Japan - February 2024

S P OT L I G H T
Savills Research

Japan Hospitality Integrated Resorts

Retail sales in Beijing were up 4.4% year-on-year to RMB539.8 billion in 1H 2018

Japan Hospitality - Integrated Resorts

Promising growth opportunities within
Japan’s integrated resort industry• Japan’s tourism industry
traditionally catered primarily
to domestic visitors, withminimal inbound tourist traffic.
Consequently, the upscalesegment has remained largely
underdeveloped.
• Japan is presently enjoying
a surge in inbound tourism.
However, the average spending
per inbound tourist remains
comparatively modest,presenting significant potential
for further expansion.
• The development of casinos had
historically been refuted by thegovernment, with smaller scalepachinko parlours serving as themain legal option, primarily fordomestic patrons.
• Osaka’s integrated resort(IR) development will herald
the birth of Japan’s casino
sector, and aims to competewith other major IR facilities
in the region and attract highspending visitors from booming
economies in Asia.
• The successful developmentof the Osaka IR will likely spurthe creation of further IR
developments elsewhere in
Japan, which should propel theJapanese casino industry as a
viable and sustainable tourism
segment.

GRAPH 1: Average Amount Spent by Each Inbound Tourist* vs US$/JPY Exchange
Rate, 2014 to 2023
Amount Spent (LHS)

US$ to JPY (RHS)
160

250,000

140
200,000

120
100

150,000

80
100,000

60
40

50,000

20
0

0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4

• The concurrent developmentof other luxury tourism sectors
in Japan will likely channel
some high-end demand forentertainment towards Japan’s
IR facilities.

TRENDS IN INBOUND TOURISM
Until the 2000s, Japan was not on the radar asa global tourism hub. Entry into the country
for many foreign travellers was cumbersome,and prices were prohibitively expensive due tothe strong yen. Japan was not geared towards
the needs of international travellers, withscarce foreign-language support. Indeed, thetourism industry of the country used to focus
on its large domestic travel market, with littleemphasis on catering to foreign visitors.
However, inbound tourists have become
an essential pillar supporting the tourism
industry in the country over the past decade,and the large rebound in international tourist
arrivals since the pandemic has certainly
brought a renewed sense of optimism for thesector. Indeed, the number of international
visitors is not only at record levels as of
Q4/2023, but the post-pandemic era has also
seen the average amount spent per visitor
hit significantly higher levels than thoseobserved prior to the pandemic.
A myriad of factors have contributed tothis remarkable growth. For instance, Japanwas ranked as a top destination to visit bymultiple institutions, including the World

US$/JPY• We anticipate continuous
expansion in the demand forhigh-end experiences globallyas income inequality progresses
in many economies, and Japan
is well-positioned to adeptly
capture much of this demand.

tourism industries and generate larger tax
revenue, allowing for investment into local
economies and public infrastructure, likely
leading to a positive multiplier effect for both
local and national economies. Overall, thedevelopment of IR will allow Japan to diversify
its tourism industry, and should generatebroad and sustainable growth moving forward.

JPY

SummaryBACKGROUND
Most forms of gambling have been banned
in Japan, with a few notable exceptions,
including race betting and pachinko (a typeof slot machine game). Although a widely
enjoyed pastime in Japan, public opinion
vis-à-vis gambling is notably mixed, given
concerns regarding gambling addiction.
Against this backdrop, the development
process of the Osaka IR, Japan’s first
officially recognised casino facility, has been
complicated and cumbersome, and faces
a number of roadblocks in its successful
implementation, including public backlash,regulatory issues, and funding concerns.
However, the development of IR in Japan
should prove serendipitous in many ways
for the Japanese tourism industry and wider
economy. Japan is already welcoming a surge
in inbound tourist demand since society’s
return to normalcy, and is increasingly
appealing to affluent, high-spending guests.
IR facilities in Japan will have the potential
to tap into the burgeoning regional market
for entertainment and gambling, given its
proximity to booming Asian economies, andwill be able to utilise its world-renowned
public infrastructure, hospitality, and social
stability to attract high-spending foreign
visitors, and generate further revenues frominbound tourism.
Japan’s regional economies, some of whichhave submitted proposals for IR facilities,
should be notable beneficiaries. Suchresorts should generate tens of thousands ofpermanent, better-paid jobs, stimulate local

