Andy of Japan’s IR Nazarechuk discuss the divisive development issue of problem gambling.

By Dr Glenn McCartney and Dr Andy Nazarechuk

22 inside asian gaming June 2017 Japan

he mere mention of the word “casino” still raises eyebrows with perhaps greater levels of interest “There are important compared to other forms of gambling such as lotteries, lucky draws, sports betting or gambling packaged to fundamental, initial questions assist a cause or within an entertainment parlor. A list of in the great social cost debate, vices or undesirable activities will often be cited by opposition groups Tas a consequence of bringing a casino into the neighbourhood. which unfortunately is largely What is important in Japan, given the stakes, is that the issues be addressed with science and empirical based evidence void of confused, poorly calculated emotions or perceptions. As a starting point, what are the social costs and consequences directly brought about by gambling? And and for the most part fraught having defined these, how do you measure social costs and prove that economic consequences were brought about specifically by the with inaccuracies.” presence of adding an IR to any Japanese city? These are important fundamental, initial questions in the great social cost debate, which unfortunately is largely confused, poorly calculated and for the most part fraught with inaccuracies. For some, the issue of whether they determine gambling to be “good” or “bad” (such as some might see smoking, drugs and alcohol) will determine their emphasis and response bias. The made based on rational actions, these are not social costs. consequences listed from problem gambling behavior often include The Macau government consumes a large part of its time and theft, corruption, bankruptcy and other illegal activities. But let’s resources on taxing, monitoring and policing the casino industry. consider that a pathological gambler may have compulsive disorder The Macau labour department constantly deals with large quantities issues (shopping, smoking and alcohol) or gamble due to other of work permit requests; the public works department is frequently problems. Should the casino then be blamed and aligned with all reviewing multiple casino resort construction permits while the the social costs brought about by this individual? Was the casino the tourism department spends resources licensing and inspecting primary reason for a crime being committed, for company bankruptcy restaurants and bars. or for a sudden increase in divorce rates? An argument is that this diverts government resources from There is great debate on the subject, but given the attention welfare, education, tourism and city infrastructure developments. granted the issue now in regards to Japanese IRs, a rational and Therefore, this could be considered a social cost. Japanese empirical based approach is needed. We need to refer to the science. authorities will similarly need to avert attention and resources to new On social costs related to gambling, Walker and Barnett in 1999* IR construction, development and policy in their daily operations produced considerable detail, science and debate on what is and (which includes those concerning social issues), as well as ramping isn’t, in their opinion, a social cost of gambling. They present several up their capacities and capabilities so as other departments do not interesting scenarios. Before addiction, they argue, the person makes forget other priorities. a decision to gamble rationally. The addiction may lead to a decline in Recent reports have put problem gambler numbers in Japan quality of life and regret towards the original decision. The argument at five million. In jurisdictions with legal and well-run casinos is that since the consequences experienced by the gambler were there is a legitimate opportunity to provide counselling, support

June 2017 inside asian gaming 23 FJapaneature

and educational resources to the community. There are dozens pachinko machines); opening hours (24/7); whether the location is of methods employed globally to communicate and try to prevent integrated into the city network, is in an isolated location or a cluster problem gambling. In jurisdictions with strong regulatory policies permitting spill-over to more than one casino property visit; casino concerning problem gambling, casinos can be required to train credit policy; regulation and regulation committee; casino staff their staff to identify problem gamblers. Materials with resources training; and table limits. and counselling information must be provided where all players can Casinos can implement policies such as putting their ATMs see it. external to the casino floor with daily maximum withdrawal limits, Studies have shown that the percentage of players cited as the logic being a gambler will have time to reflect as he or she walks problem gamblers can be anywhere from 1% to 6%. The number to the ATM. The current debate on smoking on Macau’s casino floors can be lower if cited by those supportive and higher if cited by those and a smoking lounge compromise could mean that gamblers spend against casino introduction or expansion. Naturally there is the less time away from the tables to smoke. issue of protecting the vulnerable, the young and the elderly as well One of the most discussed and interesting methods of controlling as casino staff who spend large quantities of their time around the access to the casino is through an entrance levy such as the one casino environment. in place in Singapore. The entrance levy is misunderstood by many There are many factors to consider that should be part of a who think that the primary purpose of the levy is to prevent problem community assessment on preventing gambling addiction. They gamblers from entering the casino. This is simply not the case. include the background of casino operators and suppliers in The entrance levy provides three main functions. First, it requires addressing responsible gaming; size of the casino (tables, slots, each person who enters the casino to identify his or herself with a

“Studies have shown that the percentage of players cited as problem gamblers can be anywhere from 1% to 6%. The number can be lower if cited by those supportive and higher if cited by those against casino introduction or expansion.”

