Next major markets: Japan and Thailand

Thailand’s benefits loom closer on the horizon than Japan, says the author of Japan Casino Uprising: Daniel Cheng.

But the possible future gaming hub should not be discarded, despite being whittled down, as both its proximity to China and its large middle class make Japan a strong influence in the Asian gaming scene.

Even so, Thailand is moving at “light speed”, with possible bids within 18 to 36 months, with all scales of contenders looking to get a piece.

We’re here with Daniel Cheng, Senior Gaming Executive. It’s great to have you here. I want to start off by talking about your book. I hear that we’re going to be having a new special edition of the book: Japan Casino Uprising. Can you tell us a little bit more about that?

Absolutely. Well, first of all, thanks for having me. I’ve released Japan Casino Uprising about four months ago. It’s actually my second book. But this book is an all-out exposé of all that has been happening since the 25 years in the passage of the Japanese casino legislation. And I’m telling you it’s a lot of exciting stuff to write.

And I’ve just compacted it into about 350 pages, and I hope the industry will like it and see the insights of it – besides what they’re reading from the outside, in the media. I’m also very happy that AGB has commissioned a special edition of this book. It’s special because it comes with a previously unpublished bonus chapter. It has a foreword from the illustrious person in the industry – founder of Spectrum Gaming (Capital) Fred Gushin, and a few nice words and quotes from people that were heavily involved in the industry. And I hope the readers in the gaming circle are going to like it.

Definitely. It’s been an interesting ride, particularly within the past couple of years, when we had such high expectations that Japan could be all it could be: the hundreds of millions of dollars that were put into jumping to be the first-mover. But now everything has kind of been whittled away. What do you think are the expectations of the industry now for Japan’s future casinos?

The expectations were very high. It’s been tapered down a little. But I think the fundamentals, everybody believes is still good, it’s just some kinks in the process – ghost in the machine, for the Japanese. And a little bit is the fault of us, the industry, maybe we overhyped it, for the government as well.

But we’re near the finishing line. We expect to see new movement, probably in the next month or so. Whichever way, we don’t know if it’s still in the right direction or not but certainly we should see movement, I think in the next 30 days, which is the period when the what we call the local unified elections in Japan goes underway, how that turns out, will have a very strong bearing on the next direction this is going to take

Obviously, there are divided camps within Japanese politics over whether this should go forward. But then there’s also very strong public opinion about the matter. Do you think that the public opinion could eventually completely shut down any possibility of casinos in Japan?

It’s very possible. Just because of the way it’s handled. I think you have to look at public opinion two ways. There’s certainly a vociferous crowd that are against gaming, and they come out and have their say. But there’s also a big silent majority that is not so much concerned and doesn’t really care. I mean, look at Japan, they they have hundreds of pachinko parlors.

If you count them all up, it’s over half a million playing positions. That’s actually more than all the casino slot machines in the entire world. So it’s not as if the Japanese are new to gambling, although Pachinko is officially not classified as gambling in Japan, go figure. So, maybe there’s a school of thought that the government should just bravely come forward and give the people some sort of direct decision in this and they might be pleasantly surprised.

There are 47 prefectures in Japan, and thousands of cities. I’m sure there are many of them ,in the local municipalities, that would vote and say ‘let’s go for it’. Then that just takes the question away from the table, the doubts, all of it.

A lot of it also comes down to the weight of the individual communities where the IRs would be located, which has now been narrowed down to two.

Yes, exactly. So, there were about 20 at its peak, from towns to cities, that professed they wanted to have IRs. But unfortunately, none of them did the direct route where they said: ‘let’s ask our local people first’. And I think that was a very big mistake that led to so many years of stagnation.

Right now we’re looking at Osaka and Nagasaki. Do you think that the opening up of Japan to casino gaming could possibly change the dynamic of gaming within Asia?

If done properly, it will have actually a very big impact to the Macau market, as well as the South Asian market. Because Japan, in geography, is very, very close to China. And if you look at the trends of international travelers – Chinese travelers globally, before COVID – there’s over 100 million travelers annually outbound from China.

Now, the top destination they they went to: Japan. So Japan has all to benefit because, of course, the Chinese demographic is the biggest casino gambling segment. And if they can fly one, two, three hours and come to Tokyo or Osaka, you know, Singapore is a seven hour flight away. So for sure, Japan is going to benefit. And Macau, they will still have their customers and all that. But at the end of the day, to the Chinese, it’s just a domestic market.

For the operators who are trying to move in, are they going to be concentrating only on that upper premium mass element? Or do you think that they’re going to try and take in some of the masses as well?