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Source Japan Tourism Agency, Savills Research & Consultancy* Data points during the pandemic are either unavailable or omitted.

savills.co.jp/insight-and-opinion/2

Japan Hospitality - Integrated Resorts

Economic Forum in 2021, which contributed
to building a substantial amount of pentup demand to visit the country, which
was released when the country opened
its borders to visa-free inbound tourism
in October 2022. Secondly, the yen has
significantly depreciated against mostcurrencies as many countries, most notably
the United States, have increased interest
rates, in contrast with Japan sticking withits monetary easing policies. The weak yen
has undoubtedly provided a considerable
amount of additional purchasing power tomost international visitors to the country.
However, while currency fluctuations arecertainly an important factor, a considerable
proportion of growth is likely organic andunrelated to currency. Between 2019 andQ1/2020, average spending appeared to
be on an increasing trend even though thevalue of the yen was relatively unchanged(Graph 1). Indeed, Japan ran extensive
marketing campaigns promoting higher-end
inbound tourism in the country leading up
to the 2020 Tokyo Olympics, and has also
seen infrastructural improvements like anincreased number of duty-free shops, andgreater frequencies of direct flights into
the country. These activities can be partly
quantified when looking at the budget of theJapan Tourism Agency and the amount offunds dedicated to improving and promoting
inbound tourism (Graph 2). These factors
have also played a significant role in improving
Japan’s status as a popular tourist destinationand increasing the number of visitors,
especially high-spending ones, and have likely
assisted in increasing spending as well.
Overall, Japan’s inbound tourism market
is in its prime, and momentum looks strong
with further room for growth. Tourists

The present surge in inbound tourism
is unveiling exciting prospects acrossvarious upscale tourism segments.
Notably, the forthcoming Osaka
integrated resort in the 2030s will
signal the emergence of an entirely
novel industry. Leading visionary
stakeholders are already committing
substantial sums of capital to thisburgeoning sector, foreseeing
exponential expansion and escalating
demand. Overall, the outlook is
optimistic, and these advancements
are anticipated to expedite Japan’s
evolution into a sustainable tourist
hub of the future.
from mainland China have yet to see ameaningful return, and further down theroad, the Integrated Resort in Osaka could
be a game changer for Japan and attract
significantly higher spenders. The fullpotential of inbound tourism appears yet tohave been unleashed, and still has greaterbusiness opportunities that can be explored.

GRAPH 2: Budget of Japan Tourism Agency*, FY2011 to FY2024

80,000Inbound Tourism Related

Other Budget

70,000JPY (MILLION)

60,00050,00040,00030,00020,00010,0000

Source Japan Tourism Agency, Savills Research & Consultancy* Budget for the travel subsidiary campaign is not included. Inbound tourism-related budget calculated basedon budget items explicitly dedicated to inbound tourism.

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PREMIER EXAMPLE: SINGAPORE IR
INDUSTRY
To assess the potential of IR developments
in Japan, this report looks at Singapore
as a successful model. Singapore has amodest population of 6 million and a GDP
of US$500 billion as of 2023. In 2005, it
reversed its longstanding stance vis-a-vis
casinos and gambling to introduce IR into
the country, despite concerns regarding thepotential undesirable impacts. The rationale
behind this controversial decision largely
stemmed from Singapore’s declining market
share in the regional tourism industry and asense of urgency in losing competitiveness,and integrated resorts featuring casinos
emerged as an appropriate solution.
Since the establishment of the two IRs,
Marina Bay Sands (MBS) and Resorts World
Sentosa (RWS) in 2010, both the country’s
tourism revenue and its number of inboundvisitors approximately doubled by 2019
(Graph 3). According to the Singapore
Tourism Board (STB), the country generated
SG$27.7 billion1 in total tourism revenue,
with the IRs contributing approximately
24%, or SG$6.6 billion to the overall figure.
Furthermore, according to Singapore
Tourism Analytics Network (STAN), about
half of inbound tourists visited an IR in
2019, equating to approximately 9.6 million
visitors during the year.
1 STB uses an exchange rate of US$1 = SG$1.34 in 2019.