Macau’s government spends considerable time and resources monitoring and policing the city’s casino industry

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ask the gambler to be excluded. The Macau government extends this “Casino tourism, like any exclusion to the public sector apart from those tasked to monitor and police the casino. Kangwon Land is the only casino in South Korea form of tourism, is a double- where locals are allowed to gamble, but those living in the local edged sword. The cost-benefit vicinity face additional restrictions on the number of visits per month. Key, however, is monitoring and enforcement. Singapore and Korea argument should always be requires the presentation of ID cards to gain access. Macau and the Philippines do not, the weakness in their process being that it may be implemented with a realistic more difficult to identify a problem gambler who has been excluded. Gambling has been around for a long time and will continue to be and unbiased assessment.” a part of the world we live in. In the US, prior to 1978, the only place to legally gamble in a casino was in Las Vegas. Common perception was that if casinos were allowed to open elsewhere, there would be more people with gambling problems. Today, there are casinos in 48 of the 50 states. Casino tourism, like any form of tourism, is a double-edged passport or ID card. This provides a database for use with exclusion sword. The cost-benefit argument should always be implemented programs. Foreigners enter free, while locals pay S$100 to enter, with a realistic and unbiased assessment. The high revenue stakes or they can pay S$2000 for one year’s access. The entrance levy and returns on casino development from investor to governmental generates S$150 million dollars or more per year to government agencies and NGOs has unfortunately meant conflicting and revenues to spend on community programs. skewed assessments. Second, the entrance levy makes it difficult for people with lower While still a relatively small percentage, those with a gambling incomes to gain access to the casino. The levy forces low income problem need and must have assistance to overcome it and earners to think twice before entering a casino. This in itself reduces regain their normal lives. Strong regulatory policies and a rigorous the number of people who may try a casino or become problem policy framework will be important for Japan as it is for any casino gamblers. Finally, the revenue generated from the entrance levy is jurisdiction globally. not dedicated to solving problem gambling issues, but is given to a We close with an insight from Macau. In the original Lisboa local government-approved agency whose main purpose is to fund casino, years before the new casino boom, there was a small sign on community activities and services. This allows the local community a column located at the entrance of the casino. It read, “No one can to see actual benefits that are derived directly from the casino. The win all the time, we advise you to play merely for pleasure and risk casino benefits from those who gamble, the government benefits only what you can spare.” Although the sign is gone, that advice still from increased tax revenue and the community benefits from the holds true today. casino entrance levy. It is a win-win-win for all concerned. Casino exclusion programmes are also popular. A gambler can self-exclude him or herself from a casino if he or she believes they * See Douglas M Walker and AH Barnett (1999) The Social Costs of Gambling: have a problem. Often a member of their immediate family can also An Economic Perspective, Journal of Gambling Studies, 15(3), 181-212.

26 inside asian gaming June 2017 June 2017 inside asian gaming 27 FJapaneature Japanese ingenuity

Inside Asian Gaming speaks to TGG Interactive co-founder Raymond Chan about the incredible potential Japan offers in regards to creativity and innovation for the gaming industry.

