Japan paves way for integrated resorts

February 17, 2017 / By  

In June 2014, the Japanese government announced plans to undertake a study around the feasibility of permitting integrated resorts in Japan as part of series of policies aimed at boosting tourism. The term “Integrated Resorts” (IR) is broadly defined as a large mixed-use development with gaming integrated hotels, together with retail services, F&B, MICE (meetings, incentives, conferences and exhibitions)  and other entertainment offerings.

In December 2016, the Integrated Resorts Promotion Bill was passed into law by the national Diet, effectively legalising limited casino gambling when incorporated into integrated resorts. After the passing of the bill, the government has stated they will take the necessary legislative steps to enact the bill as well as providing the regulatory framework around the operation of IRs in Japan.

In the lead-up to the passing of the bill, no less than 15 separate locations across a range of prefectures have been proposed to host an IR, however the first location is expected to be either Osaka, Tokyo or Yokohama. A number of global casino operators have also expressed their keen interest and have offered an investment commitment of up to US$10 billion.

The below provides a number of key points surrounding the fundamentals supporting the introduction of Integrated Resorts in Japan:

  • Domestic market: Despite having few forms of legal gambling and quasi-gambling available, Japan remains a very active global gambling market. The total net profits accumulated in 2014 was US$29.8 billion, according to H2 Gambling Capital, the third highest amount in the world after China and the USA.
  • Hotel market fundamentals: The luxury and upscale hotel segments have performed extremely well over the past few years, with occupancy rates in Osaka and Tokyo well over 80 per cent for both categories. With limited new supply in the pipeline in the luxury and upscale segments, there is spare capacity in the market which can be absorbed by IRs while maintaining firm operating performances.
  • Tourism trends: Recent policy changes around visas on arrival, duty-free shopping and the opening up of new flight routes have all supported strong inbound tourism growth over the past few years. Inbound visitor numbers have seen annual compound growth of 31 per cent per annum since 2011, with overall growth of 286 per cent. Total visits in 2016 reached US$24.04 million, well on its way to reaching the revised target of 30 million by 2020.
  • Cruise ship arrivals: One of the largest growth markets in tourism arrivals has been from the burgeoning cruise ship market. In 2016, there were over 2,000 port arrivals, double the level seen in 2013. Foreign passenger arrivals on cruise ships increased to 2 million in 2016, up 78 per cent from 2015.
  • Chinese visitors: Of the inbound tourism growth, visitors from China have now become the largest source of visitor arrivals and account for 27 per cent of all arrivals, compared to just 13 in 2013. This is important from an IR perspective given Chinese visitors’ higher propensity to spend on all segments related to IRs including accommodation, retail expenditure, F&B and entertainment.

Figure 1: Breakdown of key tourist expenditure items: Chinese visitors vs all visitors
(yen spent per visit
Chart1_17Feb2017Source: Japan Tourism Agency Survey Jul-Sep 2016

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