James Okafor
Ed Bowers, president and CEO of MGM Japan, doesn’t dodge the worries. Bringing casino gambling to the world’s fourth-largest economy, inside an integrated resort carrying the world’s biggest price tag, raises plenty of them.
“There’s a lot of trepidation about being the first to have this very large casino in Japan, and the issues it could bring, and we understand all of this,” Bowers says in MGM’s Osaka office, speaking to iGaming Business. Mixed in with that anxiety is local excitement: Osaka has spent decades as Japan’s perennial second city, and now it gets to be first at something.
MGM Osaka has been more than ten years in the making and is aiming for a late 2030 opening. A joint venture between MGM Resorts International and Japanese financial services group Orix, the IR carries an estimated ¥1.5 trillion (US$9.5 billion at current exchange rates) price tag and is going up on Yumeshima island, the site of World Expo 2025. Osaka residents generally view the project favourably.
Well connected
A subway station partly paid for by MGM Osaka opened in January last year to serve Expo visitors, and it sits right at the IR’s doorstep. Kintetsu Group’s rail division, one of 22 mostly local investors holding a combined 12% of MGM Osaka, plans trains running directly between Yumeshima and Nara, a popular tourist destination 45 kilometres (28 miles) east. A ferry and cruise terminal and a bus depot are also being planned.
MGM Osaka, chaired by longtime Orix executive Nobuki Watanabe with Bowers as CEO, is the biggest construction project currently underway in Japan. The 49-hectare (122-acre) site looks the part: concrete mixers stream in and out while workers keep pace with pile drivers hammering roughly 3,600 support columns into the artificial island’s soil. Bowers says crews are also working across the site to counter liquefaction and firm up the ground before construction proceeds.
The IR will have 780,000 square metres (8.4 million square feet) of floor space, according to the 31 July update of the area development plan (ADP), which Osaka City, Osaka Prefecture and MGM Osaka produce each year. It is published only in Japanese.
Grading on a curve
Steel girders rising from the ground trace the curve of MGM Osaka’s biggest building, which will eventually stand 27 storeys and house two hotels and the casino. Across the IR’s three hotels, planners project 2,500 guest rooms, more than 20% of them suites of 105-150 square metres.
MGM Osaka will have one of Japan’s largest MICE (meetings, incentives, conventions, exhibitions) facilities, with 400,000 square feet (36,171 square metres) of conference space, 330,000 square feet of exhibition space and a 3,500-seat theatre. IR regulations set the floor-area allocations for accommodation and MICE, and they are written into the ADP.
“There’s a certain amount of overseas MICE events they want us to do,” Bowers says, and he is confident MGM Osaka can deliver. “We know how to run MICE.” The ADP describes MGM as “the largest MICE operator in Las Vegas, generating annual accommodation demand for 2.5 million rooms, hosting over 9,000 shows and events annually”.
‘Tourism multiplier’
Tourist facilities are mandated too, though Bowers says the requirements are “less specific”. “You must have a tourism attraction centre and it has three functions. There’s a concierge function, explaining about things that are in Japan. The second function is that you have the ability to purchase stuff, tickets to go somewhere, for an event or whatever it is. Then the third function is we can send you there. The translation of the Japanese word they use is a ‘tourism sending facility’. So the idea is that this concierge can give you something [to do] and send you there.
“In my view, that is really at the heart of the Japanese IR, that one thing. If you think about Singapore, Singapore said we want you to create this great facility that’s going to attract people to Singapore, period. What Japan said is that we want you to attract people to Japan, but then we want you to send people to other parts of Japan as well… From a policy standpoint, I think this is the biggest thing that Japan is focused on, that the IR becomes a tourism multiplier.”
Japan drew 42.68 million international arrivals last year and is on track to surpass 41 million this year, even with headwinds from the Iran war and political tensions that cut mainland Chinese arrivals by 56.7%, or some 3.8 million, through August, according to Japan National Tourism Organisation figures. Official policy still targets 60 million arrivals by 2030, but the goal was adjusted this year to tackle overtourism in places like Kyoto, 63km northeast of Yumeshima, and to draw higher-spending visitors.
“We’re honour-bound to think about how we can work with Japan to make sure that we are focused on their tourism policies, because tourism policies are at the heart of what it is that we have to do for Japan,” Bowers says. “The quid pro quo is we get a casino, which is where we’ll make all our money.”
Gambling with Japanese characteristics
Gaming space is capped at 3% of total floor area — 23,400 square metres at MGM Osaka. Japanese nationals pay a ¥6,000 entry fee per visit, valid for 24 hours, and face limits of three visits in seven days and 10 visits in 28 days.
Revised ADP estimates put annual IR revenue at ¥520 billion, with gaming contributing ¥420 billion, or US$2.65 billion. That is roughly what Sands China’s Venetian Macao complex, including the Plaza/Four Seasons, generated in GGR last year. Bowers expects Japanese customers to account for half of revenue.
“As Japan’s first and only casino, MGM Osaka carries more than its own business case,” says Chris Wieners, managing partner of Osaka-based Hogo. “How it operates will shape how regulators, local governments and the public view any future IR.”
“From a government and economic sector point of view, we want to emphasise the merits of the IR,” says Pham Thanh Trung, a planner at the Osaka International Business Promotion Council. “But from a citizens’ point of view, we face a lot of uncertainties, especially related to hosting the first casino in Japan.”
