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Las Vegas Sands Shelves their Bid for a $10bn Integrated Resort in Japan
By Jeff Osienya May 14, 2020 IndustryAfter pursuing a Japanese entry for over two decades, Las Vegas Sands Corp. suddenly drops the bid. The company’s management team deemed the casino regulations potentially unfriendly to their bottom line.The Las Vegas Sands Corp, the biggest casino company in the world, has decided to pull the plug on its quest for starting operations in Japan. This decision marks an abrupt end to the company’s pursuit of a position that would have further marked the company’s position as the top-dog in the multi-billion-dollar casino industry worldwide. Before this unexpected U-turn, Las Vegas Sands had been running for one of the three gaming licenses that the Japanese government is planning to award to qualified operators in different cities.
Billionaire Sheldon Adelson founded Las Vegas Sands Corp back in November 1988 and it has grown to be the largest casino operator globally, with annual revenue of about $13.74 billion in the 2019 fiscal year. The company has been trying to look for leeway for a Japanese expansion for more than 2 decades since around 2005 but there was a range of factors that lead the management to snuff their bid for debut in the Japanese market.
Adelson had initially said that his company would spend a cool $10 billion in Japan to establish an Integrated Resort; a massive entertainment complex that contains first-rate casinos resorts, top-tier hotels, restaurants, and conference venues.
LVS Roadblocks that Led to Pulling Out of Japan
Some analysts presume that Las Vegas Sands’ decision could be a Coronavirus pandemic fueled decision especially based on the fact that the company has already shut down some of its resorts to try and control the virus spread.
The management, through Adelson, the Chairman, and CEO of the company, however, came out to indicate that the “framework around the development” of an Integrated Resort in Japan made their goals unattainable in the country. Instead, the company plans to focus its energy on investments and operations that they have in other Asian markets including Singapore, China, and Macao.
Industry experts close to the matter noted that one of the biggest blockades that eventually led the company to cross out Japan from their list was the concession license timeframe. A license approval in Japan would only be good for a decade, subject to a 5-year renewal, compared to 20 and 30-year licenses that the Las Vegas Sands resorts received in Macau and Singapore respectively. This ultimately wouldn’t give them enough time to profit from building an Integrated resort that will take roughly five years, among other reasons.
On top of that, since Japan is still an emerging casino market with a few I’s to dot and t’s to cross from a regulation standpoint, there’s a chance that things could change in a way that could crimp the company’s profits. For instance, the proposed taxes in the Japanese market are too steep, with a 30% gambling revenue tax rate and a 31% corporate tax.
Dwindling Reputation for Japan’s Casino Potential
Las Vegas Sands isn’t the only casino conglomerate that has faced stumbling blocks while trying to launch operations in the Japanese market. Caesars Entertainment Corp also turned its reins away from japan in August last year to focus on its operations in the USA and merging with Eldorado Resorts Inc. Genting Bhd and Galaxy Entertainment Group Limited, a giant in the Malaysian Tourism industry also pulled out of the race for an Osaka license but indicated that they still have an eye on the Japanese market but in a different location.
The fact that a ruling party lawmaker was indicted and arrested for alleged bribery from a Chinese company that was seeking to invest in the Japanese casino industry hasn’t helped the industry’s reputation either. While Tsukasa Akimoto, the Liberal Democratic Party politician denied any of the offenses, this arrest was the first that had happened to a sitting lawmaker in nearly 10 years!
The Las Vegas Sands withdrawal is also a major setback for Shinzo Abe, the current Japanese Prime Minister who has been putting a lot of focus on tourism to boost the country’s economy. While Adelson’s decision doesn’t necessarily reflect on the potential for the upcoming Japanese casino industry, this certainly is a hefty blow for Japan as it could possibly make other potential investors shy away from the Japanese casino market.
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