Inside Asian Gaming

too attractive an idea, because as an all- comers property, it could also cannibalise the existing foreign visitor market. A third and more radical option would be to open up the whole of the existing Jeju market to Koreans, creating the country’s own ‘mini Macau’. That could be a do-able and equitable solution for the industry, given that all the Jeju properties are boutique in scale. When the inventory of Jeju’s eight casinos is combined, it amounts to around 300 slot machines and 150 tables. Kangwon Land, meanwhile, contains 960 video slots and 132 tables. Second front The possibility of South Korea opening a second ‘front’ in the casino liberalisation ‘war’ and the location for it being Jeju was reported by IAG back in August 2008 in our story ‘Jeju’s Renaissance’. The Korean government’s thinking seems to be that Jeju’s relative remoteness will make it a politically acceptable choice of location for further liberalisation. There is certainly some evidence from the Las Vegas market of a relationship between ease of access and frequency of visit. Research quoted recently by Michael Chen, former President Asia, Harrah’s Entertainment Inc, suggests that people who live within an hour’s drive of Las Vegas are willing to go there for leisure purposes at least ten times a year. Make it a two-hour flight and the number of trips drops to three per annum. Allowing Koreans to gamble in Jeju would have the twin benefits of supporting the local economy while putting off the most impulsive Korean gamblers from regularly splashing their cash there. Market Outlook Foreigners-only casino sales growth Source: Company, DBS Vickers 1,000 (KRW bn) foreigners-only growth rate (rhs) 60% 800 40% 600 20% 400 0% 200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F -20% some of the litigants claimed the casino management had broken its own rules on responsible gambling. One customer, identified only as Jeong, claimed the casino coerced him to keep coming back despite his heavy losses by granting him irregular favours, such as allowing him to place bets over the set limit. While such claims by losing players are familiar to casino executives around the world, in South Korea they apparently still have the power to sway opinion among the public and, by extension, politicians. The history of casino liberalisation in other markets such as the United States suggests, however, that in general the process is a one-way street. Once it begins, it’s very difficult to roll back, short of a Cuban- style political and social revolution. The one- way street theory seems to be confirmed in South Korea’s case by rumours that a second casino will be opened up to local players— possibly by 2012. A third and more radical option would be to open up the whole of the existing Jeju market to Koreans, creating the country’s own ‘mini Macau’. According to sources spoken to by IAG , the front-runner to house this second ‘locals’ casino is Jeju-do an island off the southern tip of the country. Jeju is thought to be favoured because it’s even harder to reach than Kangwon Land. Life’s not so good Jeju already has eight casinos. It’s frankly too many in a market catering only for foreign tourists. In 2007, for example, five million South Koreans visited Jeju, but casino owners had the frustration of sitting and watching them come and go without once setting foot on their gaming floors. Since 2006, Jeju has had the autonomy to grant visa-free access to citizens of mainland China, but those people also need a visa to leave China, and that may not always be forthcoming. Opening the Jeju market to Koreans, therefore, could be the answer to many prayers. But the devil will be in the detail of how it is done. Were only one open-access casino to be allowed, it would create a catfight among the current operators, who will naturally all feel they have the right to a share of the action. An alternative might be for the existing operators to join in a consortium, to convert or if necessary upgrade and expand an existing property for domestic players. Another possibility is that Jeju’s autonomous government invites an outside company to develop and manage a new facility. That doesn’t look Korea’s Advantage It has a head start on Taiwan and Japan I f possession is nine-tenths of the law, as some attorneys maintain, then South Korea already has a tremendous advantage over both Japan and Taiwan in terms of having a functioning and developing casino industry. Both of the latter countries have spectacularly failed to make any progress in casino liberalisation, despite many years talking about it (in fact, several decades of talking in the case of Taiwan) There have been a number of practical and structural changes in the Korean casino market recently that seem to indicate the government is thinking more seriously about leveraging what it has, rather than looking the other way and pretending the industry didn’t exist. An ambivalent approach appeared to characterise government policy on casinos in earlier years, with annual caps placed on casino revenue on several occasions. But having seen the roaring success of Macau and now November 2010 | INSIDE ASIAN GAMING 7