Japan Hospitality - Integrated Resorts

GRAPH 3: Singapore Total Tourism Revenue and Visitor Numbers, 2008 to 2019
Tourism Receipts (LHS)

30

Number of Visitors (RHS)

20

25
15
SG$ (BILLION)

15

10

10

PEOPLE (MILLION)

20

5
5

0

0
2008 2009 2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source Singapore Tourism Analytics Network (STAN), Savills Research & Consultancy

GRAPH 4: Revenue Composition from Singapore IR Complexes, 2019
CasinoHotel Rooms

Other Non-gaming87

SG$ (BILLION)

6
5
4
3
2
1
0
MBS Revenue

RWS Revenue

Total Revenue

Source MBS and RWS Annual Report, 2019, Savills Research & Consultancy

GRAPH 5: Singapore Daily Per-capita Tourist Expenditure, 2008 to 2019
500
480
460
440

SG$

420
400
380
360
340
320
300
2008 2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Source STAN, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

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Casinos comprised 68% of the total revenue
generated by Singapore’s IRs, while hotel
rooms accounted for over one-third of nongaming revenue (Graph 4), and recorded a highoccupancy rate of above 90% in 2019. Other
additional revenue streams include, but are
not limited to, attractions such as Universal
Studios Singapore and the SEA aquarium
in RWS, as well as Meetings, Incentives,
Conference, Events (MICE) activities andluxury shopping experiences offered by MBS.
Singapore has certainly enjoyed outsized
benefits from the IR developments. In
addition to overall tourist revenue having
doubled between 2009 and 2019, daily percapita tourist expenditure increased by aconsiderable amount (Graph 5). Moreover,
Singapore’s hotel industry has experienced
a notable improvement in occupancy rates
from 76% to 87% over the same period(Table 1), with luxury hotels experiencing
the most substantial increments in terms ofboth Average Daily Rate (ADR) and Revenue
Per Available Room (RevPAR) (Graph 6).
JAPAN’S FIRST IR DEVELOPMENT OSAKA IR
The upcoming Osaka IR, a joint venture
by ORIX Corp. and MGM Resorts, will be
Japan’s first large-scale entertainment andcasino complex scheduled for completionin 2030, in Yumeshima (Map 1), the siteof the upcoming Expo 2025 Osaka, withslated total investment of around JPY1.3
trillion. Developers are reportedly aiming
to achieve a total annual revenue of over
JPY500 billion, which would generate anenormous annual tax contribution to Osaka
prefecture of around JPY100 billion. In
addition, the project is forecast to create
120,000 construction jobs during the courseof development and 93,000 permanent
jobs, potentially transforming Osaka’s
economy and inspiring similar developments
nationwide, generating significant tourism
benefits and a wider economic windfall effect.
Osaka prefecture and Singapore sharesimilar traits, such as overall market size,
population, and geographical area (Table2). The opening of the integrated resort in
Osaka aims to not only replicate the successseen in Singapore, but also has the potential
to catalyse the growth of Greater Osaka andstimulate overall economic development
nationwide. The resort will aim to attract
20 million visitors annually, approximately
twice the figures seen in Singapore in 2019.
Considering Osaka’s larger geographicaland population size, coupled with Japan’s
diverse entertainment and cultural offerings
for tourists, the target should be achievable.
Furthermore, developers are anticipating thatthe casino segment will generate 80% of thetotal revenue generated by the IR, aligningwith the current model in Singapore.

