MGM Japan Casino Debut Pushed to 2030, Cost Surges $1.29 Billion

Posted on: September 5, 2023, 03:52h. 

Last updated on: September 6, 2023, 07:02h.

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

MGM Resorts International’s planned casino resort in Osaka is contending with delays and higher-than-expected costs due to global inflation.

MGM Resorts Osaka casino Japan
A rendering of MGM Osaka. The project is now expected to open in fall or winter or 2030 and is seeing costs rise by $1.2 billion. (Image: MGM Resorts International)

The Las Vegas-based casino giant is partnering on the project with Japanese financial services conglomerate Orix and in April 2022, they were awarded rights to develop the integrated resort in Japan’s third-largest city. At that time, it was expected the venue could open in fall or winter 2029. That timeline has now been pushed back to autumn or winter 2030.

The delay came about because the plan did not win central government approval until April of this year,” reports The Japan Times. “Once the revised plan receives central government approval, the Osaka governments aim to sign a contract with the operator for the casino resort, possibly as soon as this month.”

MGM and Orix each control 40% of the project, with the remaining 20% allocated to a group of local investors.

Inflation Leads to Higher Costs for Japan Casino

Since early 2022, there have been concerns that soaring inflation would sap the US casino industry. That hasn’t happened in earnest, though some evidence suggests that cost-conscious consumers in regional markets are dialing back gaming spending.

However, the Japan casino project is feeling the effects of rising global inflation. The initial investment needed to move the Osaka gaming venue forward is forecast to rise by $1.29 billion, or 17.6%, owing to rising construction materials prices. Originally, the project was estimated to cost $8.1 billion. Still, with soaring commodity prices, that price tag is now in the $9.3 billion area.

MGM and Orix will foot the higher costs, meaning their stakes in the project will increase to 42.5% apiece, while the local consortium will see its interest pared to 15%.

MGM executives have highlighted the advantages of being a minority partner in the Osaka project. They note that status minimizes upfront capital commitments and risk while providing the operator ample upside potential.

Japan Casino Worth it for MGM, Orix

The road to integrated resorts in Japan has been beset by bureaucratic delays, policy missteps and other snafus — so much so that other well-known operators abandoned efforts to apply for licenses in the country.

MGM stuck with its Osaka plans, and while delays and cost overruns are clearly issues, the operator could be rewarded for its steadfast approach to Japan’s third-largest city. By some estimates, the venue could generate sales of $4 billion in its first year of operation and return on invested capital in the teens after it fully ramps up.

Some analysts believe that when the Osaka integrated resort fully ramps up, it could threaten Marina Bay Sands and Resorts World Sentosa — Singapore’s two gaming properties — for the title of most profitable casino hotel in the Asia-Pacific region.