By Ben Blaschke

28 inside asian gaming June 2017 Japan

t may already be the hottest topic in the global gaming industry, but there is more to Japan’s burgeoning casino “That’s what we are liberation than meets the eye. For Hong Kong gaming technology company TGG dreaming of when we talk Interactive, the opportunities Japan opens up for the gaming about Japan – innovation, industry as a whole extend well beyond casino walls with the nation’s proudI history of technological innovation and recreational game creativity. It can become one production ripe for the picking. “Most people, when they talk about Japan, focus on the casinos of the strongest countries that are potentially going to open and the fact that it is going to be a huge market. I don’t think anybody would disagree with that,” says in the world at developing TGG CEO and co-founder Raymond Chan in an exclusive interview with Inside Asian Gaming. games for casino gaming.” “But from our point of view, the most important thing is that because Japan is such a huge market, it attracts a lot of innovation and a lot of talent from different companies. This creates a golden opportunity to find talent in Japan. “All of the talent has previously been focused on creating PlayStation, video games and mobile games – because Japan innovation, creativity. It can become one of the strongest countries in makes great mobile games – as well as the pachinko and the world at developing games for casino gaming.” pachislots industry. Now that casino gaming is nearing, there is an There is good reason for TGG to focus so heavily on the opportunity for the talent to follow. It’s an opportunity for TGG to Japanese market. The brainchild of Chan and co-founder Ernie go over there, find this incredible talent and utilize those Japanese Suek, TGG was formed in 2014 after the duo recognized a need products which I’m sure everyone would agree are among of the for greater cooperation between those developing gambling best in the market. products and those utilizing them both in online and land-based “That’s what we are dreaming of when we talk about Japan – casino operations.

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The result was HIRO, an omni-channel open gaming platform that provides game developers and gaming operators with the freedom and flexibility to build games specifically suited to the needs of an individual operator while also meeting global regulation requirements at a fraction of the time and cost. “The Japanese society is “The open platform, we believe, will attract innovation – attract highly educated and more more game developers who have great ideas to get into this industry and create a product,” explains Chan. comfortable with electronic “This allows us to give casino operators more choice and more importantly give players more choice and more variety of product. That’s machines. They understand what the whole open platform is all about – to help developers with great ideas get into game development. That in turn will help casino operators the game rules and enjoy attract more customers and ultimately increase revenue. “HIRO allows operators to pick and choose their products the entertainment value from our library and it also provides them with access to the game they provide which is developers themselves, to talk to them directly about how to tune and twist the game as per their customer’s preferences.” generally more complicated Which is where Japan comes in. Chan points to the likes of Aruze, Konami and Sega Sammy as examples of Japanese than in table games.” gambling product developers with a strong and proven track record, however he is adamant the country’s creative juices remain severely under-represented.

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This point is particularly notable given Japan’s historical “Pachinko is about skills, horse racing is about skills – even passion for electronic gaming. While it is estimated that there are lottery is kind of about skills, or at least the perception of it. Whether somewhere between three million to five million slot machines it is high or low volatility, it has to be about skills.” in operation worldwide, Japan itself boasts four million pachinko It’s because of this unique outlook that TGG is focusing so machines, “so you can see how much Japan is into that style of much of its energy on Japan, despite the fact the actual realization of gambling,” Chan observes. Japanese IRs is still at least five years away. “The Japanese society is highly educated and more comfortable “And it’s not just TGG that should rely on that. The whole with electronic machines. They understand the game rules and casino gaming industry should be looking to Japan’s creativity enjoy the entertainment value they provide which is generally more as an opportunity,” says Chan, whose company has already made complicated than in table games. considerable inroads into the European, South American and more “The other key point is that although Japanese players are just as established Asian markets such as Macau, the Philippines, Cambodia likely to play a low volatility game like pachinko as they are a higher and Korea. volatility option like horse racing or lotteries, one thing that’s clear is “This is the perfect opportunity for the industry as a whole to take the game should have some kind of skill element. advantage of Japanese innovation.”

TGG Interactive founders Raymond Chan and Ernie Suek

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Japan on show in Tokyo

t was 2014 when the Japan Gaming Congress (JgC) was The Japan Gaming Congress held for the first time, but that inaugural event was merely a shadow of its 2017 reincarnation which returned to the Grand returned to Tokyo in May for Hyatt in Tokyo from 10 to 12 May. With the passing of the long-awaited IR Promotion Bill the first time in three years in December – the first major step in green lighting the casino Iindustry in Japan – this year’s JgC attracted a massive audience of with the biggest names in 420 attendees all looking to gain valuable insights or stake an early claim to a piece of the Japanese pie. the industry coming together And it was a powerful assortment, too. From chairmen, presidents and C-level executives from the world’s biggest casino and integrated to discuss the key issues resort operators to local lawmakers and officials keen to learn more, surrounding Asia’s next the level of expertize on hand was indicative of just how much is at stake in this latest prospective jurisdiction. gaming hub. They included the likes of Galaxy Entertainment Group President Michael Mecca, Marina Bay Sands CEO George Tanasijevich, Wynn Resorts President Matt Maddox, President of International Development at Caesars Entertainment Steve Tight, MGM Resorts By Ben Blaschke

