The process that Japan undertakes to award three casino licenses will be the most competitive bidding war the gaming industry has seen since 2006, when Singapore granted integrated resort deals to Las Vegas Sands Corp. and Malaysia-based Genting Berhad.
Both of those companies also want one of Japan’s integrated resorts, as do most of the major Nevada-based casino companies and international operators.
But one casino company, Caesars Entertainment Corp., may need the Japanese license more than any other gaming operator.
Caesars (formerly Harrah’s Entertainment) didn’t bid on a license when Macau ended Stanley Ho’s casino monopoly in 2000. Harrah’s also lost out to Sands in Singapore.
Today, Caesars needs the Asian foothold.
The company is building the $700 million Caesars Korea near Seoul’s Incheon International Airport, which is expected to open in 2021. However, projections for Korea’s gaming market are nowhere nearly as lucrative as the estimates for Japan’s, which range from $10 billion to $20 billion depending on which analyst or research report you’re reading. Macau, the world’s largest casino market, collected $33 billion in gaming revenue last year.
Caesars emerged from a lengthy Chapter 11 bankruptcy last October. The company has since been growing its U.S. footprint, acquiring two Indiana racetrack casinos for $1.7 billion last month and adding legal sports betting to its properties in Atlantic City and Mississippi.
Jefferies gaming analyst David Katz said a Japan resort would change Caesars’ business model. The company has long used its Total Rewards marketing program to drive regional customers to its Las Vegas Strip resorts. Katz said building a Japan customer base “would be transformative for Caesars from doing business the Harrah’s way.”
Winning one of the Japanese licenses “would be important to them,” Katz said. “But it’s really hard right now to handicap the odds of success.”
Macquarie Securities gaming analyst Chad Beynon said Caesars has been positioning itself in Japan for more than a decade. The company has put “boots on the ground” to build relationships and establish a presence, and Caesars Executive Vice President Jan Jones Blackhurst has logged enough air miles between Las Vegas and Japan to earn several around-the-world trips.
Beynon said the company’s expansion of its Caesars Palace brand to Dubai and Los Cabos, Mexico could further the quest.
“The Caesars Palace brand is one of the most recognizable in the world and the recent branding announcements highlight this,” Beynon said. “Most importantly, Caesars has a very strong compliance reputation worldwide, which we believe will put them in a great position with the government.”
Surprisingly, Japan did not come up on Caesars’ second quarter earnings call last week in either prepared remarks or through analyst questions.
Still, Caesars CEO Mark Frissora has made Japan a priority.
“We are seeking the most creative and respected Japanese partners to help us bring to life an unparalleled integrated resort experience,” Frissora said in a statement after the Japan government approved the casino bill in July. “Caesars Entertainment’s vision is to build a world-class integrated resort (and) bring world-class entertainment to Japanese audiences while also showcasing Japanese culture and entertainment to visitors from all over the world.”
In June, Caesars brought a little goodwill to Japan when the company “presented” a concert by Caesars Palace headliner Celine Dion, who kicked off her 22-city tour across the Asian-Pacific region with a performance at the Tokyo Dome.
Maybe the company is trying to learn from the past. Two ex-Harrah’s/Caesars CEOs both said lack of a Macau gaming license was their biggest regret while leading Harrah’s Entertainment.
In an interview with Nevada Newsmakers, Phil Satre, who retired as Harrah’s chairman and CEO in 2005, said it was a mistake for the company to not even enter a bid for a Macau gaming concession.
“Harrah’s missed out on Macau, and I will accept some of the responsibility for that,” said Satre, who will become the chairman of Wynn Resorts at the end of the year. “I was at the tail end of my career and we didn’t pursue it aggressively. It turned out to be a remarkable market.”
Gary Loveman was Harrah’s chief operating officer when the company took a pass on Macau. He had another opportunity to rectify the mistake in 2006 as CEO when Wynn Resorts offered to sell the company its Macau sub-concession for $900 million. Loveman turned down the deal and Wynn sold the license to Australian mogul James Packer, who created Macau casino operator Melco in partnership with Hong Kong businessman Lawrence Ho.
“We are not in the most important gaming market because when that opportunity came, we missed it,” Loveman told Bloomberg News in 2010. “Big mistake. I was wrong, I was really wrong.”
Beynon speculated the lack of a Macau casino might benefit Caesars in its Japan pursuit.
“Not having a business in Macau, in some ways, outside of having the extra cash, could actually work in their favor from a reputation standpoint,” Beynon said.
Meanwhile, Las Vegas Sands Chairman and CEO Sheldon Adelson believes his company is “in the pole position” for Japan, MGM Resorts International has created a large corporate presence in the country, and the addition of Satre to Wynn’s board gives the business additional credibility and allows him to possibly make up for a 20-year-old error.
Let the games begin.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
