Feature: Foreign casino operators go all in as they vie for Osaka licence
20/08/2018 08:37
* Fierce fight to woo public, officials and businesses
* Osaka casino could see gambling revenue of $4 billion/year
* Osaka public opposed to casinos over addiction fears
* Officials are cautious in dealing with casino operators
By Thomas Wilson and Mari Saito
OSAKA, Aug 20 (Reuters) - In late July, a lavish fireworks
display lit up Osaka's skies in the finale to one of Japan's
most famous festivals, courtesy of a first-time sponsor: Macau
casino operator Melco Resorts and Entertainment Ltd MLCO.O .
The company's chief executive, 41-year-old billionaire
Lawrence Ho, had only hours earlier met Osaka's governor after a
donation for natural disaster preparation.
Also in town was MGM Resorts International's MGM.N chief
executive, Jim Murren. He didn't bring a donation - just the
Blue Man Group to entertain around 100 guests on a chartered
boat.
The partying and pageantry were part of a concerted effort
to convince Osaka who should operate one of Japan's first casino
resorts. Just days before, the country authorised the initial
three licenses.
Thanks to strong local political support, an available site
and a supportive business community, the western Japanese
metropolis of 2.7 million is widely expected to become the first
major city to host a casino.
"Tokyo has not raised its hand, Yokohama has not raised its
hand - Osaka has raised its hand," said Ed Bowers, MGM's
executive vice president of global development.
A huge new revenue stream is on the line for the casino
operators, which also include Galaxy Entertainment Corp
GALE.BO , Caesars Entertainment Corp CZR.O , Genting Singapore
Ltd GENS.SI and Las Vegas Sands Corp LVS.N . An Osaka casino
could generate $4 billion a year, Morgan Stanley says.
For Osaka, which has seen its wealth and power fade in
relation to Tokyo, gambling could boost tourism and bring in
much-needed money. It hopes to open a resort by 2024, but even
after it picks an operator it must win government approval.
"I want to properly nurture the tourism industry in Osaka as
one of its pillars," Osaka Governor Ichiro Matsui told Reuters
in an interview.
Interviews with dozens of casino executives, lobbyists and
politicians depict sophisticated campaigns aimed at winning over
a sceptical public, wooing local businesses and persuading
officials.
And Osaka, eager to avoid even the appearance of corruption,
has become more cautious in dealing with casino operators.
In July, the city reiterated a ban on officials' attending
parties, sharing meals or receiving gifts. It also prohibits
officials from meeting casino representatives alone.
All told, at least eight major operators are courting Osaka.
MGM, Sands and Melco have in recent years pledged to sink $10
billion into a resort.
DREAM ISLAND
Osaka wants to build a casino on a man-made site called
Yumeshima, or "Dream Island."
Yumeshima was built during Osaka's 1970s boom times. Its
bayside area was once a blue-collar district crowded with
chemical factories and shipyards. But those companies moved
production abroad.
The city was hit hard when Japan's bubble economy popped,
and politicians have for two decades tried with little success
to revive both the waterfront and Osaka.
Still, with a four-fold surge in foreign tourists over the
last five years - more than 11 million people visited Osaka in
2017, attracted by its rich culinary culture and wealth of
nearby sights - casino operators see a fertile market.
"This is the greatest opportunity of my lifetime," Melco's
Ho told Reuters by phone.
Executives from 11 casino companies have met Governor Matsui
for "courtesy calls" 25 times between 2012 and May 2018,
prefectural records show. Operators and other related companies
have met Osaka officials 119 times since May 2017. Osaka
declined to provide breakdowns of meetings by company.
HEARTS AND MINDS
Melco's most recent donation to Osaka, reported by local
media to total about 50 million yen ($450,000), wasn't its
first. Melco also gave money for victims of a June earthquake
that killed four in Osaka, and for parts of western Japan
devastated by flooding a month later.
The company declined to say how big those donations were;
its fireworks sponsorship was worth about $9,000.
Ako Shiraogawa, Melco's Japan president, told Reuters she
reassured local officials the donations were not meant to curry
favour. It was a coincidence that Ho met Osaka's Matsui before
the fireworks display, she said.
"It looks like we are doing too much," Shiraogawa said. "But
it just happened to be the same day as the festival."
Like its Macau rival, MGM is building a bigger presence in
Osaka, including an office. It says it is trying to win the
"hearts and minds" of the city's public and businesses.
Before the festival, for instance, it gave shoppers at a
local arcade the chance to win tickets to its boat party.
Behind the scenes, MGM has worked to connect with Osaka
companies, said Kanji Hori, who runs the Hyakusha Kai
association of small businesses, which is hoping for a stake in
an operating consortium.
Tokyo-based GR Japan lobbies on behalf of MGM, Bowers told
Reuters. GR Japan opened an Osaka office in February, hiring as
associate director a former national lawmaker from Matsui's
Ishin-no-Kai party.
For its part, Las Vegas Sands says it has focused on
engaging with local officials, businesses and community groups.
Its chief executive, Sheldon Adelson, met Matsui in September.
Officials from Sands declined to be interviewed.
SENSITIVE SUBJECT
In Osaka, 42 percent of residents are opposed to a casino
over fears of gambling addiction and less than a fifth are in
favour, a poll by public broadcaster NHK in March showed.
The city's government is trying to swing public opinion with
seminars on dependency and a message of prosperity. A resort
would create more than 80,000 jobs a year in the region,
officials say.
But Teruo Sakurada, a professor at Osaka's Hannan University
who heads an anti-casino group, said those positions would most
likely be part-time and lower paid.
"They want tourism and foreign demand to drive the local
economy, but this isn't a sustainable model," he said.
Despite casino operators' enthusiasm in courting Osaka,
there have so far been no major accusations of impropriety.
The only incident approaching scandal: a PwC Consulting
employee on a 377 million-yen contract to advise the city on
casinos attended MGM's boat party, breaking no laws but earning
a scolding from a local official. A PwC Japan spokeswoman said
the incident did not violate its agreement.
"It's natural that we need to be fully open, and make sure
that citizens have no doubts about unfairness or corruption,"
Matsui said. "There's no doubt a lot of money will be involved
and that it's going to be a big business."
(Reporting by Thomas Wilson and Mari Saito
Additional reporting by Farah Master in HONG KONG and Ami
Miyazaki in OSAKA; Editing by Gerry Doyle)
((T.Wilson@thomsonreuters.com; 81-3-6441-1598; Reuters
Messaging: t.wilson.thomsonreuters.com@reuters.net))