Delayed Launch of MGM Japan Casino to 2030, Estimated Cost Increases to $1.29 Billion
MGM Resorts' proposed casino complex in Osaka, Japan, is facing setbacks and increased expenses as a result of worldwide inflation.
The Las Vegas-based casino company has teamed up with Japanese financial services conglomerate Orix on the project. They were given the nod to create the integrated resort in Japan's third-biggest city in April 2022. At the time, it was believed the hotel would be ready by fall or winter 2029. However, the timeline has since been adjusted to autumn or winter 2030.
The reason for the postponement is that the plan didn't earn central government approval until this April. Once this revised plan receives governmental endorsement, the Osaka administration hopes to sign a contract with the operator of the casino resort, potentially this month.
Both MGM and Orix hold 40% of the project, while a group of local investors manage the remaining 20%.
Inflation Hits Japan Casino with Higher Costs
Concerns about inflation hurting the US casino sector have existed since early 2022, with some data suggesting that consumers in regional markets are cutting back on gaming spending.
But the Osaka project is experiencing the consequences of global inflation. The initial investment required to advance the casino venue is projected to increase by $1.29 billion, or 17.6%, owing to the rising cost of construction materials. The project was initially estimated to cost $8.1 billion. However, with skyrocketing commodity prices, it now stands at a projected $9.3 billion.
MGM and Orix will bear the brunt of the increased costs, meaning their involvement in the project will grow to 42.5% each, while the local group's ownership will reduce to 15%.
MGM executives have stress the benefits of being a minority investor in the Osaka project. They maintain that this lowers upfront financial responsibility and risk while presenting the operator with substantial upside potential.
Will Japan Casino Outperform Singapore's?
The path to integrated resorts in Japan has been marred by bureaucratic delays, policy blunders, and other issues, forcing other popular actors to abandon their pursuit of licenses.
MGM has persevered with its Osaka plans, and while setbacks and price hikes are evident, it might benefit from its determination to bring a casino to Japan's third-biggest city. The venue could potentially earn sales of $4 billion in its first year of operation and a return on investment in the teens after reaching full capacity.
Some analysts speculate that when the Osaka integrated resort hits its stride, it may challenge Marina Bay Sands and Resorts World Sentosa - Singapore's two gaming properties - for the title of most lucrative casino hotel in the Asia-Pacific region.
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