Analysis: It’s taking a while, but Japan remains an attractive gaming destination Howard Stutz, CDC Gaming Reports · August 31, 2019 at 1:40 pm Those who have long followed the ups and downs of Japan’s much anticipated gaming market probably weren’t too concerned by recent announcements from two Nevada-based casino companies. Caesars Entertainment’s withdrawal from the licensing process and Las Vegas Sands’ change of market focus were more about the individual companies. The moves had nothing to do with Japan. “Some events surrounding Japan really don’t matter,” said Brendan Bussmann, director of government affairs for Global Market Advisors, who was visiting Japan last week. “I think we’re going to see the market heat up quickly.” Brendan Bussmann, Global Market Advisors Japan’s path toward legalizing casinos has taken more than 15 years and has attracted the interest of major casino companies from both the U.S. and Asia. The draw is due to a populous and attractive Asian market with estimates of between $20 billion and $25 billion in annual gaming revenues, second only to Macau – which took in $37.6 billion in 2018 – and more than triple the yearly figures produced by the Las Vegas Strip. Japanese lawmakers approved legislation in July 2018 for three integrated resort complexes, which would include casinos and non-gaming attractions, such as hotels, restaurants, retail, conference facilities and entertainment. Japanese leadership has still not formulated the request for proposal process nor officially settled on locations, although cities such as Tokyo, Osaka, Yokohama, Nagasaki, Hokkaido, and Wakayama have surfaced as potential sites. Bussmann expects Japan to produce draft regulations by the end of the year and the initial proposal requests in the Spring. A year from now, we could have much more clarity on the situation. The process in Japan has been a series of starts and stops, but also thoughtful and deliberative. When the country was awarded the 2020 Summer Olympic Games in Tokyo, many believed taxes from the integrated resorts would be used to help offset the infrastructure costs associated with venues for the competition. Now, the initial integrated resort is seemingly focused on Osaka, which will host an International Expo in 2025. “Everybody wants immediacy,” Bussmann said. “But there are a lot of moving parts, and anyone who has followed the Japan process from the beginning is not surprised by the time things have moved along.” Caesars’ departure was expected, even though the company spent more than a decade making inroads in Japan. Caesars is being acquired by Eldorado Resorts in a $17.3 billion merger that is expected to be completed next year, creating a casino giant that currently owns 60 properties in 16 states. Eldorado leadership will control the merged entity and has said the company will focus on its domestic business. Spending millions of dollars in Japan on a potential licensing effort didn’t make the grade when Eldorado said it wants to achieve $500 million in cost savings as part of the deal. “It’s viewed as somewhat of a disappointment because Caesars is an international brand,” Bussmann said. “We’re at least a year away from any type of formal decision, so I’m wondering if they jumped the gun.” A week before Caesars pulled the plug on Japan, Las Vegas Sands said it was withdrawing its focus from Osaka – where Chairman and CEO Sheldon Adelson proclaimed a year ago the company had “the leading position” and would spend upwards of $10 billion for an integrated resort. Las Vegas Sands has now turned its attention toward Tokyo and Yokohama. The reasoning behind the switch is twofold. Las Vegas Sands’ attention – and more than $5.5 billion – is focused elsewhere on the company’s casinos in Macau and Singapore, which provides roughly 85 percent of its quarterly revenue stream. And MGM Resorts International has made Osaka the gaming giant’s “hill to die for.” Gaming analysts have speculated that Las Vegas Sands didn’t want to get into a bidding war with MGM for the one integrated resort license in Osaka. MGM invested a considerable amount of time, money and personnel in Osaka, named former Nevada Governor Brian Sandoval to lead the international expansion efforts, and partnered with Japanese company Orix, which has a strong presence in Osaka. Stifel gaming analyst Steven Wieczynski told CDC Gaming Reports MGM “has a strangle hold on Osaka.” Las Vegas Sands is also eyeing New York City. In July, the company hired former New York Governor David Paterson in an effort to move up the timeline from 2023 on the bidding process and development of a Big Apple integrated resort. Other gaming companies have not diverged from their interest in Japan. Wynn Resorts said it would “welcome the opportunity” to build an integrated resort in Yokohama after Mayor Hayashi Fumiko said that the city would explore the idea. The company has also expressed interest in Tokyo. “Yokohama has been the innovator of ideas into Japan and it is therefore significant that Yokohama is now taking steps forward in this new concept for Japan,” Wynn Resorts spokesman Michael Weaver said in a statement. “There are numerous areas in Japan that are very appealing for an integrated resort. The demographics and the tourist attraction of the Tokyo Bay area make that market particularly appealing.” Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at email@example.com. 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