Sands gives up on Japan
The renowned US casino company Las Vegas Sands has decided to scrap its billion-dollar casino plans for Japan. The primary reason behind this decision is the tough legal restrictions in the country, including the fact that the gambling licenses have a duration of just 10 years. Is the liberalization of gambling in Japan faltering?
Licenses with a Duration of Only 10 Years
The massive casino conglomerate Las Vegas Sands is putting the brakes on its USD 10 billion Japan casino project, postponing years of planning. The company, founded by billionaire Sheldon Adelson, has been keen on expanding in Japan since at least 2005. The country is renowned as one of the most lucrative gambling markets globally.
As per reports from the US news agency Bloomberg, the Sands management is unhappy with certain stipulations of Japanese gambling laws. The most significant issue is a casino concession validity period of merely 10 years, considering a five-year construction period. With such investments, the question arises whether Sands will be able to generate enough profit in Japan over the long term.
Furthermore, there's a potential added risk of national or local government officials changing terms and conditions during this period, further curbing profits. Sands' CEO Adelson recognized this issue, highlighting that their resorts in Macau and Singapore boast licenses that endure for 20 or 30 years. Consequently, Adelson stated:
"We are thankful for all the connections we've made and the strong ties we've established in Japan. But now, our organization must channel its energy towards other prospects."
A Double-edged Sword for Shinzo Abe
Sands' denouncement is a substantial roadblock for Prime Minister Shinzo Abe. He played a pivotal role in pushing through the liberalization process in Japan and set the stage for casino resorts in March 2019 by amending the law. He aimed to revive Japan's economy by emphasizing tourism. The coronavirus pandemic has also threatened these casino plans.
Sands' withdrawal is almost certainly disheartening for potential casino suppliers and partners. CLSA analyst Jay Defibaugh opined on the matter, noting that Sands' decision was hardly surprising in light of the ongoing pandemic. He linked this to the shutdown of some of Sands' resorts as a result of Covid-19, including those in Las Vegas and Macau, where the casinos were completely shuttered due to the virus.
Furthermore, Jefferies analyst David Katz weighed in. Although Sands' decision appears shocking, he found it reasonable considering the unclear future due to the pandemic. Katz assessed that the cost-revenue ratio wasn't as persuasive as initially presumed.
Japan's Chief Cabinet Secretary Yoshihide Suga didn't comment on the Sands debacle during a press conference on May 13th. Instead, he maintained that he wished to adhere to the timeline for setting up the casino resorts without alterations. The impact on online gambling remains unclear. In the meantime, Sands' stock fell 0.5% in pre-market trading on May 13th, following a 33% decline.
Fading International Interest in Japanese Casinos
International enthusiasm for Japanese casinos is rapidly dwindling. There were high expectations that Japan was a significant opportunity for the industry, based on its mature and affluent population of 126 million. Residents are well-versed in pachinko - a slot machine-like game that generates billions. Nevertheless, there are no Vegas-style casinos in the country to date.
The Japanese government predicts that opening up to three resorts could garner over 20 billion USD per year, turning Japan into the second-largest gambling region in Asia after Macau. Yet, significant operators now hold doubts. In August 2019, Caesars Entertainment abandoned its bid for the Japanese licenses.
The Las Vegas-based company indicated a preference for concentrating more on its U.S. operations in the future. The merger with Eldorado Resorts is also in the pipeline. At the same time, MGM Resorts became the winner of the Osaka license, shortly after tourism behemoths Genting and Galaxy Entertainment Group also withdrew.
Unpopularity of Casinos in Japan
Casinos continue to face disapproval from the Japanese public. Most residents have voiced their opposition to the openings, a factor that possibly influenced the companies' decisions. Resistance was especially felt at the proposed Yokohama location, a site of interest for Sands.
The industry's image was tarnished by the arrest of a ruling party legislator in December. Liberal Democratic Party lawmaker Tsukasa Akimoto was suspected of accepting bribes from a Chinese gambling company seeking to invest in the Japanese casino sector. The lawmaker has denied the accusations. His arrest marked the first instance of a sitting lawmaker arrested in a decade.
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Source: www.onlinecasinosdeutschland.com
