Ratings agency Fitch says it expects Japan’s first round of integrated resort developments to generate annual gross gaming revenue of more than US$10 billion, with win per unit, per day to match those enjoyed by Las Vegas Sands’ hugely successful Singapore IR Marina Bay Sands.
The figures form part of a new report on Japan gaming published Thursday in which Fitch revises its estimates for the nation’s IRs upwards from a previous GGR forecast of US$7 billion each year.
Assuming the planned allocation of one regional and two metropolitan IRs becomes reality, Fitch said it is now more positive on Japan’s GGR potential with a 3% cap on casino floor space unlikely to be a major inhibitor due to considerable leeway under the regulatory limit.
“This greater freedom will come from the considerable size of the total investments planned and the measurement methodology of the casino area, which excludes walkways and casino floor amenities (similar to Singapore),” the report said.
“We assume about 6,000 slots and 700 tables at each at the major resorts with win/unit/day similar to that of Marina Bay Sands (US$792 for slots and US$9,563 for tables in 2018).”
However, while operators can expect to make good use of their available floor space, generating Singapore-level ROI will prove much more difficult due to lower EBITDA and higher costs, with the need for added infrastructure investment potentially pushing IR development costs in metro areas towards US$15 billion.
“The IRs in Japan are far from slam-dunks in terms of generating a decent ROI (EBITDA/cost), which we think of as roughly 10% or higher,” Fitch said.
“Besides the higher gaming tax … operators will have to deal with high development costs and bureaucratic red tape.
“We estimated US$10 billion in costs before the trip. We now think the proper cost range is US$10 billion to US$15 billion after accounting for supporting infrastructure investment and meeting the stipulated amenities such as the cultural requirements.
“EBITDA margins could be closer to those in Macau and Las Vegas (about 25% to 30%) as opposed to Singapore (about 50%).”