Sands Withdraws From Japan

Concessions are only valid for 10 years

Casino giant Las Vegas Sands is abandoning its $10 billion Japan casino project, shedding decades of planning. The company, founded by billionaire Sheldon Adelson, has been trying to expand in Japan since at least 2005. The country is considered one of the most potentially lucrative gambling markets in the world.

However, according to reports from US news service Bloomberg, Sands management objects to some provisions of Japanese gambling legislation. The group sees the biggest hurdle in the fact that the casino license should only be valid for 10 years. This with a construction period of five years. Given the high investments, the question arises as to whether Sands can operate profitably enough in Japan in the long term.

In addition, national or local government officials could change conditions within this period in ways that further reduce profits. In this context, management pointed out that the company's resorts in Macau and Singapore have licenses that last for 20 or 30 years. With this in mind, Managing Director Adelson explained:

"We are grateful for all the friendships we have made and the strong relationships we have in Japan. But it is time for our company to focus its energy on other opportunities."

Setback for Shinzo Abe

Sands' cancellation is a major setback for Prime Minister Shinzo Abe. This played a key role in driving forward the liberalization process in Japan and set the course for casino resorts through an amendment to the law in November 2019. The aim of the move was to boost Japan's economy by focusing on tourism. The coronavirus and the subsequent collapse in travel have also damaged the plans.

Additionally, Sand's decision is likely to be a disappointment to potential casino suppliers and partners. It is no coincidence that Sands comes to this conclusion in the midst of the pandemic, said CLSA analyst Jay Defibaugh. The expert referred to the closure of several Sands resorts as a result of the Covid-19 pandemic. Examples of this include Las Vegas and Macau, where the coronavirus shut down all casinos.

Jefferies analyst David Katz also spoke out. Sands' decision was surprising, but understandable given the uncertain outlook. One simply has the impression that the “cost-return dynamic is not as convincing as originally assumed”. The long-term consequences of the pandemic cannot be foreseen.

Japan's Chief Cabinet Secretary Yoshihide Suga, however, declined to comment on the Sands decision at a press conference on Wednesday (May 13). Instead, he stated that he wanted to stick to the schedule for establishing the casino resorts without any changes. Whether this also has an impact Online casinos, remains unclear. Meanwhile, Sands shares fell 0.5 percent in premarket trading on Wednesday. Beforehand, however, there was a drop of a full 33 percent.

Caesars also jumped off

International interest in Japanese casinos is waning overall. Japan was actually seen as a huge opportunity for the industry given its mature and wealthy population of 126 million. Locals are big fans of pachinko, a slot machines -like game that has become a multi-billion dollar business. However, there are currently no Vegas-style casinos.

The Japanese government estimates that opening up to three resorts could generate over $20 billion annually, making Japan the second-largest gambling delta in Asia after Macau. Nevertheless, there is increasing skepticism among large operators. It was only in November 2019 that Caesars Entertainment announced that it would be withdrawing from the race for the Japan licenses.

The market giant based in Las Vegas stated that it wanted to concentrate more on its US business in the future. In particular, they plan to complete the merger with Eldorado Resorts as soon as possible. At the same time, main competitor MGM Resorts became the license winner in the metropolis of Osaka, shortly after the tourism giant Genting and the Galaxy Entertainment Group also pulled out.

Casinos unpopular in Japan

According to statements by Bloomberg Casinos remain unpopular with the Japanese public. The majority of residents spoke out against the openings, which could have further influenced the companies' decisions. The organizers encountered resistance, especially at the planned location in Yokohama, which Sands was also interested in.

The industry's reputation was also damaged by the arrest of a ruling party lawmaker in DecemberIGT. Liberal Democratic Party politician Tsukasa Akimoto was suspected of accepting bribes from a Chinese gambling company that wanted to invest in the Japanese casino industry. The politician has denied the allegations. His arrest was the first of a sitting lawmaker in a decade.