Poor timing has quashed bids for casinos in Japan
When Japan announced that it was going to host an integrated resort casino, companies fell over themselves trying to get their bids in. Osaka was seen as the biggest draw, while Yokohama and Nagasaki were also seen as good options too. With a population of over three million people in the port city and 19 million in the Kansai metropolitan area, as well as being the second largest hub for culture, business and tourism, a resort casino in Osaka was viewed by most of the operators as a license to print money. Four casino operators, MGM, Genting Singapore, Galaxy Entertainment and Las Vegas Sands put in Osaka bids, but all except MGM dropped out after MGM raised their offer to $10 billion, as well as saying they could go higher. Originally Caesars and Melco Entertainment considered an offer too, but Melco dropped out when they saw the first offers come in and Caesars dropped out when they decided to focus on the acquisition of Eldorado Resorts. As part of the bid, Osaka was set to see a huge improvement in infrastructure, including a subway system.
MGM decided to partner with Japanese financial firm Orix Corporation and seemed raring to go in early 2020, but after the pandemic pummeled both Japan and the U.S., they indicated that their original bid would have to be lowered. As a result of that announcement, Osaka said it would reopen the bidding process and accept proposals for at least one more year to see what type of interest there was. To date MGM is still the only company that expressed an interest in an Osaka casino. Other casino operators, including Genting, Galaxy and Wynn expressed greater interest in the Yokohama casino after dropping out of the Osaka bid. Yokohama is only 45 minutes from Tokyo, so it would draw a lot of interest from people in the capital city and the casino companies were hoping the summer Olympics would be a good opportunity to promote the city and the casino opportunities.
The pandemic has hit Japan hard and while the country and the casino operators hoped to use the summer Olympics, and more so the 2025 World's Fair, to show the people of Japan and tourists the value of the integrated resort casinos, that likely won't happen. The Olympics are scheduled to take place this year, one year later than expected, but Japan has shut down its borders to most other countries and attendance at the Olympic games is limited to Japanese residents only. Consequently, the excitement and promotion of the country that was expected to take place from the Olympics simply won't happen. And while the games are taking place predominantly in Tokyo and Yokohama, other cities realize that the main purpose of the games was to promote the whole country in an effort to boost tourism and business.
Osaka's mayor, Ichiro Matsui, was on record saying that the International Olympic Committee should move the games back to 2024 in light of the pandemic and other winning bids should be moved back four years as well. So, Matsui would like to see Tokyo host in 2024, Paris in 2028 and Los Angeles in 2032. "The whole world is facing unprecedented times," Matsui said when pleading for Tokyo and the IOC to postpone the games. It was also very recently revealed that Tokyo is considering holding the games without any fans in attendance, since only 1% of the population has been vaccinated and any events that happen in the streets such as the marathons, cycling and even the torch relay may have to be cancelled or rerouted. Yokhohama's mayor, Fumiko Hayashi, hasn't said much about the games, although she did say it might be difficult for the city to hold some of the events considering the pandemic. Hayashi is also being very wary of not saying anything to upset her public persona, since an election for Yokohama is set to take place this year.
To add to the concern over hosting the games, Japan is seeing a large new increase in Covid cases, including almost 900 cases on Saturday in Tokyo and over 500 cases in Osaka, the largest outbreak this year. As well, over 50 deaths each day are being reported in Tokyo and the city is starting to get concerned about their hospitals becoming overwhelmed. The IOC also said that athletes will likely test positive during the Olympics and the IOC is working with a local hotel to secure 300 rooms to house athletes who test positive but have mild or no symptoms. Naturally athletes with severe illness will be expected to go to the hospitals. There is also an indication that many top athletes are planning to pull out of the games due to concern of contracting the virus. Justin Rose, for example, said last week that he will not be participating for England in golf and some countries, including Canada, have indicated they may not send any athletes at all. Moreover, support in Japan has plummeted for hosting the games.
When Japan first won the bid to host the games, over 90% of residents said they supported the bid, but recent polls showed that almost 70% said they don't support hosting the games at this time. As one local newscaster said, "the Olympic games will be even less successful than the 1980 Moscow Olympics," the games where many countries, including the United States, boycotted the events in protest of human rights from the former communist country. There was even one analyst who suggested sending athletes to the country when you know there is a raging pandemic is a crime against humanity. It was also pointed out that Japan will lose a fortune by hosting the games, since they will get no revenue from ticket sales and ancillary revenues that are gained from hosting an Olympics.
But as bad as not hosting the Olympics will be for the casino bids, the bigger concern is the World's Fair. The theme for Expo 2025, which is scheduled to take place in Osaka in 2025 and is expected to attract 28 million visitors, is "Designing Future Society for Our Lives", with sub-themes of "Saving Lives", "Empowering Lives" and "Connecting Lives". Ironically, the part related to saving lives, chosen before the pandemic, included the importance of sanitation and vaccinations along with reducing poverty, gender equality and renewable energy, among other themes. But there was also going to be a whole area devoted to the integrated resort casino and an announcement that the winning bidder would be a major partner in achieving the goals of the world's fair. The plan was that the winning bid would be announced in 2020, construction of the integrated resort would start immediately, and the casino would be unveiled to the city and the world at the exposition.
But with that no longer viable, it is expected that the earliest a casino can be built is 2028 and for that reason along with the ones previously mentioned, many of the original interested casino companies have said the bids they submitted to pay to build the casino no longer make financial sense. Consequently, Osaka and the other cities have said they will continue to accept bids until 2022 and at least to try and generate more interest. It isn’t clear just how low a bid MGM has put in secretly, but some experts have said it is less than half the original bid. It has also been rumored that MGM’s new CEO Bill Hornbuckle just isn’t as excited about the Japanese casino as Jim Murren (who now works for National Infrastructure Advisory Council) was. There is belief that Hornbuckle thinks the big growth opportunities are in the United States, especially in the area of sports betting.
It also must be noted that China instituted a crackdown on travel for gambling from its residents in 2020 and has doubled down on it this year. The countries that Chinese nationals will not be allowed to travel to for gambling include most of Southeast Asia, and while Japan isn’t currently listed as a blackballed country, since they don’t have casinos yet, it is expected they will be added to the list if and when those casinos are built. Upon announcing the ban, the Chinese government stated that gambling is "endangering the personal and property safety of Chinese citizens."
Japan at a crossroads
Yokohama and Osaka figured that when they reinstated the request for proposals, they would be overrun with bids, since the financial outlay was lower, but both Las Vegas Sands and Wynn have withdrawn from the Yokohama bid and to date not one other company has put in a bid for the Osaka casino. Aside from the uncertainty of the viability of the casino industry going forward, especially as more people choose to use casinos online, the casino operators have been hit hard financially and simply don’t have the money to put in an enormous bid on a hope and a prayer. Casino visits to Macao are still a fraction of what they once were and even in Las Vegas there is a hesitancy from much of the public to travel to sin city to gamble and stay in hotel rooms. There is no doubt when the pandemic is over things will start to return to normal, but it isn’t certain what the new normal is and there are real concerns that COVID-19 is just the start of a slew of new pandemics that will hit the world.
So many casino operators are holding back large outlays to ensure they remain a going concern, but Japan clearly isn’t prepared to simply give away the casino bid if the winning proposal doesn’t meet their price. It’s a very unfortunate situation but the question is clear. Considering the pandemic and the uncertainty of the casino industry who will blink first, the casino operators or the Japanese governments?