Melco Resorts Still Keen on Japan IR Project Even as Rivals Bail

Posted on: August 21, 2020, 10:00h. 

Last updated on: August 21, 2020, 12:42h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Melco Resorts & Entertainment (NASDAQ:MLCO) CEO Lawrence Ho reiterated his company’s commitment to Japan on the operator’s second-quarter earnings conference call Thursday. It’s an affirmation that comes after some rivals ditched the Land of the Rising Sun.

Melco's Lawrence Ho Affirms Japan Interest
Melco Resorts CEO Lawrence Ho, seen here in Manila in 2018, says his company remains committed to Japan. (Image: Forbes)

Ho’s comments were made on the same day in which Yokohama — the city Melco is eyeing for an integrated resort (IR) — said it’s pushing back publication of its IR policy. The mayor of Japan’s second-largest city, Fumiko Hayashi, is blaming the central government for the delay.

We continue to believe that Japan represents the best new integrated resort development opportunity outside of Macau,” said Ho on a call with analysts and investors. “And we are unwavering in our commitment to bring the world’s leading IR to Japan.”

Melco’s ties to Asia-Pacific’s gaming industry run deep. The company is one of Macau’s six concessionaires and runs Altira, City of Dreams, and eight Mocha Clubs in the world’s largest casino center. The company also owns and operates the City of Dreams Manila in the Philippines.

Differentiating Itself from Rivals

In discussing Melco’s commitment to Japan, Ho took a veiled shot at US-based rivals that recently threw in the towel on the country.

“We know that a number of our global competitors have abandoned their efforts in Japan. I’m pleased to differentiate Melco and demonstrate our long-term commitment to Japan,” said the Melco boss.

In May, Las Vegas Sands (NYSE:LVS) rattled the gaming industry when Chairman and CEO Sheldon Adelson, citing ongoing delays and government snafus, announced his company’s departure from the IR competition. At that time, analysts said the absence of LVS could be a boon for other operators, including Melco.

Earlier this month, Wynn Resorts (NASDAQ: WYNN) said it’s shuttering its Yokohama office, potentially further narrowing the field of well-heeled operators Melco will tussle within the city.

Playing the Long Game

Ho, who previously said a high-end Japan gaming venue will cost at least $10 billion to bring to life, isn’t deterred by the delays and says he knew this was a long-term game when Melco entered the competition.

“When I entered this race more than a decade ago, I knew it was a marathon and not a sprint,” he said. “Frankly, while COVID has certainly impacted development efforts in the near term, based on all the news flow out of the medical community, COVID will be well in the rearview mirror when IRs actually open in Japan in the back half of this decade.”

Analysts and industry observers believe that when Japanese gaming properties fully ramp up, the country will be home to the world’s second-largest casino market in terms of gross gaming revenue (GGR), trailing only Macau, while easily topping Las Vegas.

With delays forced by the COVID-19 pandemic, the most optimistic scenario is that the first IR in Japan will open in 2026 and even that timeline is highly tentative.