MGM Resorts is applying intense effort toward building an integrated resort in Osaka, making it an ambitious endeavor in the entire gaming industry.
Leadership at the company explained at the JP Morgan Forum: Strategic Growth and Innovation (SGI) recently that they believe that MGM Osaka could potentially be the largest impact integrated resort project ever created after Marina Bay Sands. Internally, MGM does not regard this as just one of their properties; rather, it is viewed as a future flagship which will redefine large scale entertainment and gaming destinations.
MGM’s Chief Financial Officer Jonathan Halkyard stated that they anticipate putting nearly $450 million in equity into the Osaka project this year. He further said that the company would feel comfortable investing this amount of capital into the project. His comments show the strong level of continued confidence that MGM has in its Japan strategy despite having to manage capital allocation for multiple projects throughout the world.
According to Bill Hornbuckle, chief executive officer of MGM Resorts International, the Osaka integrated resort has both corporate and personal implications for him. He describes the Japanese Integrated Resort Project as one of the few, true, world-class opportunities available to the company, adding that his very own reputation will be riding on its success.
Market Potential and Strategic Location Advantages
By comparing the anticipated performance of the Osaka project to current performance results in Singapore, Hornbuckle provided support for his estimates of the potential profitability of the project. He indicated that if the Osaka project was to achieve $2 billion in cash flow, then the 55% equity stake that MGM would have owning the property would produce approximately $800 million per year for MGM.
Hornbuckle added that he believes that those projections are somewhat conservative, and if one references the scale of the Japanese pachinko market, which generates approximately $30 billion in revenue per year, it is obvious Japan has a pre-existing, strong market base of gaming-related entertainment that could generate sufficient demand for an integrated resort, such as the one in Osaka.
Osaka’s geographic location is also a key advantage for MGM, as noted by Hornbuckle, as it may provide enough distance from many of mainland China’s major population centers that are along the route to Macau to provide international visitation to the resort. Osaka is approximately one-and-a-half hours closer to Shanghai and Beijing than Macau is to those cities, making it a lower cost alternative for travelers who may be seeking out a different gaming/entertainment experience within the region.
Partnership, Investment Scale, and Project Timeline
The Osaka project is a partnership between MGM Resorts International and ORIX Corporation. Although the forum did not disclose every detail associated with the project’s features, the general perception is that the planned development will contain gaming facilities, hotels, entertainment venues and large hospitality facilities that all can support a large tourism destination.
The project’s financial magnitude is staggering, with an estimated investment of approximately $12 billion – one of the largest integrated resort developments in the gaming industry. With an investment of that size, MGM and ORIX want the development of the property to play a major role in Japan’s eventual development of large casino resort destinations.
The anticipated launch date of the new Osaka facility appears to be Q3 2030 based on the current construction timeline. The project could potentially draw more than 20 million visitors per year once it opens. MGM could potentially generate annual cash flows of around $800 million from the project based on revenue projections. This is not just another expansion for MGM; however, this project is expected to become a key element of MGM’s long term strategy in Asia. Furthermore, MGM executives have stated multiple times that they are dedicated to making this project work.
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