34 inside asian gaming June 2017 Japan

Japan CEO and Representative Officer Ed Bowers and Sega Sammy President and COO Haruki Satomi, plus key government groups and attendees from the City and Prefectural Governments of Osaka, Hokkaido, Wakayama and Nagasaki. Explaining the event’s importance, Mr Mecca said, “Doing business in Japan is a very special opportunity. Japan is very interested in developing the IR business in a very Japanese way. The resort itself has to be iconic to the city and prefecture of where we are doing business. “In all of our conversations with the government and corporations The Japan Gaming Congress saw a number of expert panels address key their focus has been that they want the resorts to be incredibly special, issues facing Japan’s casino industry they want them to represent Japan and the city and the prefecture where they are going to be built and they recognize that in order to do that there has got to be a significant investment. “Certainly every IR company would like to be selected to be part of an IR in Japan.” “This year’s JgC attracted The JgC saw a number of senior executives from renowned a massive audience of 420 IR operators provide their visions for how an Integrated Resort in Japan might look, but also included in-depth discussion attendees all looking to gain from local experts on key issues such as understanding Japan’s political environment, collaboration with local firms, licensing valuable insights or stake an regulations and considerations, potential IR locations and problem gambling concerns. early claim to a piece of the Among the more notable revelations was the suggestion by Senior Manager and Sub-Leader for the Integrated Resort Japanese pie.” Support Office at Ernst and Young Japan, Masayo Watanabe, that the process for confirming a host prefecture may include that

Operator visions for Japan

Steve Tight Michael Mecca would provide a complimentary shuttle President of International Development at President of Galaxy Entertainment Group service from the integrated resort to Caesars Entertainment Corp all the key areas in the city. And, as we “Galaxy Entertainment have done in Macau, we would invite a “We’ve used the term Group will ensure that number of shop owners, a number of ‘Integrated Resort’ any IR we build in Japan restaurant owners, to be part of the IR since Singapore’s is integrated with local and in every way share in the success of properties opened in attractions. We will the IR with the local community. 2010. I understand it’s leverage local creativity, “We believe because of our a term that helps us having signed Paul partnership in Monaco [with Société understand. But Japan Tange as project architect. We would des Bains de Mer, owner and operator provides us with an opportunity to look like to provide career opportunities for of the Principality’s Monte Carlo beyond the Integrated Resort to the ‘Japan the local community. Casino] and the work we have been Entertainment Resort’ – JER. “What we have suggested is that doing in Japan over the last two and “A JER would include timeless design. everyone who registers in the hotel, a half years, as more government and It has to be uniquely Japanese and bring in everyone who comes and visits the resort, corporate entities learn about the the unique history of Japan. We are currently we would give them a map of the local business philosophy of Galaxy we are exploring opportunities in both urban and community identifying all of the shopping learning that this fits in very well to the regional markets.” areas and local tourist attractions. We concept of an IR in Japan.”

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“In all of our conversations with the government and corporations their focus has been that they want the resorts to be incredibly special, they want them to represent Japan and the city and the prefecture where they are going to be built.” – Michael Mecca

Ed Bowers Matt Maddox George Tanasijevich Senior Vice President of Global Gaming President of Wynn Resorts President of CEO, Marina Bay Sands Development, MGM Resorts International “Wynn has a long history of IRs and “The day will come “MGM’s business that’s something to consider for Japan. for me to make a model is to build But Japan is also one of the most forward very strong Japan large-scale destination looking countries in the world. We think pitch for Las Vegas resorts with lots of we can combine both elements. Sands, but for now stuff that costs a lot “Mr Wynn and our company has the important issue of money, so it needs been doing this for 40 years. Las to talk about is to be in a high-density Vegas has gone from eight million tourists to 40 responsible gaming and talk about population area. The ones mentioned million tourists since Wynn arrived. Every time a what we’ve done at Marina Bay are Tokyo, Osaka and Yokohama, so Wynn property opens, tourism spikes. Sands in Singapore. we’re focused on those three. “Steve Wynn envisaged and opened Mirage in “IRs are introducing gambling “We envisage a uniquely 1989, Treasure Island in 1993, Bellagio in 1998 and to Japan but the effect of IRs will be Japanese resort that highlights and Wynn in 2005. We’ve never purchased any properties quite muted. This is a very mature compliments the unique features of because we always think you have to be looking gambling market. The type of Japan. City Center (MGM’s 1.5 million ahead, not looking at what someone else has done. gambling they have here is not the square foot mix-use complex on the Our company is about innovation. least risky. We’ve been working with Las Vegas Srip) is the kind of world “If you look at Maishima in Osaka, it is 900-plus Howard Shaffer from Harvard on a class resort and partnership we hope acres and could fit all the resorts I mentioned. As for study showing that IRs should not to create in Japan.” the resort, the entertainment needs to be uniquely cause a spike in problem gaming. Japanese, but we do believe it needs to be immersive In fact, the introduction of IRs and and interactive.” the regulation that comes with it

