Morgan Stanley: Japanese Casino Market to Hit $15 Billion Valuation

Posted on: April 12, 2018, 10:00h. 

Last updated on: April 12, 2018, 09:59h.

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Expertise: Commercial Gaming.

The Japanese casino market will be worth $15 billion per year by 2025, according to revised figures from Morgan Stanley. The new estimate is based on recent legislative agreement on the size of the market and other key issues, such as taxation.

The US investment bank had previously suggested the value of the market would be “in the range of $7 billion to $20 billion,” depending on its size.

After some delay, the task force charged with developing a framework of casino legislation agreed last week that three new integrated resorts (IR) would be permitted, with a flat tax rate of 30 percent and an entry fee for Japanese residents of $56. The maximum casino floor space has been set at no more than three percent of the size the entire resort.

Bigger than Vegas

While $15 billion is a far cry from the $40 billion projections that were being touted back in 2014, the figure, if realized, would still be enough to make likely put Japan as the second-biggest gaming market in the world after Macau.

Morgan Stanley also predicted that a casino in Tokyo would enjoy the lion’s share of the Japanese casino market, generating some 40 percent of revenues and 50 percent of all tourist spend, although it noted there was no guarantee that Tokyo would even apply for a license.

Tokyo Tied Up with Olympics

“Based on foreign visitation numbers in each city, we estimate roughly 50 percent of $3.9 billion foreign GGR goes to Tokyo, 30 percent to Osaka and 10 percent to the third city,” the latest Morgan Stanley report said.

“Based on the income level/GDP, infrastructure development and tourism attraction, we would expect Tokyo to take around 40 percent of the total US$15 billion GGR at US$6 billion market size and Osaka’s market size to be slightly smaller at US$4 billion,” continued the analysts.

“While Osaka seems to have all its stars aligned, there is no certainty around other locations. Tokyo seems to be busy with the Olympics, leaving Yokohama as one of the candidates. Tomakomai, a resort city in Hokkaido, Wakayama and Nagasaki are other interested locations,” Morgan Stanley opined.

While Japanese Prime Minister Shinzo Abe had initially hoped the first integrated resorts would be ready in time for Tokyo 2020, that train has left the station. Morgan Stanley said it would now be difficult for any of the three facilities to open before 2023, based on the three-to-four year construction timelines for integrated resorts in Singapore.

The investment bank said it could be six to 12 months before the IR implementation bill is passed by the legislature.