The Japanese gaming market, once considered a goldmine by the world’s leading casino operators, seems to be quickly losing its luster.
Major gaming companies have bowed out of the bidding, including the Las Vegas Sands Corp. and Wynn Resorts. MGM Resorts International, Osaka’s longstanding and ardent suitor, now appears to be rethinking its involvement. And French operator Partouche, which had planned to partner on an integrated resort (IR) in Nagasaki with Oshidori, recently made its exit.
The caution and uncertainty caused by Covid-19 hasn’t helped, but the lack of a basic government policy and a potentially restrictive framework also are factors. When the Sands Corp. withdrew from Japan in May, Sands Chairman and CEO Sheldon Adelson would only make oblique references to “unreachable” goals. But in an earnings conference call earlier this month, he made the reasons for his departure clear.
The regulations “were not conducive to attracting the kind of investment that (Japan) requires”—an estimated $10 billion. “It didn’t justify, like in another jurisdiction,” Adelson said. “If it were down to US$3 billion, US$4 billion, well—I’m not sure it would have made much of a difference, because of some of the rules they’re talking about, like withholding income tax from foreign winners.”
He continued, “So a player comes in from another country. He wins. The government wants the operator to withhold the taxes to pay the Japanese government. That will never attract one foreigner. And there were 30 percent gaming taxes, 30 percent income taxes, and no assurance that they won’t raise the taxes from there. So there were just too many negative regulations that we couldn’t live with.”
Sands President and COO Robert Goldstein agreed, saying, “No one wanted to be in Japan more than Sheldon and the team here. We spent a lot of time and money, and we were very hopeful. But the environment there just wasn’t suitable to make an investment that this company demands in terms of returns.”
Adelson did say he might change his mind if Japan rolls back or modifies the regulations he considers onerous. “Our mind is open to go back,” he said.
Meanwhile, Wynn Resorts has closed its office in v as it ponders how to “evolve its operations to align with a post-pandemic market.” But most surprising may be MGM’s equivocation on its commitment to Osaka, where it planned to construct a multibillion-dollar IR with domestic partner Orix Corp.
MGM Resorts CEO and President Bill Hornbuckle recently conceded that the company is “not fully all-in” on plans to develop an IR on Yumeshima Island in Osaka, which will host the 2025 World Expo.
“As you know, there are a great deal of things to be worked out there,” Hornbuckle said on MGM’s second-quarter earnings call on August 1. “We will only make this investment if we think it’s going to be prudent, if we think it’s going to pay the kind of returns that we need to meet our expectations. There’s a long way to go.”
MGM now says it’s interested in a 40 percent to 45 percent stake in an Osaka IR development, but will take a wait-and-see attitude as the government completes its basic policy.
Hong Kong’s Oshidori International Holdings says its alliance with Groupe Partouche fell apart due to “differences in vision and strategies.” A news release issued by Partouche on August 3 said it had terminated its partnership with Oshidori back in May, adding that it “remains attentive to the evolution of IR development projects and remains interested in having the opportunity to participate in one of them.”
Oshidori remains confident that its bid for a license in Nagasaki will be “far more exciting” than any other project and the end of its collaboration with Partouche won’t affect its chances.
A lesser player is on the horizon, however; in a July 30 release to the Hong Kong Stock Exchange, Get Nice Holdings confirmed it is moving forward with an IR bid in Japan, focusing on the Huis Ten Bosch site in Nagasaki.
Get Nice’s Japan is being conducted through its subsidiary Genius Wise Holdings in partnership with the Current Corp., a subsidiary of the Shotoku Rinaldo Corp.