36 inside asian gaming June 2017 Japan

prefecture nominating the IR operator before any official decision by Saeki told IAG in an exclusive interview at JgC. the national government was made. “If you look at somewhere like Wakayama Prefecture where the “It may be that each local government will have to find their population and the economy is quite small, to maintain a huge facility operator first,” he said. “There might be an RFP (request for proposal) like that is very difficult. They talk of conventions and amusement process first with the local government finding an operator so that parks but even the Tokyo Disney resort is facing some difficulties when the local government submits their application to the national which shows how difficult it is to maintain the amusement park to government it includes an already selected operator. be profitable. “That way, when the national government selects where Japan’s “MGM used to have a huge amusement park and they had to IRs will be, they will be for areas with a known operator attached. The shut it down because it just doesn’t make money. The same thing can national government will know who the operator is.” happen unless you locate this IR in the densely-populated areas such Takayoshi Koike, President & CEO of Capital & Innovation as Yokohama and Tokyo. Inc, said the winning formula for a joint venture consortium in Japan “These are the only areas where the so-called IRs can survive. would be one involving three parties – “a foreign operator with “So, contrary to the purpose of this law to foster local economies experience; large, well-financed national corporates who understand with IRs, the basic IR model doesn’t fit that. It can only go somewhere Japan; and local business leaders who understand the local area that already has a big population.” where the IR is going to be,” Mr Koike said. Any implementation of an IR industry in Japan would, it was The JgC also addressed a number of important concerns that explained, first require a widespread education campaign targeting will need to be taken into account before any Japanese IR becomes a local population famously wary of problem gambling. However, it a reality. could also present a rare opportunity to improve best practice on a Among them is the issue of IR locations, with Mr Hidetaka global scale. Saeki – an expert in Japanese government policy and Honorary As Scientific Games Managing Director for Asia, Ken Jolly, Fellow, School of Government at Kyoto University & President explained, “By the time casino doors open in Japan we could have of IRIS Research Institute – noting contradictions in the IR even more advanced harm minimization functionalities such Promotion Bill. as tracking back to ID cards, enhanced information displays for “This law states that the purpose of the law is to foster local players – even recommending voluntary exclusion could be done economies or promote tourism in local areas, but the definition of in the system. integrated resort contradicts that because they have to be so big,” Mr “We are always developing new functionality. By the time we get

can bring down rates of problem Geoff Davis Haruki Satomi gambling. So we have to put Executive Vice President Sega Sammy President and COO together the right regulations and and Chief Financial Officer, Melco Resorts heighten public awareness. “Paradise City in Korea “I suggest Japan consider an “When Lawrence Ho says he fits with our long-term entry fee. I’m a member of the is committed to Japan, it’s strategy to acquire a Responsible Gaming Board and coming from the controlling full set of skills that are helped draw up the Responsible shareholder of the company. indispensable to operating Gaming Guidelines which has helped He’s not a manager, he’s the an IR in Japan. It proves a 54% gambling rate decline to 44% decision maker. our commitment to in Singapore. “Melco Resorts has been Japan. Our mission is creating moving “Japan has an opportunity part of the world’s most successful gaming experiences. to put together a plan that really partnership (Melco-Crown) but we are ecstatic “We are not a video game or slot works for this market … that shows and extremely enthusiastic about pursing the machine maker, we are creating a the industry’s commitment to gaming opportunity in Japan as a standalone. connection – that is our raison d’être. We responsible gaming and how we “We are committed to local communities. We do not want to make a simple casino. We collaborate and share information. are committed to social safeguards. We support community and want our property The industry doesn’t want people are committed to combating problem to provide food plus entertainment. to lose all their money. We want gambling. We are committed to sustainable “We are building our business them to be repeat visitors and development. Melco Resorts has a proud culture experience to be a platform for a successful enjoy gaming responsibly.” of compliance driven by Lawrence Ho. IR in Japan. We are open to partners, to “Our vision for Japan and approach is to foreign partners where we can be a trusted work collaboratively with any local partners and local operating partner and create the best the host city to create a great IR.” IRs in the world.”

