MGM Believes Japan Casino Could Compete with Marina Bay Sands on Profitability

• Marina Bay Sands, operated by Las Vegas Sands, is the most profitable casino in the world
• MGM believes its Osaka integrated resort could eventually compete on that level
• MGM Osaka is expected to open in 2030

Executives from MGM Resorts International (NYSE: MGM) believe it’s possible that the company’s Japanese casino hotel project could eventually evolve into the one of the most profitable gaming venues in the world.

At the J.P. Morgan Gaming, Lodging, Restaurant, and Leisure Management Access Forum earlier this week, MGM executives waxed bullish on the under construction MGM Osaka, noting it could eventually be a viable competitor on a profitability basis to Las Vegas Sands’ (NYSE: LVS) Marina Bay Sands in Singapore.

We’re allocating this year, probably $450 million in equity investment to our Japan project, and that will grow next year and the year after,” said MGM CFO Jonathan Halkyard at the conference. “But we think that, that’s going to be the largest and most successful integrated resort globally since Marina Bay Sands. So it’s — we’re very happy to put capital there.”

That’s a lofty comparison because the Sands-operated integrated resort is consistently the world’s most profitable venue of its kind — a competition that isn’t particularly close and one with a widening gap because earnings at the Singapore casino hotel are steadily rising.

MGM Sees Singapore Similarities in Japan

MGM CEO Bill Hornbuckle is optimistic about the company’s future in Japan, noting it’s possible the casino market there – one in which MGM will be the only operator for at least a few years – could eventually be comparable to Singapore.

“Look, there’s a market, if it just manifests itself what’s going on today in Singapore, if we start with a $2 billion cash flow business, we’re going to net about $800 million given our stake and given our share. It’s a meaningful business,” he said at the J.P. Morgan conference.

“If you put it in perspective, 120 million people. We are 1.5 hours closer from Shanghai and Beijing than Macau,” he said.

Japan Is a Compelling Casino Market

Credible global growth opportunities are hard to come by in the gaming industry. That situation is exacerbated by Macau and Singapore being closed off to new concessionaires for years to come.

For now, Japan and the United Arab Emirates (UAE) are the countries where large-scale operators, such as MGM, can forge new growth frontiers. Both jurisdictions are starting off as single casino markets, but that’s expected to change over time. Japan could open a new round of integrated resort bidding next year and data indicate the country can accommodate multiple gaming venues.

“So the proximity, the scale, what’s happening in the Pachinko business to this day in Japan is over $30 billion, that we’re pretty sure about,” said Hornbuckle at the J.P. Morgan conference. “The infrastructure is there. It works. I think the product we’re going to build is going to be exceptional world-class over the use term, but it will be, given the things we do and what we’re known for.”