I think before the junket overhaul that happened a few months ago, they would be thinking: ‘yeah, let’s concentrate big on premium’. But now that the dust has settled, and we still don’t know what this junket picture is going to be like in next few years, more and more of them are thinking ‘let’s do a more segmented business strategy’, still do premium, but ‘let’s focus as well, to a large extent, on premium mass and the general mass market’.

And that makes sense, because if you look at Japan, they have a population of 125 million, and it’s almost completely middle class. So, the third-largest economy in the world: it’s a no brainer that you want to have a big mass market because they are right there for the taking. The only question is, unlike Macau, the domestic market is not proven casino players – not like the Philippines where you see you have a very strong domestic market. For Japanese, we don’t know how much those Pachinko players are going to convert to a casino player because the products are not exactly the same. And the experience is completely different.

Although lots of question marks still do exist around this next one, Thailand, how is that going so far? How quickly could it become a player?

Thailand has been sitting on the surface for 20 years now, since the previous Prime Ministers have spoken about it. It has always seen being seen as a an ideal gaming market, just because of the nature and culture of Thailand is just fitting for activities like casino gambling. 40 million inbound visitors just before COVID struck, the same as Macau.

But these are real inbound visitors that fly in from all over Asia, including the Western world. So there’s a lot of software and hardware required in an integrated resort when we develop them that’s already inherent in Thailand that we don’t need to create. So we just need to go in and put the associated elements around with it and we’re ready to go.

If that happens, it’s going to outshine Singapore for sure easily two the one, I believe. So, it would be a real threat to Japan actually. Japan –  if they roll theirs out well, they will still continue to hold their fair share of the market, for reasons that the Chinese like them and they’re closer to mainland China, but I think Thailand can be the next regional market leader.

There are different tiers that they’re looking at, very different types of casino or IR possibilities. Do you think that there might be a difference of opinion in between where the operators want to set up and where the Thai government would prefer them to set up so the benefits are spread to the community?

First of all, the classification right now, in the study that was commissioned by the House, they have a classification of three sizes: small, medium, large. That is not to say that they want small, medium and large integrated results. They’re just laying it out to say: ‘we can have all these options’.

And so you could end up with all the varieties, or one or two of them,we will only know down the road. But does an operator wants to have such and such a location? If you look at outside of the business, we also have, in a sense, also a small, medium large, if we want to put it that way, classification of casino operators.

So, you have the big Vegas operators, and you have the regional operators in the US, you have the smaller European operators. And even in Asia, you have the very large ones and the very small ones as well. So, I think depending on what the Thai government put out on the table, I think just by natural selection the appropriately sized casino companies would then gravitate towards the regions that suits them.

Unlike some of the other casinos in the region, for example, Vietnam who have one casino which is allowing locals to gamble, Thailand has put local gambling within the potential framework going forward. Do you think that that would ever change?

I don’t think so because Thai society is quite liberal. Vietnam is still a communist country. So it’s understandable that they would restrict locals, even though they’re doing a pilot for one property right now. But Thailand, since the very beginning, had said they wouldn’t restrict their own people from such activities.

But then, having seen the experience in Singapore, it’s a nice trade off now, at least, to appease the anti-gambling bloc, to say, ‘hey, we’ll put in the same restrictions in Singapore and make sure our citizens are above 20 years and have a certain amount of income, and still pay an entry fee’. That should mitigate some of the social issues that might arise.

Do you think that there are any political divisions which could still potentially derail this from happening in Thailand?

There are. There always are. But it’s a very, very small minority. So if you look at the house, of 500 parliamentarians, you can count on your hands how many of those who opposed it. So that’s an overwhelming majority. When they voted to have the casino study go forward, it was voted 310 to nine, that’s almost full consensus.

So no one expects to see any problems at the government side, which was one of the big problems in Japan, where the opposition completely disagrees with IR legislation. Even though Thailand is going to have national elections in a few weeks’ time, just because of the consensus, that’s not going to have a bearing.

It will just have a bearing on the timing because you need the new leaders to be appointed before they take the process forward to the next step. And the first step, on which a lot of progress has been made, was all done in something like less than 18 months. So you’re talking about a very, very fast track. The Japanese will see it as ‘light speed’. So it could be another 18 to 36 months (after which) we might be likely to see the bids going out for operators to tender for three, four or five locations.

So it looks like a very exciting two years that are coming up!

It is very exciting, and even as we speak and before we spoke, I think there are at least a dozen operators that are already on the ground and they’ve been on the ground for the last six months to a year. So things are really moving very fast.

Well, let’s see how everything plays out and I also am greatly looking forward to the special edition of your book. Thank you very much for being with us.