Osaka and MGM to pair up for first Japanese integrated resort
After plenty of speculation, analysis and controversy, Osaka has made their big decision as to which casino operator will be their integrated resort partner.
Calvin Ayre reports that Osaka made the announcement on Friday that MGM Resorts is their preferred partner, via a post on their website.
While the announcement names two parties, MGM and the Orix Consortium, the two groups are working together.
This means MGM has lasted the gauntlet of a half a dozen other challengers.
In May, the city’s mayor Ichiro Matsui noted that the city was also considering partnering with Galaxy Entertainment Group, Genting Singapore, Las Vegas Sands, Melco Resorts and Entertainment, Wynn Resorts and an “Osaka local alliance.”
It became clear that of those on the list, MGM was the top choice.
They were the only operator making promises to hit a 2025 grand opening, an important date for Osaka as that’s the year they will host the World Expo.
The summer of 2019 saw both Las Vegas Sands and Melco Resorts drop out of contention, with Fitch Ratings declaring MGM the clear favourite shortly after.
The choice became even clearer in October, when Wynn Resorts also dropped out of consideration.
In November, MGM was one of three remaining competitors.
Being the only operator with a successful bid gives MGM a lot of clout going into the rest of the integrated resort bidding processes.
With Osaka apparently hell bent on having an integrated resort, and as soon as possible, MGM can now set the terms of the deal.
If Osaka doesn’t like it, they’ll have to restart the whole process.
Considering how much time and money both sides are throwing at this opportunity, the odds that either would risk the deal scuttling seems unlikely.
MGM in the box seat for Osaka
MGM Resorts’ status as the front runner to be the first casino operator to open an integrated resort in Japan was cemented after Wynn Resorts said it was no longer interested in competing for a licence in Osaka, Nasdaq reported in November.
Since Las Vegas Sands also withdrew from contention, as did Melco Resorts & Entertainment, it increasingly looks as though the licence is MGM’s for the taking.
There will ultimately be three licences issued in Japan when the process is complete.
Tokyo, Yokohama and Osaka are expected to become hosts, but because Osaka will be the site of the World Expo in 2025, it is likely to be the first to be given the green light to ensure the casino has the best chance of being operational in time.
As many as eight companies originally vied for the right to build an integrated resort – a comprehensive entertainment complex, including a casino – but just three remain: MGM, Galaxy Entertainment and Genting Group.
Many of the operators seeking a licence have said they expect to spend upward of $10 billion to build a resort in Japan.
That’s more expensive than money invested in Las Vegas or Macau, but even that figure might be conservative.
Las Vegas Sands president Robert Goldstein told analysts on the casino’s earnings conference call that he saw that figure as a baseline.
“I think $10 billion is the starting point. And I don’t think anybody’s going to do it for less than $10 billion, unless you’re going to do something subpar,” Mr Goldstein said.
He sees $12 billion as closer to reality, and believes it should serve as a gut check for the industry to really consider whether it can get the appropriate return for investors by spending that kind of money.
Fitch Ratings recently said upward of $15 billion might be needed.