Why a key government ruling this summer could turn this Asian hub into the next gambler’s paradise — and it doesn’t have a single casino yet…
“Whatever it takes.”
Those were the words from Las Vegas Sands Corp’s (NYSE:LVS) CEO Sheldon Adelson back in February when asked what it would cost for his company to set up a casino project in Japan.
Sands is a likely frontrunner to win one of the first coveted casino licenses from the Japanese government, should the country decide to vote in favor of legalizing gambling in the country.
Casinos are currently banned in Japan, but judging by the myriad of Pachenko midway-style gaming halls and underground gambling dens, there’s no shortage of demand for one.
Adelson even went as far as stating that he’d be willing to shell out $10 billion to build a resort in either Tokyo or Osaka.
It’s a steep price to pay, but other major casino operators aren’t denying the potential payoff that having a glittering casino on Japanese soil could offer.
Tokyo is particularly enticing.
With a large and mostly affluent population over 13 million, a mere 1,300 miles from Beijing, and also the host city of the 2020 Summer Olympics, Tokyo presents a huge investment opportunity that only comes along once in a generation.
The close proximity to mainland China, however, is what casino companies are most excited about.
As I’ve said in previous articles, the Chinese love to gamble and gaming revenues in Macau are proof.
With a swelling middle class helping to raise the income levels of the Chinese population, there’s no better way to flaunt what they make than dropping stacks of chips on the casino floors of the world.
Macau, being the only region in China were gambling is legal, has benefited immensely from junkets of wealthy Chinese men flocking to its shores on a weekly basis to play pricey hands of Baccarat and Pai Gow Poker.
Although they have just half the number of casino properties compared to Las Vegas, what Macau earns in 2 months is equal what Las Vegas now generates in a year. In 2013, Macau pulled in a record $45 billion. This year, that figure could soar to $51 billion.
But while Las Vegas is currently second behind Macau in casino earnings, it could easily be eclipsed by Japan if gambling is allowed.
According to broker CLSA, Japan has the potential to generate $40 billion in gaming revenues each year.
While casino operators are ready to cut their checks at a moment’s notice, gaming authorities in Macau are keeping a close eye on Japan’s progress.
Already, the former Portuguese colony is being mindful of the dozens of new hotel resorts that have been built or are in the process of being built all over Asia Pacific over the last few years.
From Australia to Singapore, casino properties are springing up practically everywhere in a bid to lure the Chinese gambler away from Macau.
Even the Philippines and Russia have new resorts under construction, hoping to generate some highly lucrative casino tax revenues of their own.
But none of these regions are a likely threat to Macau’s well-oiled gambling machine anytime soon.
However, a region as developed as Japan coming onto the radar is big news — it’s presence will certainly give Macau a run for its money.
The exact date of the vote is uncertain, but you can bet your bottom dollar that the entire gambling world will be tuning in to hear the decision.
The 2020 Olympics is likely to weigh heavily on making casinos a reality in Japan, so investors should look to current players already doing big business in Asia such as LVS, MGM Resorts International (NYSE:MGM), Melco Crown Entertainment (NASDAQ:MPEL) and Wynn Resorts (NASDAQ: WYNN).