Gap in the market: Understanding the Japan opportunity

Natalie Meyer, founder and CEO at cultural insight agency Tokyoesque, offers a view of Japan‘s emerging casino landscape – and the opportunities that lay in wait

Japan is opening a casino industry estimated to be worth nearly $16bn, larger than the size of Nevada’s operations.

Passed on July 20, 2018, the Integrated Resort Implementation Law in Japan dictates that up to three IR areas will be approved, to be reviewed seven years after the first approval. The law itself will be reviewed and reconsidered five years out. This comes as Japan primes itself for a variety of global events.

The 2019 Rugby World Cup, the Tokyo 2020 Olympics, the World Masters Games 2021 and the Osaka Expo in 2025 will happen in quick succession. Tourism has also more than tripled since 2010. Added to that is an initiative from Japanese government and corporations to change the very fibre of their society – to reform the education system for a more global dynamic; to recruit foreign talent to supplement an ageing workforce; to add more flexibility to the workplace and more empowerment for women in business. There is a drive to incorporate innovations from outside the country, echoing the developments of the post-war era in Japan.

As tourist numbers boom, led by those from China and South Korea, with strong numbers also from Thailand, Hong Kong and Taiwan, there’s a clear need to target multiple levels of audiences. Against this backdrop, the needs and attitudes of the Japanese population must be taken into account, with regeneration of local areas playing a large role, especially during a time when Japan is experiencing unprecedented urbanisation.

Nearly one in three live in the Tokyo area, and more are moving every year. At the same time, there is an emphasis on what can appeal to non-Japanese tourists, of whom Chinese,
Korean and English language are among those represented.

It’s important to keep in mind domestic concerns about how integrated resorts will influence Japan, with fears of gambling addiction leading to rules limiting Japanese nationals’ entry, as well as requiring ID to gain access and payment of a 6000 yen ($55) admission fee.

Fears of corruption also mean that the more open and transparent the industry is, the better it will be received among the general population and in government.

ItS novelty will appeal to domestic audiences – The key will be in capitalising on that sense of newness

While for now we know that the actual casino cannot comprise more than three per cent of
all floor space of an IR, there are many as yet undetermined factors and regulations yet to be confirmed. For example, it’s unclear the level of Japanese partnership required for a foreign company to participate in a Japanese IR.

We recommend that businesses monitor the developing regulations closely, but in the meantime build relationships with Japanese players on the ground in order to establish trust within a traditionally Japanese business climate.

While the emphasis may be on what the casino can bring, the whole infrastructure will also be a hotspot for new innovations. It will appeal to domestic audiences simply because of its novelty. The key will be in capitalising on that sense of newness to develop a sustainable level of interest among tourists and locals alike in the experience of an IR.

A lack of domestic awareness of the concept of a casino means that operators have an opportunity to paint a picture of what they want them to be seen as. Are they ports of entertainment? Places where dreams can come true? Places where luxury takes centre stage? Is it a closed place, where only the select few may enter, or an open playing field? Is it exotic, and ‘Western’? Or does it homogenise and merge with the Japanese landscape?

All of these connotations are up for grabs in Japan at the moment. When we compare the above possibilities to a more traditional understanding of Japanese gaming – like the ubiquitous pachinko parlour – there is a stark contrast to the image in many Japanese audiences’ minds of a typical Bond-style casino.

“The gap in the market means that incoming operators and suppliers have immense power

This type of glamorised, Hollywood experience does not actually exist in Japan. Not many have been to a casino overseas, and their own imaginations may be the sole awareness they have of this type of zone. This gap in the market means that incoming operators and suppliers have immense power in their decision-making about how they will portray themselves to an audience that may know nearly nothing about them.

The three prefectures and operators that are chosen will form the foundation for how the market emerges, and into this will stream many and varied suppliers, new technologies and non-Japanese players that also have the opportunity (and sometimes the challenge) to shape the market in Japan.

Each IR area will require approval of the local city in question, which means that operators will be working to present the benefits they can bring to each locale. In terms of gaps in
the industry, we see a need for:

  • New technologies. Japan is innovative and high-tech in many ways, but in others it is slow to adapt. The advent of the casino industry means that in this case, it is being forced to adapt. Japanese companies will be on the lookout for tech that can help improve customer experience as well as enable cybersecurity support. Fintech is also a key emerging industry, with the Tokyo government putting a spotlight on this.
  • Consultancy. Any experts in this area – particularly those in major events and smart cities – will be in demand for their global perspective and tangible experience on-the-ground. A lack of Japan-specific experience is not important here; what is needed are those who have already seen the casino and IR industry play out abroad.
  • Training, particularly in hospitality. Japan is well known for its omotenashi – a culturally embedded care for hospitality and service to others. However, the market is still coming to grips with an influx of tourists, not to mention a lack of experience with the gaming industry in general. Dealing with non-Japanese speakers in a new market will generate high demand for training.
  • With a sector so new and at risk of being misunderstood, the message to be communicated will require careful consideration. There are many differences between the Japan and Europe markets, a fact which is well known.

    Yet as Japan has made it a priority to embrace global opportunities, now is the opportune time to find a way of resonating with not only the millions of tourists streaming into the region each year, but also with Japanese audiences and corporations that can often be seen as a barrier to entry.

    We would suggest it is important to embark on the Japan market entry journey with an open mind and an understanding of how Japanese business culture works, as well as the most effective way to build relationships and communicate with all key players.

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