On April 14, after a year of deliberations, Japanese lawmakers approved a plan by MGM Resorts International and Orix Corp. to build a massive integrated resort (IR) on Yumeshima Island in Osaka Bay. But the developers and the local government have lots of work to do before they can break ground on the multibillion-dollar project.
Joji Kokuyro, managing director of Japan-based industry consultancy Bay City Ventures Ltd. told GGRAsia, “There is still the need for Osaka and the MGM/Orix consortium to sign their final agreement, which would be the real kickoff of the Osaka IR project. Osaka still has many issues to solve in terms of the Yumeshima landfill and construction, related to both the IR and World Expo.”
The latter event is set to take place on the man-made island in 2025, and before the pandemic, former MGM head Jim Murren projected that the IR would be open in time for the six-month expo. Now, under current CEO Bill Hornbuckle, MGM and its partners are shooting for 2029. Meanwhile, the original budget for the IR has grown from $8 billion to $10 billion.
Before shovels hit the ground, the Japan Casino Regulatory Commission must finish vetting the operators and their associates, then grant the casino licenses and also ensure that the IR plan includes sufficient problem gambling protocols. Osaka authorities have promised to increase the number of “psychiatric medical institutions” in the region by 140 percent before the IR opens.
As for performance and the IR’s impact on the competition, JP Morgan analysts DS Kim and Mufan Shi say it’s too early to tell “with a reasonable level of accuracy.
“At this stage, we just conjecture that the majority of demand is likely to come from local Japanese demand—like any other major gaming jurisdictions globally—and this is likely to be created incrementally.
“’Supply drives demand,’ as the decade-old mantra in the industry goes,” they continued. “Hence, we do not foresee any material impact on existing jurisdictions in Asia. Time will tell, and we shall find out in seven to eight years.”
Under Japan’s casino legislation, the Osaka IR can devote up to 3 percent of its total floor area to gaming, with GGR to be taxed at a flat 30 percent rate, according to Inside Asian Gaming. Locals must pay a JPY6,000 (US$45) entry levy each day they visit, and visits will be limited to three times a week and 10 times a month.
John DeCree and Max Marsh of CBRE Securities said annual earnings before interest, taxation, depreciation and amortization (EBITDA) “could be upwards of US$2 billion, making it one of the most profitable casinos in the world.” They added, “It is possible that Osaka is such a big market MGM may not be able to build enough hotel rooms and gaming supply to fully capture our estimated total addressable market.”
MGM and Osaka say the IR could generate US$3.2 billion in gross gaming revenue (GGR) per year, including US$3.9 billion in net revenue.
Daniel Cheng, former Hard Rock International executive, told the news outlet that the proposed opening date of 2029 might be a stretch unless “everything goes like clockwork from henceforth.” He added, “It’s more likely to be 2030 or 2031.”
Nagasaki, which also submitted an IR bid with its partner Casinos Austria, has yet to learn if its proposal will be accepted. But it’s still in the running and hopes to achieve “accreditation as soon as possible” for its proposal.
Nagasaki presented a plan to build a JPY438.3 billion (US$3.3 billion) IR in Sasebo City, near the Huis ten Bosch theme park. Its potential alliance with financier Credit Suisse, which is now being sold to UBS Group, is one likely obstacle to approval by the central government.
Cheng said Nagasaki “was never in the top political sights. There’s [no]… inherent rush to certify them, and the Credit Suisse issue just exacerbated matters.”
GGRAsia reports that Osaka’s plan scored just about 66 percent of the available points, slightly above the minimum threshold, under a metric formulated by the Japan Tourism Agency and the country’s Ministry of Land, Infrastructure, Transport and Tourism.
Meanwhile, MGM celebrated its victory with a statement from Hornbuckle saying, “It is an honor to be selected by the government of Japan to develop a tourism project of this scale. We couldn’t be more excited to get started on the development of one of Japan’s first integrated resorts in the great City of Osaka, and we look forward to working with our partner Orix and Osaka prefecture and city to realize this long-held goal.”
