The lineup of would-be Japan casino operators underwent a major realignment last week.
The Las Vegas Sands Corp. announced that it had changed its plan to pursue an integrated resort license in Osaka, and will focus instead on Tokyo and Yokohama. And another U.S. operator, Caesars Entertainment Corp., announced it would take a pass on Japan entirely, to concentrate on its domestic business and its merger with Eldorado Resorts.
Sands spokesman Ron Reese told the Las Vegas Review-Journal that Tokyo and Yokohama are more in line with the Sands’ convention-centric business model. “As the two largest cities in Japan, Tokyo and Yokohama certainly have all facets—such as accessibility, broad transportation infrastructure , diverse workforce—we look for when evaluating new opportunities,” Reese said.
The Sands’ exit from Osaka seems to make MGM Resorts, with its longstanding “Osaka First” policy, the one to beat for that license, if it’s approved by the government.
Global Market Advisors analyst Brendan Bussmann said MGM is “clearly the front-runner at this point, but you still have to see how this plays out … You still have to run the race, you still have to compete.”
The Sands announcement must have come as welcome news at MGM headquarters in Las Vegas. In a statement, CEO Jim Murren said, “MGM Resorts remains deeply committed to pursuing an integrated resort in Osaka, Japan” and added, “What we will bring to Osaka is something only MGM Resorts can deliver.”
That includes “world-class entertainment, exciting cultural events, convention expertise and premium dining and retail experiences that will have broad appeal both nationally and internationally,” Murren added. “We have extensive experience in developing and operating large-scale integrated resorts across multiple regions.”
He said MGM is “excited” about its partnership with Orix, “a highly respected Japanese company with a strong presence in Osaka, as we jointly pursue this venture. Together, we are working to submit our response to the ‘request for concept’ and look forward to the next steps in the process.”
Osaka is expected to be the first region in Japan to develop an integrated resort, in large part because it plans to host the World Expo in 2025. MGM and the local government agree that they want the IR to open before then, possibly as early as 2024, though some industry analysts say that timeline is unrealistic given the scope of the development.
Before Thursday’s announcement, the Sands Corp. was considered one of the front-runners for an Osaka license, along with MGM. CEO Sheldon Adelson said in a news release last Thursday that he believes investments in Tokyo or Yokohama will give the company a better opportunity to “maintain our industry-leading returns on invested capital.”
“For the past several years, we have engaged in conversation with the Osaka government regarding the possibility of building a world-class integrated Resort there,” Adelson continued. “We thank the people and the government there for their professionalism and wish them much success with Expo 2025 and the other initiatives they had planned.”
Also in Japan, after much hesitation, Yokohama has finally thrown its hat in the ring as a candidate for an IR. Francis Lui, deputy chairman of Macau-based casino operator Galaxy Entertainment Group Ltd., told GGRAsia that’s a good sign.
“We are encouraged to see that in recent weeks more cities are considering entering the race for an integrated resort,” Lui said. “Competition is always good for business, as it will be for the IR process in Japan. It will ensure Japan gets the most impressive and innovative IRs ever built.”
Lui added that Galaxy Entertainment continued “to carefully study the candidate cities, and learn from all persons connected with the process with the aim of developing a global landmark integrated resort” in Japan.
Galaxy Entertainment has confirmed it hopes to collaborate with Monaco casino firm Société des Bains de Mer et du Cercle des Étrangers à Monaco, and Japanese partners, to bid for a Japan license. Their preferred location is Yamashita Wharf in Naka Ward. Galaxy hops to open an IR by the late 2020s.
Asia Gaming Brief reports that Wakayama Governor Yoshinobu Nisaka is “unshaken” by Yokohama’s entry into the IR race, though it suggests that all of Japan’s regional markets—Hokkaido, Nagasaki, and others—may be competing for a single available IR license.
“Wakayama is the best as far as I am concerned,” Nisaka told the local media, “the land is prepared and we can begin building as soon as the permission is granted. It’s possible that competition will intensify, but I think that’s okay.”
A note last month from brokerage Sanford C. Bernstein Ltd. said two IRs in metropolitan areas like Yokohama and Osaka and one in a smaller regional vicinity could eventually generate gross gaming revenues of US$7 billion to US$8 billion per year. More optimistic projections put that figure in the $25 billion range. Both projections are far less than the $40 billion originally estimated by some analysts.
