Osaka has announced revisions to its IR Implementation Policy that include an opportunity for more operators to apply.
Under the city and prefecture’s revised policy, new operator applications will now be open until March, with final proposals due in July. There is also room for Osaka’s only current contender, MGM Resorts in partnership with ORIX, to overhaul its own application.
Notably, the IR Implementation Policy notes plans to partially open in the late 2020s but does not specify a target completion date. Governor Hirofumi Yoshimura had previously aimed for a full opening in 2027 or 2028.
Although Osaka’s IR was meant to be the pillar of a growth strategy alongside the Osaka-Kansai Japan Expo 2025, the future is now somewhat clouded as a result of the COVID-19 pandemic.
The joint group of MGM Resorts International and ORIX is currently the only participant in Osaka’s operator recruitment, but MGM has been hit hard by the pandemic and it is likely Osaka has reviewed its plan amid concerns that the US casino giant had been reconsidering its commitment to a Japan IR.
Japan’s IR Implementation Act requires any IRs to integrate a casino, international conference halls, exhibition facilities and large hotels under one roof. It also requires the exhibition facility to cover at least 20,000 square meters and hotel accommodations a minimum of 100,000 square meters.
While Osaka’s revised implementation policy maintains a stance of exceeding the national IR scale standards, for the first time it now permits “preparation in stages” with consideration for business conditions currently impacting operators.
The exhibition facility must be at least 20,000 square meters at the time of opening, at least 60,000 square meters within 15 years of opening and 100,000 square meters within the operational period, defined by the national government as 35 years. The accommodation scale also only needs to meet the national standards at the time of opening, so Osaka has set the deadline for its own standards to “within the operational period.”
MGM was forced to temporarily close its US properties in March 2020 due to COVID-19, and revenue for the June 2020 quarter dropped 91% year on year. While all its properties had reopened by the end of September, revenue for the December quarter were still down 53%.
However, President and CEO Bill Hornbuckle stated during the company’s 4Q20 earnings call last week that MGM remained committed to Osaka, stating, “We’ve been in that marketplace a long time. We’re a believer in Asia. We’re a believer in Japan.
“We’ve spent a lot of time and energy becoming the sole one standing at the gate, if you will, in Osaka.
“It’s going to take some time to rebound, but we have the intent and I believe the government still has the same intent of moving forward.”
It is anticipated that Osaka will resume discussions with MGM regarding its IR schedule and property size expectations shortly. One of the points of contention will no doubt be the JPY20.2 billion (US$192 million) price tag of expanding the subway system to the candidate site of Yumeshima. Osaka is steadfast on billing the operator for this matter, but MGM may request some leeway.
Osaka prefecture and city plan to have an additional RFP period starting in March and to select an operator in September of this year. With the likes of Las Vegas Sands, Galaxy Entertainment Group, Melco Resorts & Entertainment, Wynn Resorts and Genting Singapore having previously withdrawn their Osaka interest, it will be interesting to see if any other contenders return to the table.
RelatedPosts
