It appears Las Vegas Sands is not so bullish on the prospective casino market in Japan.
The investment community doesn’t seem to mind the shift in strategy.
On last week’s third quarter conference call with analysts, Las Vegas Sands President Rob Goldstein said the company is no longer sure investing in a Japan casino pencils out. The starting cost for one of the three integrated resorts the Japanese government authorized in 2017 is somewhere between $10 billion and $12 billion.
Sands President Rob Goldstein
Las Vegas Sands didn’t put the brakes on Japan, just pumped them slightly.
“No matter how good you are at this business, that (figure) must give you pause (to) stop and think, ‘Is that prudent?’” Goldstein said in response to one of several questions about Japan, which some have predicted could produce upward of $25 billion annually in gaming revenues, second only to Macau as the world’s largest gaming market.
“Can you really deploy? Can you get the return?” Goldstein added. “We’ve had those discussions, and we’ve had them with the Japanese government.”
Analysts have similar concerns.
“We find this level of transparency in the company’s messaging around Japan refreshing, and appreciate management’s discipline in considering such a large potential capital commitment in an environment where some competitors appear to have already gone ‘all-in,’” Stifel Financial gaming analyst Steven Wieczynski told investors following the conference call.
Union Gaming Group’s John DeCree voiced similar sentiments.
“With integrated resort construction budgets potentially soaring above $10 billion in major cities in Japan, Las Vegas Sands emphasized its focus on generating sufficient returns rather than just pursuing the investment at any cost,” DeCree said.
The company’s Japan focus has changed in the past few months.
In August, Las Vegas Sands pulled out of the bidding for an integrated resort license in Osaka to focus on either the Tokyo region or Yokohama. Goldstein said at the time that larger markets play better to the company’s strengths. That same month, Caesars Entertainment withdrew from the Japanese process entirely due to the company’s $17.3 billion merger with Eldorado Resorts.
MGM Resorts International has targeted an “Osaka First” strategy. Some analysts have speculated Las Vegas Sands didn’t want to get into a bidding war with MGM over that market.
Goldstein said Las Vegas Sands is answering the “request of comments” document the Japanese government issued earlier this year and will wait to see how the process plays out.
Still, spending $10 billion to $12 billion on one integrated resort – roughly the same figure the company spent in China for “many casinos and retail malls” – gives Goldstein cause for contemplation.
Tokyo, Japan
“I think there is some time to ponder how Japan plays out in the end… we hopefully (are) right in the middle of it and (will) make the best decision for our company (and) our shareholders,” he said.
A year ago, Las Vegas Sands was singing a much different tune.
Company Chairman and CEO Sheldon Adelson said on an earnings call then that Las Vegas Sands had “the leading position” in Japan. A few months later, Pro Publica reported President Donald Trump had personally lobbied Japanese Prime Minister Shinzo Abe on behalf of Adelson to “strongly consider” Las Vegas Sands for one of the licenses.
The legislation passed in Japan for the three prospective integrated resort complexes calls for casinos, hotels, restaurants and non-gaming attractions, such as retail, conference facilities and entertainment. However, the formal request for proposal may not take place until January, and the government has not officially settled on locations.
Meanwhile, Las Vegas Sands is spending more than $5.5 billion on renovations and expansions to its existing resorts in Macau and Singapore, which, combined, provide the company approximately 85 percent of its total quarterly revenue stream.
In Macau, more than $2 billion over the next two years is going into the renovation, expansion and rebranding of its Sands Cotai Central complex into The Londoner Macau, a London-themed resort first announced in 2017. Sands will also spend $400 million for the 370-suite St. Regis Tower Suites and $450 million for the 290-suite Four Seasons Tower Suites, both of which are expected to be completed by the first quarter of 2020.
This April, Las Vegas Sands said it would spend $3.3 billion on Marina Bay Sands in Singapore, which includes a 15,000-seat arena, a 1,000-room hotel, and additional convention space. Expansion to the resort’s casino – one of two in the island nation – is not part of the project.
Goldstein said Macau and Singapore were two growth opportunities where the company’s money “is well spent.” And he’s not discounting Japan – yet.
“Japan will take a little more thought process,” Goldstein said. “All that money for one (integrated resort) does make you stop and say, ‘can you get the returns that your shareholders deserve? Our chairman and our board will make that decision ultimately.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
