Wynn Resorts Reaffirms Japan IR Ambitions
The international casino conglomerate, Wynn Resorts Ltd., has again reaffirmed its intentions to establish an integrated resorts project in Japan. The firm has outlined its strategy to win a casino license in the country but offered no indication that it would be seeking to participate in the request for proposal (RFP) process surrounding the license bidding at Yokohama. Despite this, the operator has positioned itself well in the running and remains one of the primary candidates to gain the first foothold in the new frontier of Asian high-end gambling experiences.
The Japanese initiative to establish so-called integrated resorts – large casino complexes with shopping malls, hotels, and business conference centers – has garnered international interest from around the world. Onlookers and interested parties can plainly see the enormous business opportunity that such a project represents. Not only could it unlock an extremely lucrative market that is up-until-now relatively untouched.
It is plain and obvious to see from an observer’s point-of-view that the integrated resort opportunities in Japan are going to be highly sorted after. With only three such venues receiving the preliminary approval to go ahead, there is plenty of competition between big casino operators vying to gain one of these lucrative contracts. The application process is tedious, and each prospected city has different guidelines for how a casino can apply, and ultimately which will be awarded the development contract.
If Wynn plans on gaining access to the lucrative Yokohama city licenses then they will certainly have to move with haste, these lucrative licenses are currently open for applications and the city authorities have outlined two separate judgment periods. The first will take place between February and May, followed by a second window beginning in June. This selection window will draw to a close with a firm winner expected to be chosen at the beginning of the summer.
US-based Wynn Resorts Under Financial Pressure
It is a curious time for Wynn Resorts Ltd, the US-based firm has had a difficult time during the pandemic, much of the businesses earnings were attributed to activities in Macau, where the subsidiary Wynn Macau operates. This branch of the business has for a long time proved itself as a reliable cash-machine, but since the pandemic rocked the land-based gambling sector and wiped out demand, the expenses have been piling up with very few means of revenue generation available.
This turn of fortunes has been seismic, to say the least. The Macau unit of Wynn reported a 3rd quarter loss in 2020 of over $280 million, compared with a net profit of $103 million the same quarter in 2019. This painful absolute shift of nearly $400 million has been devastating for the short-term prospects of the company. Despite these massive losses, the firm has amassed a sizeable war chest from years of profitability and still has the liquidity to meet its immediate liabilities, thus does not represent a going concern.
Previously Wynn had stated that its main focus in Japan would be to establish a resort in Yokohama, and yet they are not pursuing the available license. Also, the firm has previously pulled out of the race to establish a resort in other cities, Wynn canceled its Osaka bid at the end of 2019. But it seems now that the world is a completely new place, rife with new opportunities whilst previous projects that seemed fruitful no longer have the intrinsic appeal.
Re-clarifying the position of his firm the Wynn Resorts chief executive Matt Maddox had said that whilst Japan had represented an area of interest for the firm in previous years, right now the focus has shifted to other regions and elsewhere. Given the insurmountable pressures being piled on by the COVID pandemic, it is no surprise that the company has sought to secure its balance sheet before venturing into new markets where the risk of failure is much higher.
Wynn Looks Ahead to the Future
The Wynn Group published an update on its official position regarding an expansion into Japan in the Review-Journal. They outlined that the firm is highly interested in building a presence in Japan, but will not be participating in the new round of applications for Yokohama. Reasons given for their absence in the latest round of applications towards the integrated resorts were to do with COVID and the uncertainty that the pandemic brings to future cash-flows in the gambling sector.
Without a more accurate understanding of where the business will be positioned in the next few months, and also the severity of the pandemic and the ‘new normal’ – the casino is unable to commit to a long-term liability like the establishment of an integrated resort.
The pandemic really has proven to be a spanner in the works of the integrated resort’s planning, pushing back the bid process by over 9 months to October 2021. Under the current timetable, we don’t expect the firm to make any substantial movements in Japan, for the remainder of 2021 they will seek to unlock new capacity in their revenue model and rely on long-held liquidity to see them through this difficult period.