Osaka Casino Could Wrest Profitability Crown from Singapore Rivals

Posted on: April 17, 2023, 02:00h. 

Last updated on: April 17, 2023, 05:17h.

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

Marina Bay Sands and Resorts World Sentosa, the only integrated resorts in Singapore, are two of the most profitable casino resorts in the world. But that status could be threatened by the emergence of a rival venue in Osaka.

MGM Japan Yumeshima Osaka casino
Yumeshima Island is viewed from above with downtown Osaka in the background. An analyst believes MGM’s casino there could rival Singapore venues in terms of profitability. (Image: Getty Images)

Last week, Japan announced its third-largest city will be home to the country’s first game venue. That $8.1 billion property, slated to open in 2029, will be 40% controlled by MGM Resorts International (NYSE: MGM), 40% by Japanese financial services firm Orix, and 20% by local investors.

While 2029 is a long way off, CBRE analyst John DeCree isn’t shy about saying the MGM Japan property could be a giant in the Asia-Pacific gaming landscape.

Osaka is one of the largest MSAs (metropolitan statistical areas) in the world with a population of over 19 million and sees over 12 million foreign tourists per year,” observed the analyst. “The local population in Osaka is three times larger than in Singapore, and while Singapore draws more foreign tourists, Osaka more than makes up for that in domestic tourism.”

Some market observers believe that, at least in the venue’s infancy, the Osaka casino hotel will generate the bulk of its gross gaming revenue (GGR) courtesy of patrons from that prefecture and from other parts of Japan.

For Osaka Casino, Location Matters

Location is a major consideration for any operator when evaluating homes for new gaming properties. For its part, MGM could be rewarded for its selection of, and patience with, Osaka.

When Japan initially approved gaming laws several years ago, MGM rivals were drawn to Tokyo and Yokohama due in part to those cities’ larger populations. However, the integrated resort concept in Tokyo never gained adequate traction, while Yokohama locals opposed the idea, making it difficult for operators to proceed there.

Osaka does offer MGM and Orix a desirable location and demographics. Plus, it could be home to the only casino in Japan for several years.

“Osaka is a quick 90-minute flight or two-hour bullet train from Tokyo, giving MGM access to an even greater population base with no other domestic casino options potentially for several years,” DeCree added.

Based on the total addressable market, the CBRE analyst estimates the Osaka integrated resort could eventually generate GGR of $5.75 billion per year on earnings before interest, taxes, depreciation, and amortization (EBITDA) of around $2 billion.

Room Supply Integral for Success

A lingering question that may take some time to answer is whether or not MGM will be able to build a hotel large enough to adequately capitalize on the large total addressable market awaiting the Osaka gaming venue.

“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,” concluded DeCree. “Moreover, MGM/Osaka’s proposed revenue forecast likely assumes competition in Tokyo, which could be several years behind MGM.”