Paradise Co. and Sega Sammy Holdings will start building South Korea’s first integrated casino resort in October.
All Asian countries with legal gambling seem to have a very specific target these days: Chinese players. And South Korea, a country where the casino industry is growing, is no exception. With no Chinese casinos on the mainland, South Korea’s biggest gambling operator is preparing a resort which will cater to players’ every needs.
The Paradise City project located close to the Incheon Airport is scheduled to open at the beginning of 2017. One year later, the US casino giant Caesars Entertainment Corp and its Hong Kong-based partner Lippo Ltd. will be opening a resort of their own.
Knowing that gamblers from the mainland spend billions of dollars in Macau, casino developers are banking on South Korea’s proximity to northeast China, hoping that their new resorts will be just as profitable.
Chinese high-rollers, “a megatrend”
Here are the total revenues generated by South Korean casinos over the past three years:
•2011 – $2.1 billion
•2012 – $2.46 billion
•2013 – $2.64 billion
Last year, the number of Chinese tourists visiting South Korea increased almost 53%. The country’s casino industry had a very profitable year too, with total casino revenue reaching $2.6 billion. That’s just 6% less than Macau’s gambling revenue.
In a recent interview published in local gambling news, Choi Jong-hwan, chief executive operator of Paradise Sega Sammy Co, told reporters: “There will be more rich people in China, and they will need to travel. This is a megatrend.”
Since 2011, when the Seoul-based Paradise Co signed an agreement with Sega Sammy, shares have gone up more than sevenfold. Paradise recently raised $276.54 million in a sale of treasury shares.
Junket operators to bring in more gamblers
The first part of the resort will cost the two partners about 1 trillion won, and will include a casino, a hotel, shopping and convention centers, and entertainment facilities. The gambling venue will offer visitors 120 tables, 400 slot machines, and an additional 300 electronic gaming tables.
According to Choi, the company will also have to rely on junket operators to bring in between 20 and 30% of its business, whereas now they only provide 5% of customers. Working with junket operators is highly profitable for any casino, as these operations usually bring in high-rollers from China.
The casino developers will make sure the resort has a very specific Korean-style, as Choi claims “Korea is a hot place right now”. “The main content that we will be showing to the Chinese VIPs will be Korean culture,” he added. This includes food, music and other country-specific cultural elements.
Only for tourists
But speaking of the conservative local culture, South Korean gambling laws forbid the country’s citizens from playing. The state’s casinos are only there to attract and entertain foreign visitors, and generate tax revenue, so local gamblers cannot fully enjoy these new facilities.
The only gambling venue that is open to Koreans is located in a remote ex-mining town, at three hours’ distance from Seoul. The casino is operated by a company called Kangwon Land Inc, and has made a total revenue of 1.28 trillion won ($1.24 billion last year. The other 16 casinos in the country, all of which are smaller but only open to foreigners, made 1.37 trillion won.
South Korea’s rivals include Japan, which is also planning on changing its laws to allow casinos in time for the 2020 Olympics.
“Many of the Koreans will be travelling into Japan to play the casinos and at that time, maybe the Korean government could be thinking of putting in an ‘open’ casino,” Choi said.
Chances that the conservative South Korean authorities will allow locals to gamble are slim. However, according to the CEO, Paradise City doesn’t need local players to succeed and is not planned with such expectations in mind.
Too small for high-rollers?
But not everyone thinks the future casino resorts will be an instant success. Seo Won-seok, a professor of hotel and tourism management at Kyung Hee University, believes the projects are relatively small and considers this to be a drawback.
“The integrated resorts planned for South Korea aren’t landmarks like Marina Bay Sands (in Singapore). These are small resorts that won’t be able to draw the crowd by their presence alone,” he explained in an interview.
Investors and officials are certainly hoping he’s wrong. It is also true that high-rollers usually frequent large resorts and luxury casinos, expecting the extravagance for the kind of money they spend.
Meanwhile, Genting Singapore and Landing International Development have also announced plans to build a $2.2 billion casino resort on Jeju Island, a location that seems to be very popular among Chinese visitors, but the project was slowed down due to local opposition.
Other casino companies – including Las Vegas Sands and Melco Crown – have also expressed interest in building resorts in South Korea. However, these companies prefer to play it safe and said they would only invest if locals are allowed to gamble.
Many believe that the Asian country has the potential of becoming a popular gambling hub, but with authorities opposing a fully open market, it will probably be a long time before South Korea becomes a worthy rival for Macau.