TOKYO – Many foreign casino operators are cancelling or postponing plans to enter Japan, measures that underscore pessimistic customers in a market that many industry connoisseurs once thought may be the second largest casino destination in the world after Macau.
The main players, in their most recent calls for results, have blamed uncertainty in Japan’s regulatory environment, adding higher taxes and onerous needs for the proposed hotels. The hotel rules had to be published until January, but have still been published.
The COVID-19 pandemic has been a blow to the stations of existing operators and would possibly have deterred some from Japan. This is far from the case before, when large gaming corporations said they were willing to spend $10 billion on casinos across the country. A new arrest this month for alleged forgery of witnesses through a former leregistration in a corruption case involving a Chinese casino developer has further clouded casino gaming customers in Japan.
Prime Minister Shinzo Abe, who has been a promoter of the broadcasters, announced Friday that he would resign because of problems.
“Regulations enacted through the Japanese government that passed through the Diet (parliament) led to attracting the kind of investment it needs,” Sheldon Adelson, president and ceo of Las Vegas Sands, told analysts in July.
Adelson criticized the government’s plan to impose a tax withholding on the profits of foreign visitors, which was proposed by the Ministry of Finance, saying japan will “never attract a foreigner” if such regulations are imposed. He complained about the country’s maximum structure prices and said, “There is no guarantee that [the government] will not raise taxes from there,” he said, adding a 30% tax to the game that has already been approved.
Sands considered one of the pioneers of a casino license in Japan, having spent nearly two decades negotiating with local regulators. The recall, announced in a May release, surprised stakeholders, but Sands said the proposed framework for so-called built-in stations made their goals in the country “unattainable.”
Japan legalized casinos in 2018, hoping to boost the tourism industry. Its goal was to put into operation its first built-in complex, combining hotels, casinos, entertainment complexes and convention centers, until the last decade of 2020.
Another U.S. operator, Wynn Resorts, which, like Sands, seeks to build a beach hotel in Yokohama, southwest of Tokyo, showed in an earlier effects call this month that he had closed his workplace in the city and was no longer looking for opportunities in Japan.
“In March, we made the decision that until we had more clarity on what the company would look like, what the global would look like, and what the regulations would look like there, we would practically impede our efforts,” said CEO Matt Maddox.
MGM Resorts International, which partnered with Japan’s Orix and is the sole bidder for a planned hotel in Osaka, said in July that it would take a minority stake of 40% to 45% in the consortium that will emerge in the resort. “We’ll do this InvestmentArray … that if we think it will bring back the kind of functionality we want to meet our expectations,” said Bill Hornbuckle, MGM’s new CEO.
The cooling of operator enthusiasm reflects the development of doubts about Japan as a market. The government’s fundamental rules on site selection, which shape the basis of local authorities’ bidding procedures, were first promised in January, but are still being finalized. The corruption scandal and the new coronavirus epidemic have slowed down the process.
Despite this delay, the local government must still choose an operator and send the call to the central government until next July. These finalists will participate in auctions at sites of up to 3 stations. Local governments and casino operators are now unrealistic, according to Takashi Kiso, executive director of the International Casino Institute, a consulting firm.
“It is [for Japan] to realize that operators would probably not invest if we give them too many expectations” and remain deaf to their needs, said Ayako Nakayama, CEO of the Japan IR Association, an organization that promotes the gaming industry.
In a recent survey, the agreement found that while the majority of respondents interested in hotel projects in Japan remain interested in making investments, many feel that “legal and regulatory requirements” are an obstacle.
Unlike American gaming companies, some Asian players are still interested in entering the Japanese market. “We continue to say that Japan represents the new most productive opportunity for the progression of resorts incorporated outside Macau,” said Lawrence Ho, president and ceo of Melco Resorts And Entertainment, founded in Hong Kong on August 20, while acknowledging that “several of our global competitors have abandoned their efforts in Japan.”
Another Hong Kong-based casino operator, Galaxy Entertainment Group, also said earlier this month that it was fulfilling its mission in Japan: while “the Japanese government would possibly take some time to focus on managing the COVID-19 pandemic, it will not be our long-term expansion plan in Japan,” the company said.
MGM’s partner, Orix, remains optimistic. “It’s a promising company,” said Hitomaro Yano, the company’s leading executive and treasurer, last August. According to the company’s medium-term capital expenditure plan, 650 billion yen ($6.1 billion) of its budget of 2 billion yen has gone to the built-in hotel business, as it targets the proposed Osaka hotel.
Presentations to Japan advance with the remaining candidates. But the government’s fundamental rules “will be discussed from scratch, reflecting emerging desires in the wake of the pandemic,” Kiso argued, as the requirement of giant convention spaces in drafting rules.
“All foreign assemblies fit online, and this habit will replace much even after vaccine development. The existing requirement, which focuses on attracting a giant number of guests, corresponds to the post-COVID era,” Kiso said.
Additional report through Kenji Kawase and Grace Li in Hong Kong.
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