It looks like the high stakes that casino operators have to put into Japan's integrated resorts scene is too much of a gamble, especially in the post-pandemic climate which makes returns on tourism investment even more uncertain.
Las Vegas Sands said it has ended plans to open an integrated resort casino in Japan, dealing another blow to Japan’s attempts to energize its economy through tourism.
Caesars Entertainment Corp and Wynn Resorts Ltd have also withdrawn from casino projects in Japan, which the government had hoped would sustain tourism after the Tokyo 2020 Olympics, now postponed due to the global coronavirus epidemic.
Las Vegas Sands did not give a reason for the cancellation of the project. Only in January it sounded upbeat about Japan and put on magic shows and Broadway musical numbers to drum up enthusiasm for the industry at an exhibition in Yokohama.
“The framework around the development of an integrated resort has made our goals there unreachable,” Sands Chairman Sheldon Adelson said in the press release on Wednesday announcing the cancellation.
“It is time for our company to focus our energy on other opportunities.”
Japan wants to build several integrated resorts – Las Vegas-style complexes that include casinos, shopping arcades and conference centers – although a bribery scandal has hardened public opposition to the plans.
The government has authorized licenses for three integrated resorts and has been expected to receive bids officially from interested cities in 2021. Potential bidders include Yokohama, Tokyo, Osaka – Japan’s three largest cities.
Analysts at Sanford Bernstein last year estimated Japan’s casino market would be worth $8 billion a year.
Sands pulled out of bidding for a project in Osaka in 2019, turning its attention to Tokyo and Yokohama for an integrated resort that Adelson had estimated could cost $10 billion.
“I think that is probably more Sands than Japan,” Mio Kato, the head of LightStream Research who publishes on the Smartkarma website, said about the cancellation.
“They and most casino operators have been cutting their dividends and since most operators were already levered, the COVID crisis has made a complete mess of their balance sheets,” Kato added, referring to COVID-19, the disease caused by the novel coronavirus.
At a third-quarter conference call, Sands President Robert Goldstein suggested that the high price of building in Japan was giving the company second thoughts.
The cost of one resort in Japan would be the same as all of Sands casinos and malls in China, he said.
(Reporting by Rocky Swift; additional reporting by Christopher Gallagher; Editing by Tom Hogue and Ana Nicolaci da Costa)
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Photo credit: The logo of Las Vegas Sands Corp is pictured at the Japan IR EXPO in Yokohama, Japan January 29, 2020. Kim Kyung-Hoon / Reuters