Japan Hospitality - Integrated Resorts

GRAPH 6: ADR and RevPAR Growth Among Hotels* in Singapore, 2009 vs 20192009 RevPAR
2009 ADR

2019 RevPAR
2019 ADR

500
450
400
350

SG$

300
250
200
150
100
50
0
ADR

RevPAR

Overall

ADR

RevPAR

ADR

Luxury

RevPAR

UpscaleADR

RevPARADR

Mid-tier

RevPAR

EconomySource Singapore Tourism Board (STB), Savills Research & Consultancy* Covers only hotels approved and inspected by the Singapore Tourist Promotion Board (STPB)TABLE 1: Hotel Occupancy Rates in Singapore, 2009 vs 2019
2009

2019

Overall76%

87%

Luxury72%

88%

Upscale77%

86%

Mid-tier

79%

89%

Economy74%

84%
Source STB, Savills Research & Consultancy

Infrastructure developments have been
taking place in Osaka that will further
integrate the resort into the city transport
network and improve wider connectivity.
This includes the concurrent extension of
the Chuo Line by 3.2km from Cosmosquare
Station on Sakishima to a new station on
Yumeshima by 2025. Meanwhile, plans
have been mooted for an extension to
the Sakurajima line from Sakurajima
station until Yumeshima, in addition to an
extension to the Nakanoshima Line from
Nakanoshima station to Nishi-Kuji station,
which would increase interoperability
between different railway lines, and provide
additional routes to the IR. That said,
these proposals are yet to be finalised, andfurther announcements will likely be madethroughout 2024.
Elsewhere, development work to the
Naniwasuji Line connecting JR Namba andNankai Shin-Imamiya stations is scheduled
for completion in 2031, which will run from
north to south through central Osaka,aiming to further enhance local public
transport options in the city and improveaccessibility to airports and major central
rail hubs by connecting the Yamatoji Lineand Nankai Main Line with Shin-Osaka
station. This should guarantee a smoothertravel experience for tourists, potentiallyfacilitating IR visitors to explore other partsof Japan, while also minimising potential
local opposition to the IR development andthe region’s burgeoning tourism industry
by easing congestion on existing lines andimproving access to central city areas.

MAP 1: Map of Osaka City - Yumeshima and Upcoming Public Transport Developments*

Umeda

Tokyo to Umeda:
150 mins to 67 mins
after Maglev

Nakanoshima
Nakanoshima Line
Kujo

Naniwasuji Line

Sakurajima Line
Sakurajima

Namba
Shin-Imamiya

Yumeshima

KIX to Umeda:
70 mins to 40 mins
by 2031

Cosmosquare
Chuo Line

Source Savills Research & Consultancy* Dotted lines indicate that the transport development project has yet to be confirmed.

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Japan Hospitality - Integrated Resorts

TABLE 2: GDP, Population & Area Comparison between Singapore and Osaka
Prefecture, 2021 and FY2021

PERIODREGION

GDP/GRP

POPULATIONAREA

FY2021

Osaka Prefecture

US$376 billion*

8.8 million

1,900 sq km

2021

Singapore

US$424 billion

5.5 million

730 sq km

Source IMF, Osaka Prefectural Government, MUFG, Savills Research & Consultancy* Converted with MUFG 2021 yearly average rate.

