MGM Could Be More Appealing to Japan’s Regulators Overseeing Venue Licensing Because of Layoffs

Posted on: June 9, 2019, 04:21h. 

Last updated on: June 9, 2019, 04:21h.

Layoffs at MGM Resorts International may help — not hurt — the operator capture one of three coveted gaming licenses up for grabs in Japan, company officials said.

MGM Resorts International’s Brian Sandoval said layoffs at the company could make the gaming operator more competitive in the venue selection process now underway in Japan. (Image: YouTube)

Brian Sandoval, the ex-Nevada governor and former judge and state Attorney General who is president of global gaming development for the company, said the reduction in labor costs will show a more-nimble company. That would make MGM more competitive in what is looking to be a hotly contested selection process.

The company has initiated MGM 2020 — a strategy which is leading to more than 1,000 layoffs of employees. Most of those let go are in management.

MGM announced the 2020 plan in early January. The goal is to increase annual adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by $200 million over the next two years, and an additional $100 million by the end of 2021.

The bottom line is if they’re aware of it, it’s about making MGM a stronger, more nimble company, and it’s actually going to benefit our work in Japan,” Sandoval was quoted by the Las Vegas Review-Journal.

“I’ve been to Japan four times, and I haven’t been asked once about MGM 2020,” Sandoval added.

MGM Layoffs May Impact Service Levels

But analysts who follow the gaming sector see both pluses and minuses from the layoffs and how they are viewed by government officials in Japan. Analysts praised the company for its transparency and note how the internal strategy provides MGM with more money for the Japan initiative.

“I don’t think it would be a sticking point for a Japanese regulator,” John DeCree of Las Vegas-based Union Gaming, was quoted by the Review-Journal.

Chad Beynon, a Washington- based analyst with Australia’s Macquarie Group Ltd., also told the newspaper, “It certainly sounds like you’re talking out of both sides of your mouth if you’re firing 1,000 people in a service industry and you don’t think it’s going to affect any service levels.”

Last month, MGM Resorts CEO Jim Murren said, “I stand behind the decisions we have made and believe them necessary to assure our future, but I deeply regret the impacts they have on individuals and their families.”

Japan Could Become Second Largest Market

The Japan gaming market may generate more than $25 billion annually. Early estimates predict Japan could become the second-largest gaming market following only China’s Macau.

Altogether, Japan is likely to grant three licenses nationally for integrated casino resorts and will issue additional requirements later this year. Osaka is seen as a likely spot for one of the venues.

Osaka likely wants the venue to be opened when the World Expo 2025 will be held — between May 3 to November 3, 2025 –on Yumeshima Island in Osaka Bay. Yet, it may take a longer time to plan, review and construct the gaming venue.

MGM and Las Vegas Sands are two likely contenders for the license in the Osaka market. Altogether, seven gaming operators submitted preliminary information to gain a license in Osaka.

Each of the seven sent in early request-for-concept (RFC) documents before the deadline of May 24. The city’s mayor, Ichiro Matsui, has not identified the names of the interested parties, GGRAsia reported.

The next step in the process is operators submitting more documents and an initial review — which is likely to be finished in August, followed by three months when local government leaders will discuss the proposals. The decision on which casino operator to partner with is likely to be made in the early part of 2020.

The documents will offer details on a large hotel, exhibition space, the capacity to host major conventions, and features that will help promote tourism. Proposals also include information on how operators plan to limit problem gambling and other harms to the local community.