Investing in the Japanese gambling market has been a target for many US casinos. However, the cost of doing so may be more expensive than initially thought.
Japan is in the process of confirming the rules that will be laid down for their casino industry. Companies such as Wynn Resorts, MGM Resorts, Las Vegas Sands and Melco Resorts have all expressed their intentions to move into the Japanese market. They are prepared to spend up to $10bn to do so after projections showed it could be a multibillion-dollar Japanese gambling market.
The exact costs haven’t yet been confirmed but Fitch Ratings see some possible problems ahead. They believe a 10-year license renewal process consideration is likely to be announced. That’s not as long as in some other countries. For example, the length of that licenses awarded in Macau was 20 years.
As for that $10bn estimate it might be a bit under what the actual figure will be. Fitch believe that it could be $5bn short of the eventual figure. Infrastructure and amenities plus other factors that the Japanese government require, could push up the costs.
Despite those fears, it seems that investing in the Japanese gambling industry could prove profitable. They estimate that there could be $10bn earned in gambling revenue over a 12-month period. To put that into comparison, the total Las Vegas strip has yearly revenues of $6.6bn. With a likely EBITFA (cash flow) of over $1bn a year, investing in Japan looks a good move.
The planned casino in Osaka is looking likely to be built by MGM Resorts. That leaves Las Vegas Sands and Melco Resorts to aim for the casinos in Tokyo and Yokohama. Business in those two cities could be brisk as they are the largest ones in the country.
There is still a lot to learn about the size of the market and the cost of investment. But the future looks bright for the investors. They just need to perhaps work their figures out again and the real amounts required should be known in the not to distant future.
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