MARKET INSIGHT: INTEGRATED RESORTS: JAPAN
Historically, Nagasaki was the only port that permitted foreign trade during the Edo Period when Japan shut down its borders between 1639 and 1853. At that time everything flowed through Nagasaki and this has influenced culture and architecture in the prefecture today.
Nagasaki boasts a beautiful coastline, spas and nature resorts and is a key tourism spot. However, the population is decreasing due to the outflow of youngsters to metropolitan areas.
It’s a prime location for an IR development mostly because of its geographical proximity to Asia and existing tourism appeal. Tere are five international airports within a 2.5-hour drive from the IR area and more than 330 cruise ships dock at the ports annually in the prefecture. International flights from Shanghai or Singapore to Japan take just over an hour.
Te IR location is earmarked for the Huis Ten Bosch (House in the Forest) theme park in Sasebo City. Tis is Japan’s largest theme park and commemorates the history between the Dutch and Japanese and replicates a Dutch village from the 17th century. It is located on 152 hectares of land and opened back in 1992 and houses four hotels, retail, restaurants, park areas such as Jurassic Island. Some three million visitors come to the theme park each year.
Te park is connected hourly by express trains from Fukuoka Airport (Hakata station) or by car takes about two hours. Nagasaki Airport also links to the theme park via a high speed boat service which takes 50 minutes or via bus. A car ride from Nagasaki City takes about one hour 30 minutes.
THE PROJECT
Nagasaki submitted its bid in April last year alongside Osaka, however the prefecture has yet to receive any approval confirmation from the government.
Te bid has been placed in partnership with Casinos Austria International Japan. After a controversial bidding process with seven interested parties initially this was whittled down to three finalists – Oshidori International, Niki Chyau Fwu (Parkview) Group and Casinos Austria International Japan. Oshidori International (Mohegan Gaming’s partner) later withdrew from the bidding saying the RFP process was not implemented “ethically or fairly.”
Total investment for the IR project will be approximately ¥438.3bn ($3.4bn) which will be used to buy the real estate and build and run the resort. Shareholders will contribute ¥175.3bn of which CAIJ, respectively its sub-investors, will provide about 60 per cent whilst the remaining ¥263bn will come from loans.
Kyushu Resorts Japan, a special purpose company set up by CAI Japan, will develop the hotel and MICE facilities for 6,000 people. Tere are plans for four hotels which will provide 2,500 plus rooms. Other projects include retail outlets and shopping mall, restaurants, parking facilities. Tere will be a 1,700 seater theatre.
Te area for the casino activity will be 2.38 per cent of the total IR area which will cover four floors and operate around 400 tables and 3,000 slots. Te plan was to open the resort by 2027.
Tere is a provision within the project to provide around ¥800m annually for updating the facility with 1.5 per cent of the operating profit going towards gambling addiction programmes.
THE RETURNS
Visitor figures are expected to be around 6.73 million annually divided between 5.21 million Japanese and 1.51 million foreign visitors spending ¥256bn in total at the IR during their stay. Tere will hopefully be around 40 international conferences annually and 47 international exhibitions.
Annual sales are estimated to reach ¥218bn ($1.7bn) by the fifth year of operation. Of this the gaming division is expected to bring in around ¥209.5bn – about 77 per cent of the revenue with non-gaming bringing in the remainder. Net income for the Integrated Resort in Nagasaki after the fifth year of opening is expected to be ¥31.7bn.
Te economic ripple effect in the construction stage will be around ¥534.2bn whilst the economic ripple from the operation will be an estimated ¥327.9bn. Tere will be 31,386 employed at the construction stage and just under 10,000 employed directly via the IR. Nagasaki has allocated ¥1.52bn in its draft budget for fiscal year 2023 for project.
THE ISSUES
Tere have been some concerns over CAIJ’s input in this project as Casinos Austria has never built an IR or operated in Asia so there have been question marks over the company’s ownership, financing, and size.
Although Nagasaki as an IR location may not have as much potential as Osaka many say it still warrants a larger scale IR than what has been proposed. CAI owns or operates 25 casinos worldwide and is part-owned by the state.
CAIJ secured some of its financing for the project through Credit Suisse which nearly went under earlier this year before being rescued by rivals UBS Group AG. Tis acquisition has been cited as why the tender review has been delayed.
WIRE / PULSE / INSIGHT / REPORTS P95
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