June 2017 inside asian gaming 37 FJapaneature

“There might be an RFP process first with the local government finding an operator so that when the local government submits

their application to the there, data science will be a big thing. We will also see improved loyalty and business intelligence functions. national government “Typically players have been rewarded in groups, but individual players could be identified and rewarded too. It could be tied into the it includes an already host management system. Players could enter the casino and local Japanese hosts could immediately know. selected operator.” “This could have good harm minimization outcomes – a local Japanese host could approach players as soon as they walk into the casino.”

Wakayama Prefecture could find it difficult to support a large Integrated Resort, according to local expert Hidetaka Saeki

38 inside asian gaming June 2017 June 2017 inside asian gaming 39 Industry profile

Raquel Dias: Thanks for chatting to us Clinton. Can you start by telling us a little bit about yourself? Clinton Long: I grew up in Sydney and Aristocrat was my first real job – when I finished university I immediately went to Aristocrat. A lot of guys start their career like this, straight from school. I started in sales right after that, in the Sydney area. Then in 2007 the company moved me to Singapore. I went through the openings of Marina Bay Sands and Resorts World Sentosa in 2010. Then after 12 years with Aristocrat I joined Shuffle Master. I had Ken Jolly (Vice President and Managing Director – Asia at Scientific Games) as a boss at Aristocrat back in 2007/08 so I joined Ken again. Eventually Shuffle Master was bought by Scientific Games, Clinton so I’ve been in sales with them for a few Long: years now. Asian persuasion

Inside Asian Gaming Deputy Editor Raquel Dias caught up with Scientific Games Sales Director Clinton Long to discuss his love affair with Asia.

40 inside asian gaming June 2017 Industry profile

RD: How did you find the transition RD: And how did you end up in from Australia to South East Asia? Macau? CL: I had only been to Asia twice and that CL: Well I had been coming to Macau had been to Bali, which is basically like “The gaming industry for many years with Aristocrat. I was very visiting any other Australian city! But I is always evolving confident because of my experience in remember Singapore was easy. They describe Singapore. I knew Macau was a small place it as Asia for beginners and it really is. There and we have to know as well and I anticipated a few challenges wasn’t a language problem, it’s a very easy but it was better than I thought. Everything society to live in. But I was eventually moved everything that is was extremely convenient, everything was to Cambodia – that was an eye opener! I have nearby and I love the expat community to admit though, it was easier than I thought. happening to be here. Of course, it has its challenges. Most people spoke English and I had no Going to the supermarket can be expensive problem adapting to the food. I love Asian ahead of the game.” and you don’t always find what you are food. The biggest thing was the culture. looking for. But altogether I have enjoyed the experience. RD: How so? CL: Well, in Asia you have to interpret a lot RD: Between Singapore, Cambodia more. Dealing with western businessmen I love dealing with Asian business people and Macau you’ve been in Asia for a you are more direct, more straightforward. because they are a lot more loyal and once long time now. Do you still feel like Here you have to understand what they you gain their friendship, they will continue you are learning? mean. You have to learn to be more patient, to stay close to you. They are also very CL: I’ve been in Asia for 10 years now but especially when you’re dealing with emails. hospitable. No matter which country I visit, it feels like two! I feel I’m always learning, You have to be more careful. But I found I always feel welcomed. especially after joining Shuffle Master. It has Long was based in Singapore when Marina Bay Sands opened in 2010.