Furthermore, the Chuo Linear Shinkansen
is set to run until Shin-Osaka, slated forcompletion in 2037, with non-stop services
from Shinagawa expected to take around67 minutes. This development will aim tocreate a “super mega-region” across Japan’smajor metropolitan areas, by enabling
faster and more seamless access between
Tokyo, Nagoya, and Osaka, which containa combined population of over 60 million
people. The shorter journey time would
likely create greater footfalls to the Osaka
area, which should cause an expansion in thepotential visitor base to the Osaka IR resort.
A positive ripple effect of the IR
development will be felt across multiple
sectors, and local officials are currently
accepting proposals for concert venues,
retail, hotels and residential developmentson the present Expo 2025 Osaka site, withconstruction work slated to take place from2026 after the conclusion of the Osaka expo.
Further development plans will likely be
confirmed in due course as the opening dateof the IR draws closer. Subsequently, greater
anticipated levels of tax revenue should
boost overall investments in infrastructure,benefitting local residents, facilitating
further growth in Japan’s tourism sector, andcontributing to a positive multiplier effect forJapan’s wider economy and society.
ADDITIONAL IR FACILITIES IN THE
FUTUREThe Japanese government announced in2020 that a maximum of three localities
would be given permission to host IRs. In
addition to Osaka, various locations had been
considered, including Hokkaido (Tomokomai,
Rusutsu), Tokyo (Daiba), Yokohama, Aichi(Nagoya, Airport), Wakayama, and Nagasaki(Huis Ten Bosch), although a number of cities
withdrew from the bidding process, citing
concerns such as inadequate fundraisingplans and gambling addiction issues. In April
2022, Osaka and Nagasaki officially applied tohost IRs, and Osaka was ultimately chosen as
the country’s first IR host.

savills.co.jp/insight-and-opinion/

Although Nagasaki’s initial proposal was
rejected due to financing issues, potential
plans for an IR facility in Nagasaki have likely
not been completely buried, rather appear toremain on hold. PAG acquired the Huis Ten
Bosch theme park for JPY100 billion in 2022,
and reportedly has long-term aspirations to
expand and improve the park, with plans toinvest significant sums into developing new
attractions and entertainment options. Giventime to observe the positive trajectory of the
Osaka IR, there may be renewed vigour, in
addition to greater financial backing for the
potential expansion of Huis Ten Bosch into
an IR facility.
Elsewhere, Hokkaido may reconsider
its application stance, while the Tokyo
Metropolitan Government appears tomaintain its position on the pursuit ofIR, stating that it is currently “underconsideration.” If Tokyo decides to proceedwith the project, a potential candidate sitewould be the Tokyo Bay area that extends
across Daiba in Minato and Aomi in Koto.
Indeed, with the anticipated success andmultiplier effect from the Osaka IR, there ispotential for replicating the concept in otherparts of the country, which would generate
further ripple effects for regional economies
and for the Japanese economy as a whole.
POTENTIAL LIMITATIONS
Although there is vast opportunity inthe presently untapped casino market, anumber of stakeholders have raised concerns
regarding the viability and suitability ofcurrent development plans. There has beensome backlash by local residents in Osaka
due to concerns regarding the potential
for addiction and security deterioration,
particularly public disturbances and crime.
However, the government will reportedly
introduce a number of measures to ease theseconcerns. For instance, there will reportedly
be a limit on the number of times Japanesepatrons may enter the casinos to three times
a week, or ten times in a 28-day period. An
entrance fee will also be levied on Japanesenationals at JPY6,000 per visit, of which a

