Inside Asian Gaming

INSIDE ASIAN GAMING | September 2013 46 The Asian Gaming 50 – 2013 Choi Hung-jib, 62, is a former governor of South Korea’s Gangwon Province—the economically depressed former coal mining region where the majority state-owned Kangwon Land casino is located. He was appointed CEO of this most remote and the most lucrative of the country’s gambling operations in July 2011, becoming the seventh person to head it since it was founded in 2003 as a sovereign wealth fund for all intents and purposes, designed to plow its profits back into the regional economy and community. He replaced Choi Yung, who resigned amid an investigation into allegations of corruption. Kangwon Land is the only one of South Korea’s 17 casinos where Koreans are allowed to play, and owing to that exclusive position, generates a great deal of money. On weekends, eager city dwellers pay local grannies the equivalent of hundreds of US dollars just for reserving seats for them at the tables. The property generates gross revenues in excess of US$1 billion per year. Not surprisingly, it has always been capacity-constrained. The casino opened with 30 table games. Following 18 months of steady expansion, the National Gaming Control Commission imposed a cap of 35 Choi Hung-jib President and CEO Kangwon Land Inc. 132 tables and 960 machines in line with government orders to limit the casino industry’s income. That cap, which led to sluggish revenue growth, remained in place until November last year. Following its lifting, Kangwon Land quickly expanded, having the new maximum allowable 200 tables and 1,360 machines in place by June. The casino reported soft second quarter results, with revenue up a mere 1.1% year on year to KRW298 billion (US$268 million), but the third quarter is expected to come in much stronger given the boost provided by the expansion. Political involvement in commercial ventures can have its upside as well as downside—especially in East Asia. South Korea chose Gangwon for its winning bid for the 2018 Winter Olympics. The event will be held at Pyeongchang, up the road from Kangwon Land. The property, which also has a ski resort, is likely to benefit from the huge influx of visitors expected in the region. The downside is that no matter how successful Kangwon Land has been—including overcoming the not inconsiderable handicap of being 125 miles and four hours’ drive along difficult mountain roads from the capital of Seoul— as a publicly owned venture it constantly risks having the rug pulled from under it. Kangwon Land’s exclusive right to serve domestic gamblers expires in 2025, and authorities say that licensing for at least one new venue catering to locals could take place at that time or soon after. Furthermore, official plans call for the licensing of up to five resort-scale casinos over the next decade or so. It’s not all bad news for Kangwon Land, though. In anticipation of the Winter Olympics, the central government is planning to build an upgraded road to connect Pyeongchang and the county of Jeongseon, where Kangwon Land is situated. Hong Kong-listed Success Universe Group, best known for running Ponte 16 Resort, Macau, has diversified into the burgeoning China lottery sector. In late 2012, the company began operations of its China Sports Lottery technology service platform and providing sales agency services to the Sports Lottery administration centers in Jiangxi and Qinghai provinces. Success Universe plans to extend its services to other parts of the country and has also launched a dedicated website, www.128cai.com , offering lottery and market information and online support services. It’s early days for the company’s 36 Sonny Yeung Chairman Success Universe Group lottery segment, but in 2012 it generated approximately HK$10.7 million in revenue (US$1.4 million). Though the company’s lottery interests have a way to go before turning a profit, they appear on track to benefit from continued strong demand. China lottery sales surged 18% year on year to RMB261.5 billion in 2012 (US$42.7 billion), with Sports Lottery sales up 17.8% to RMB110.5 billion. Meanwhile, the Ponte 16 casino resort, in which Success Universe holds a 46.8% stake, also benefited from robust demand among mainland Chinese punters. Ponte 16, one of Sociedade de Jogos de Macau’s 14 “satellite” casinos, is 51% owned by SJM, with Success Universe acting as the third-party promoter, effectively controlling most of the business. The property got off to a sluggish start following its February 2008 opening but has recorded continuous improvement in its