Long was based in Singapore when Marina Bay Sands opened in 2010

June 2017 inside asian gaming 41 Industry profile

“These are also good times with a lot development in new gaming jurisdictions around Asia. More and more markets are growing and that is very interesting.”

been such an experience because Aristocrat me questions about gaming. That’s it’s true. I have no reason to move on to was very oriented towards the slot machine because it’s an interesting area to work in. another industry. business, but at Scientific Games we deal Everything is always changing. The stories with everything in the market. That’s a big I get out of it, maybe because of a trip to RD: What do you like to do away from learning curve, especially when it comes to the Philippines or Cambodia, are always work? gaming tables. Also, having a team under fun. There’s also the fact that you deal CL: Golf, golf, golf! I’ve played it since I was me is a challenge. I was always used to with different types of people. Especially a kid. working alone, having to report to a single when it comes to clients, there are just person about how I was doing. Now I have so many different types of characters and RD: What is your handicap? a responsibility with the team and that’s personas from high-level executives to CL: It’s about five or six. I don’t actually have been fun. They are a good bunch of guys two guys in a smaller venue in the middle one because I’m not a member anywhere. I to work with which has made it a lot easier of nowhere. You find everything. Also, play as much as I can. I just bought a condo for me. gaming is in different stages in different in Danang, right on the golf course, which markets so you’ve got customers that are happens to be my favorite course in the RD: What is your favorite part of highly experienced and others that are world. But if I’m here in Macau I go to the working in the gaming industry? very new to it. country club most weekends. Sometimes I CL: It’s not boring! I have a lot of might take my golf sticks with me, but it’s a friends working in the financial industry RD: Do you have the perfect job? good icebreaker and a great thing to have in or other industries and they always ask CL: Well, I won’t tell my boss that, but common with a customer.

RD: What is your favorite thing about Macau? CL: I would have to say it’s the food. Sure, Long recently purchased a Singapore has a lot of good food as well, condo in Danang, Vietnam but Macau’s is special. When I go back to Australia, within two weeks I’m craving local food. It might be Portuguese or Asian or Chinese food, it doesn’t matter. My favorite restaurant? I usually take my friends and family to Fernando’s!

RD: What would you tell a young person who dreams of working in the gaming industry? CL: The only thing is that you have to like it. You have to truly like it. It doesn’t matter so much your background, but make sure you like it because there is no cut off time, you are always working. You have to understand you are not taking a job, you are accepting a lifestyle.

42 inside asian gaming June 2017 June 2017 inside asian gaming 43 Trade Shows

Onwards and upwards for G2E Asia

G2E Asia saw record numbers countries and regions. Visitor attendance was up 28% over 2016. Among the attendees were 1,652 serious buyers and decision makers gather at the Venetian Macao last with purchasing power. This significant representation of VIPs represented a 74% increase from 2016. month as Macau’s biggest gaming The event boasted many of the biggest names in the industry from Scientific Games, Aristocrat, IGT, Aruze and Konami to iGaming trade show again attracted the leaders BBIN, SA Gaming, IDNPLAY, eBet and Qtech amongst the eyes of the industry. 180 exhibitors displaying the newest trends. Just as significant was the G2E Asia Conference, covering a wide range of relevant topics from the Asian Markets Forum to the iGaming Summit and various issues surrounding Integrated Resort By Raquel Dias Operations and Marketing. This year’s keynote speakers were Galaxy Entertainment Group Vice Chairman Francis Lui and Director of Macau’s Gaming and Inspection Coordination Bureau (DICJ), Paulo Martins Chan, who both provided their insights into the state of Asia’s gaming industry. s has become customary over the past decade, May saw Among the many topics discussed by Mr Lui was the undersupply the latest edition of Global Gaming Expo (G2E) Asia fire of hotel rooms in Macau, with the prominent local figure stating, up at the Venetian Macao. And just like previous editions, “Macau needs more hotel rooms to support its tourism industry. 2017 saw G2E Asia set record attendance numbers to North America averages 100,000 to 115,000 hotel rooms in its major Acement its standing as the region’s most prominent annual gaming tourism centers. Macau has 36,000.” industry trade show. Mr Lui added that limited supply – which contributed to Galaxy This year, G2E Asia welcomed a total of 13,953 visitors from 84 boasting 97% occupancy across its five hotels in 1Q17 – threatened

44 inside asian gaming June 2017 Trade Shows

“This year, G2E Asia welcomed a total of 13,953 visitors from 84 countries and regions. Visitor attendance was up 28% over 2016.”

