On the company’s second-quarter earnings conference call earlier today, Melco Resorts & Entertainment (NASDAQ:MLCO) reiterated its desire to bring an integrated resort to Japan.
While Yokohama wasn’t mentioned specifically by CEO Lawrence Ho, that is the city in which the operator is interested in developing a gaming venue. In Japan’s second-largest city, Melco is competing with Genting Singapore, which is widely viewed as the front-runner.
In Japan, we remain committed to bringing a world-leading integrated resort there and continue to pursue opportunities within the market, where we remain actively engaged with our partners,” said Ho on a conference call with analysts.
The Melco boss points out that the COVID-19 pandemic is presenting challenges in Japan “in terms of process timing and travel.” But he adds that integrated resort development is moving forward.
Melco, which owns and operates integrated resorts in Macau and the Philippines, has long been optimistic about Japan as a new market. But it’s the only operator competing against a rival for one of Japan’s first three gaming licenses. In Osaka, MGM Resorts and local partner Orix have the field to themselves, and in Wakayama, Canadian private equity firm Clairvest Group is the lone bidder.
Ho, Melco Enthusiastic About Japan
While the Japan integrated resort process is lasting longer than operators previously hoped — with the pandemic creating more delays — Ho remains enthusiastic about bringing a high-end gaming venue to the world’s third-largest economy.
“We remain convinced that Japan represents the best potential new gaming market globally, and that the quality of our assets and our focus on premium segment is a great fit for the country’s tourism development,” he said on the call. “We remain patient and continue to maintain our disciplined approach with respect to all development activities, including in Japan.”
Melco’s Asia-Pacific operational experience could work in its favor, because that’s a trait Japanese officials covet. However, rival Genting Singapore has that as well, and there’s speculation Japanese authorities prefer the Singapore gaming model to that of Macau.
Last week, MGM and Orix submitted a $9.1 billion proposal to Osaka, which is a more favorable price point than was originally expected. However, it’s estimated that that venue, assuming it’s approved, wouldn’t open until 2028 at the earliest.
‘Beyond Our Control’
As Melco executives acknowledge, there are factors in Japan they simply cannot control, including mayoral politics. Yokohama Mayor Fumiko Hayashi, the pro-casino candidate, is seeking another term. But there are no guarantees she’ll be reelected.
“In terms of the specifics that you’ve mentioned, the incumbent mayor has come out and is running on a pro-IR platform,” said Melco President Evan Winkler. “There are a variety of other candidates who have come out against IR. As Lawrence articulated, some of these things are simply beyond our control. And we’ll know more after the election takes place in Yokohama on August 22.”
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