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proportion will be channelled towards official
gambling addiction programmes. In addition,
domestic patrons of the IR will be required toverify their identity upon entry to casinos, withfamily members reportedly able to request thata customer be banned from using the casino.
Meanwhile, casino operators will reportedly
be required to report information to thegovernment on patrons who have exchanged
chips with a value exceeding JPY1 million, in
an effort to prevent money laundering.
Elsewhere, ballooning construction costs,
as well as various environmental concerns
surrounding the host site Yumeshima haveraised some doubts regarding the general
feasibility of the Osaka IR project. Elevatedmaterials and other costs have inflated
overall construction costs significantly byan additional JPY190 billion to the current
estimated total cost of JPY1.3 trillion.
Moreover, Yumeshima is an artificial island
made primarily of sand, soil and otherdebris, and environmental concerns such as
soil liquefaction and contamination present
additional hurdles for the construction
process. Given these various roadblocks,
a cancellation clause was included in thedevelopment contract with operators ORIX
and MGM, allowing them to withdraw fromthe IR project without facing a financial
penalty if the necessary financing anddevelopment work has not been fully preparedby September 2026. Other candidate cities
may subsequently reassess the benefits ofpossessing their own IR when looking at theinitial costs and various uncertainties that
accompany the development process.
Meanwhile, labour shortages are a
pertinent issue affecting all hospitality
sectors in Japan equally, which has resulted
in dampened occupancy rates across hotels
in Japan for now. Such large-scale resorts
will require a considerably large workforce,
including skilled, multilingual staff, who areable to commute to and from the IR facility,
which, in the case of the Osaka IR, has poor
proximity to most residential areas in Osaka.
Nevertheless, the average income in thehospitality industry is relatively low (Graph7), which suggests that offering higher wages
in order to attract more workers for thishighly anticipated sector should be feasible in
the foreseeable future.
Lastly, observers may take note of the
failure of other candidate IR plans whenevaluating the future prospects of the sector.
Concerns surrounding public safety andgambling addiction were primary factors
in Yokohama’s decision to withdraw its bid
for developing an IR, while financial issues
underpinned the failure of Nagasaki’s andWakayama’s plans. In addition, while many
foreign resort operators are certainly keen to
operate in Japan’s fledgeling casino market,
some operators appear to hold reservations

Japan Hospitality - Integrated Resorts

GRAPH 7: Average Annual Income by Industry, 2022
8
7

JPY (MILLION)

6
5
4
3
2
1
0

Source Japan Tax Agency, Savills Research & Consultancy

due to uncertainties regarding the complicatedregulatory environment. Nevertheless, many
host cities and operators are currently ina wait-and-see mode. With the successful
implementation of the Osaka IR project,in addition to further developments in thehigh-end tourism sector, many of these doubts
will likely change to optimism, and other IR
projects should learn from and build on the
successes of Japan’s first IR facility.
OUTLOOK
The casino industry in Japan is currently avast ocean of opportunity, and Japan has

the ideal conditions to develop this into a
successful and sustainable tourism sector,
given its reputable customer service, social
stability, proximity to booming neighbouring
economies, and renowned infrastructurebase. Japan has finally begun to emerge asa popular hub for high-spending travellers,
and with careful planning and sufficientinvestment, it will become more ready towelcome high-end visitors.
The Osaka IR will mark the birth of thecasino industry In Japan, and a significant
amount of investment planning has gone
into realising these ambitious plans. Parties

involved anticipate that inbound spending
will cause a large ripple effect, boosting local
employment and transport infrastructure, as
well as contributing to further regional andnational economic growth. The successful
development of the IR in Osaka should also
pave the way for further developments inJapan, which will likely repeat this positive
multiplier effect elsewhere.
Demand from inbound tourists for travel
in Japan has gone from strength to strength
since the end of the pandemic, and thisencouraging trend is expected to continue
and gain momentum. At the same time, we
anticipate a general expansion in the demand
for luxury services globally, with income
inequality progressing in many economies
and expected to accelerate as urbanisationand technological development progress.
As Japan transitions into a global tourist
destination, and makes further strides indeveloping its high-end travel sector, theperception that the international audiencehas of it may gradually transition to one of“luxury”, and should allow Japan to capitaliseon inbound tourism more effectively andearn greater revenue. Japan’s growing
appeal as a global tourism hub should help
the casino sector rapidly grow and mature,
rivalling and capturing an increasing shareof wealthy spenders from other IR facilities
in Asia. Overall, the prospects are bright for
the IR sector in Japan, and observers should
anticipate strong returns from its successful
implementation.

For more information about this report, please contact us
Savills Japan

Savills Research

Christian Mancini
CEO, Asia Pacific(Ex. Greater China)+81 3 4330 3611
cmancini@savills.co.jp

Tetsuya Kaneko
Managing Director, Head of
Research & Consultancy, Japan+81 3 4330 3103
tkaneko@savills.co.jp

Simon Smith
Regional Head of Research& Consultancy, Asia Pacific+852 2842 4573
ssmith@savills.asia

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