‘Virgin and vulnerable’
Pham, a longtime Osaka resident who was born in Vietnam, adds: “Japan is completely virgin and vulnerable to casinos. People do not know how to live with a casino in the city.”
Japan has no casinos, but Wieners points out that “Japan already has a large gaming culture through pachinko and amusement venues.” Legal betting on racing, from boats to bicycles, reached ¥8,874 billion last year, including US$22 billion on horse racing — close to 20% of the worldwide total. The country even has entertainment casinos, where players buy chips and play casino games but cannot cash the chips in for real money.
Dominic Carter, CEO of The Carter Group, recalls 2019 findings from the firm’s Japan market research arm showing “the casino itself was not really seen as ‘gambling’ in the way Japanese think of pachinko. Pachinko was a habitual, slightly downmarket vice. A casino had a glamorous, almost James Bond image and was seen as a special occasion. That distinction matters for who the domestic customer is likely to be and how often they come.
“Problem gambling was plainly flagged as a serious downside risk in the responsible gaming debate. Still, Japanese consumers usually hold the individual accountable first and regulators second for doing their job properly. That outlook will probably colour how the public sizes up MGM’s responsible gaming record.”
Osaka wants to set the pace
“Osaka deserves real credit for wanting to lead Japan, and maybe the world, on problem gambling,” Bowers says. “They aim to be out front in defining responsible gambling and in handling problem gambling.
“We’ll run a robust responsible gambling programme, drawing in part on what we do in the US through a programme called Game Sense. Osaka is setting up its own Osaka Addiction Centre, so we’ll be closely aligned with government policy here.
“Frankly, I think Osaka will end up with a best-practice approach and framework for gambling responsibly, and that would be a first. It’s not fully appreciated, and sometimes people would rather not discuss it, but Osaka City takes its obligations very seriously.
“They want an IR, they want the entertainment, and they’re comfortable with a casino. But they also take their obligations seriously when it comes to keeping people safe, and we’re working with them on that. I think the rest of Japan will then look at Osaka and ask, ‘Why aren’t we doing this?’”
Yumeshima: a Cotai in the making?
East Asia seems to have found a formula for waking up large, underused public tracts: build an integrated resort. Las Vegas Sands’ Venetian Macao set off Cotai’s transformation from unwanted swamp into the most profitable casino hub on earth. Singapore ran the same play with Genting’s Resorts World Sentosa.
Japan is testing the tactic on Yumeshima, a man-made island in Osaka Bay that most of the public ignored until last year’s World Expo drew 25.58 million visitors. The country’s first IR – MGM Osaka – is scheduled to open on Yumeshima in 2030.
“Comparing Cotai with Yumeshima doesn’t make much sense to me,” says Lee Kah-Wee, an integrated resort expert at the National University of Singapore. “Cotai was reclaimed, divided and developed mostly by the casino concessionaires themselves. There was no official plan for the area; an earlier one was discarded once the casino companies arrived.
An island with a plan…
“Yumeshima is different – there is an official plan. The authorities have set out land use for each plot, there’s a phasing strategy and a strategy for selling land in each phase, plus an overall infrastructure plan to make sure each phase connects with the others.”
In September, Osaka set a minimum price of US$595 million for the second-phase 42-hectare plot next to MGM Osaka, including part of last year’s Expo site. A third site, also next to the IR, will be offered later. Theme parks and hotels appear in preliminary proposals.
Government-directed development of a recreation and entertainment island sounds a lot like Sentosa, off Singapore’s south shore. Recreation on Sentosa dates to 1972 – RW Sentosa, home to Southeast Asia’s only Universal Studios theme park, opened in late 2009 – yet planners still struggle to weave the island into Singapore’s fabric. Does Sentosa hint at what lies ahead for Yumeshima?
“Sentosa is a slightly different creature,” Lee says. “It has the same problem of being cut off from the main urban core and, yes, Genting spent heavily to make the connection more integrated. But it also competes with another casino that mass transit reaches far more easily – Marina Bay [Sands] sits on an MRT station!”
Learning from the leader
For Lee, “the more meaningful comparison is between Yumeshima and Marina Bay”. He should know, having written the book on how Marina Bay Sands rose on what was essentially wilderness, despite sitting close to Singapore’s financial district.
“It’s clear to me the Japanese authorities did more than adapt the ‘integrated resort’ concept from Singapore. If you recall, the most critical parts of that model are the cap on gaming floor area, an entry levy for locals, and a focus on MICE – all of which appear at MGM Osaka.
“What’s also similar is the planning and development of Yumeshima. It may look underused now, but that’s because the authorities are controlling how development is phased across the island. Phasing means you have to watch several important moving parts. First, private capital. Since Yumeshima will be funded largely by private money, each phase has to be financially viable for investors. If a land area is too big, you may not find developers with deep enough pockets, and so on.
“Second, public authorities and planners need to work out how to time and connect the different phases. That can mean when the train station will be operational, when existing land uses will be phased out, how the new park will link all the properties and create a new public realm, and so on.”
At Marina Bay, those processes worked spectacularly, built around an iconic IR. MGM Osaka and Osaka hope that ten years from now, everyone will compare Yumeshima to Marina Bay.
Muhammad Cohen is a former US diplomat and current iGB Asia editor at large. He has covered Asia’s casino business since 2006, most recently for Forbes, and wrote Hong Kong On Air, a novel set during the 1997 handover about TV news, love, betrayal, high finance and cheap lingerie.
Source: igamingbusiness.com
