TOKYO -- Hong Kong casino giant Melco Resorts & Entertainment revealed on Oct. 29 that it will invest 27 billion yen ($248 million) from a new fund into the Japanese hospitality industry, on top of at least $10 billion the company is looking to spend on a resort if it wins a casino license from the Japanese government.
Speaking at the Nikkei Global Management Forum in Tokyo, chief executive Lawrence Ho said Melco is looking for more partners for its Creative Exchange fund "who have a passion for Japan." The fund's first two investments will be an onsen hot spring resort in Hakone, near Tokyo, and a ski resort in Nagano.
"Melco Creative Exchange is focused on bringing people to the rural countryside," Ho said in an interview on the sidelines. "People really want that, rather than just going to another U.S. or European city."
He said the "objective" of integrated resorts -- hotels combined with casinos and other entertainment facilities -- "is to bring visitors to cities where international visitors don't go, and regional cities have the space and ability to create a better IR," he added.
Melco and its competitors Las Vegas Sands, MGM, and Genting of Malaysia all expect to spend at least $10 billion each in Japan, on what would be the world's most expensive integrated resorts. The companies are bidding for three licenses put up for tender last year, when the Japanese parliament passed a bill legalizing gambling at such complexes. The cities of Tokyo, Osaka, Chiba, and Yokohama are vying to host the three envisioned resorts.
"Yokohama is our priority," Ho said. "The benefit of Yokohama is its proximity to Tokyo, but it's very much a day-trip market. We are looking to build the world's biggest IR to make Yokohama a primary city for people to go and stay for two or three days."
Goldman Sachs forecasts Japan's potential casino industry to be worth $15.8 billion, which would make the country the world's second-largest gambling market after Macao, Melco's home market. Japan's government aims to welcome 40 million tourists in 2020, and 60 million in 2030.
"I think that goal can be easily accomplished by the government," Ho said, pointing to Japan's advanced transportation infrastructure.
Opening Japan to legalized gambling is part of Prime Minister Shinzo Abe's push to stimulate the economy through tourism. But the idea has been unpopular with a public wary of gambling addiction, making Japanese private companies hesitant to join in integrated resort ventures.
Ho said Melco will bring its Melguard facial recognition system to Japan and combine it with the MyNumber national identification system to stop visitors who are at risk of gambling addiction from entering its casinos. The system would also limit the number of times an individual can visit a Melco casino each month.
"Unlike our competitors," he said, "we've already developed that system and we'll share source code with the Japanese government if we get the license."
Ho suggested Japanese companies are warming to the idea of investing, saying he has received interest from transportation and railway companies, real estate firms and banking institutions. "It's really in the last year and a half that a lot of companies have started revealing that they are actually interested," he said.
Ho pushed back against the popular belief that integrated resorts are merely a cover for casinos. "The casino portion of the IR is only 3%" in terms of scale, he told the forum. While casinos do provide 70% of integrated resort revenues in Asia, Ho insisted that the profits subsidize more wholesome entertainment options such as performance shows and art museums.
Although Melco also plans to take advantage of another Japanese law change -- the newly relaxed immigration law -- to bring in foreign labor, he expects that international staff would only train locals and would transfer managerial positions to them over a three- to five-year period.
"It's a great opportunity to introduce women and retirees back into employment," Ho said.
Ho hopes to open the two resorts in Hakone and Nagano around 2025. "Hakone is taking a longer time because it's important for us to offer an onsen in every single one of the hotel rooms, and we didn't realize how difficult it is to get onsen water," he said.
During a panel discussion at the conference, Ho said his first international trip was to Japan when he was 5 years old. "For me, it's more than just a business. It's always been a lifelong dream to build an IR in Japan that is uniquely, authentically Japanese," Ho said, reminiscing about staying at Tokyo's Imperial Hotel with his father, casino mogul Stanley Ho.
"I've really fallen in love with Japan," he said, noting he has visited the country around 400 times.
Melco also announced that Japanese tennis star Naomi Osaka will serve as a brand ambassador and director of sport for the company's Japanese resorts.