the long-term health of the city’s tourism industry. helping turn the industry’s fortunes around. “China is not only Macau’s number one tourism source, it is the G2E Asia 2017 also saw the launch of G2E Asia Daily – a brand number one tourism source for the world,” he said. “The US$261 new daily newspaper printed and distributed on each of the three billion spent by Chinese tourists in 2016 represented a 161% increase show days. A partnership between Reed Exhibitions, organizer of in just five years. Macau must be protective of its Chinese tourism G2E Asia, and O MEDIA, publisher of Inside Asian Gaming, G2E market – particularly with China so under-penetrated.” Asia Daily proved a huge success on debut with 7,000 copies widely Meanwhile, Mr Chan said that the DICJ would, “continue to distributed throughout the show providing the latest news from the monitor closely the ongoing operations of the different gaming conference and exhibition floor, showcasing exhibitor products and operators and any changes to the external gaming environment.” providing all the must-know information on everything from G2E He added that Macau had come a long way over the past 12 Asia’s array of press conferences and media launches to its many months, overcoming 26 consecutive months of decline to find networking events. itself riding a wave of nine straight months of growth. And he G2E Asia and G2E Asia Daily will both return to the Venetian credited the DICJ’s persistence in pushing for diversification for Macao from 15 to 17 May 2018.

June 2017 inside asian gaming 45 Events Calendar

4|6 July 2017 3| 5 October 2017 World Gaming Executive Summit 2017 Global Gaming Expo 2017 Barcelona, Spain Las Vegas, USA The World Gaming Executive Summit 2017 will bring together Global Gaming Expo (G2E) is the international gaming trade over 80 of the best and brightest speakers in the gaming show and conference “by the industry and for the industry.” industry, as they share their expertize and knowledge of future G2E is the best place for anyone working in gaming to see the developments with you. Attendees will benefit from targeted latest products, learn the trends and network with the Who’s content for the offline and online gambling communities, with Who. It offers a 360-degree view of the industry from slots and tracked sessions including focused case studies and panels. table games to iGaming and food, beverage and hospitality. www.terrapinn.com/conference/world-gaming-executive- www.globalgamingexpo.com summit/index.stm

14|16 August 2017 30 October | Gaming, Racing & Wagering Australia 1 November 2017 (GRWA) European iGaming Congress & Expo Sydney, Australia Berlin, Germany Gaming, Racing & Wagering Australia (GRWA) is the region’s This year our agenda will focus on how we can bring our premier gaming conference taking place in August, bringing industry to the next level of intelligence, taking advantage together over 150 of Australia’s leading sports betting, gaming, of the new technology, products and concepts whilst wagering, lottery and racing executives to learn about the considering what this means for our legacy systems going latest developments in the industry, incoming regulations and forward. While continuing to attract the world’s leading disruptions, and strategies to stay ahead of the curve. This year iGaming brands and newly launched start-ups, EiG will also will be the 8th edition of GRWA, held at the Novotel Darling make a significant effort to bring operators from regional Harbour, just across the street from the newly renovated venue and emerging markets to reflect the expanding universe. It of the Australasian Gaming Expo, the International Convention provides a unique platform which encourages and facilitates Centre Sydney (ICC Sydney). networking and learning for the entire iGaming ecosystem. www.gamingdownunder.com www.eigexpo.com

15|17 August 2017 14|16 November 2017 Australasian Gaming Expo 2017 MGS Entertainment Show Sydney, Australia Venetian Macao, Macau Wherever you are in the world, jump on over to the MGS Entertainment Show (MGS) is organized by the Macau Australasian Gaming Expo (AGE) 2017, in Sydney’s all new Gaming Equipment Manufacturers Association (MGEMA), International Convention Centre. Experience all the latest, co-organized by the General Association of Administrators the greatest and glimpse the future at one of the world’s and Promoters for Macau Gaming Industry, Associação de biggest gaming and equipment expos. And then take in some Mediadores de Jogos e Entretenimento de Macau, Macau Jockey of “Australia” whilst staying in the internationally renowned Club, MACAUSLOT and Macau Yat Yuen Canidrome. It is the harbor city of Sydney. first large scale gaming and entertainment exhibition organized http://austgamingexpo.com and run by Macau organizations. MGS will have a floor area of over 10,000 square meters. Exhibitors and buyers eyeing the Asian market will be coming from all corners of the world. www.macaogamingshow.com

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