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Osaka Casino’s funding problems

On Friday, April 14, the government of Japan finally approved the hotel-casino on the artificial island Yumeshima in Osaka Bay.

Unfortunately for the American operator MGM Resorts International and the Japanese financial services group Orix Corporation who are carrying the project, the latter is currently experiencing some difficulties in financing the casino.

Indeed, some partners have just withdrawn and replacements might be a bit difficult to find.

Nearly half the cost of the hotel-casino not yet covered

While the hotel-casino project in Osaka has just received approval from the Japanese government, construction is already scheduled to begin by the end of the current year 2023. Nevertheless, the gaming complex budgeted at about 9 billion dollars is currently facing some difficulties in terms of financing.

This is because the project’s owners had previously obtained verbal confirmation from dozens of lenders. However, several of them have just cancelled their participation. This decision follows, among other things, the evolution of the casino market due to the international pandemic of the Covid-19 coronavirus.

In addition, since the law authorizing casinos in Japan was passed, these gaming establishments have been facing a lot of resistance from the population. This is particularly true in Osaka, where repeated attempts have been made to stop the project. However, many potential financiers also seem to be bothered by this popular opposition.

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For example, some estimate that about half of the cost of the hotel-casino would not be covered, at present. To try to find replacements, the project’s sponsors have turned to Resona Bank and SBI Shinsei Bank, which have already indicated that they will take part in the project.

They are also in discussion with Sumitomo Mitsui Trust Bank and Development Bank of Japan among others.

Rise in online gambling and construction site worries some financiers

According to a recent study published by Grand View Research, the online gaming market was worth about $63.5 billion in 2022 and is expected to grow at an average of 11.7% per year until 2030, which is the year in which the Osaka hotel-casino is scheduled to open.

Thus, by that time, the online gaming market is expected to reach $153.5 billion. The study also tells us that only 17% of gamblers were betting online in 2022, while they are expected to be 35% by 2030.

As a result, some financiers fear that this rise in online gambling will ultimately harm the Osaka hotel-casino project. If this is the case, it is not expected to bring in $4 billion in the first year as planned.

It should also be noted that some financiers are concerned about the site chosen to host the gaming complex. The complex is to be built on the artificial island of Yumeshima. The island was previously a landfill.

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Some fear that the soil will be seriously contaminated. Others say that the island is already starting to sink. These considerations have even led at least one insurance company to withdraw from the project.

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