Inside Asian Gaming

September 2014 inside asian gaming 35 While at the other end of the country, Genting Singapore has joined a partnership to build an IR on the resort island of Jeju, priced at $2.2 billion at full build-out. Paradise says it also plans an IR in Jeju, where it currently has two casinos. Paradise is confident Paradise City will stand out among the crowd. “Paradise will differentiate from new foreign players with ‘Korean-ness,’” Mr Chun says, expecting to capitalize on hallyu , the Korean pop culture trend sweeping Asia. “The main content Paradise will be showing to our guests will be Korean culture such as K-pop and other entertainment content.” The key, though, will be its proximity to China. “We strongly believe that new supply will bring attention and create new demand from China, especially northeastern China,” he says. The resort will benefit as well from a direct connection by monorail to Incheon International Airport. There are skeptics, such as Kore Managing Director Steve Park, a Seoul gaming consultant, who contends Korea’s proposed IRs are too small to make waves internationally. Standard Chartered analyst Philip Tulk is more bullish. He believes IRs in Incheon will produce a cluster attractive to foreign visitors, a business already well-known to Paradise, which gets the lion’s share of Korea’s foreign VIP trade. The company has a long history in that business, dating back to its founding in 1965 by Mr Chun’s father. Mr Chun took over the top job in 2005. But Paradise pays for its VIP lead and the outer Seoul location of its flagship Walker Hill casino with generous comps, about 20% of sales, according toMr Tulk, who rates Paradise his top Korean gaming pick. Comp spending depresses Paradise’s operating margins, which usually run 10 percentage points below those of its main rival, Grand Korea Leisure. Paradise’s five casinos, in Seoul, Incheon, Busan and the two in Jeju, achieved a 54.8% market share in the second quarter with gaming revenue of 149 billion won ($146.5 million), up 16.4% from a year earlier, on drop that rose 16.4%. Chinese VIPs accounted for 66.1% of the drop. However, profits fell 35.1% to KW26 billion. Walker Hill accounts for around 60% of gaming revenue, but the Paradise Sega Sammy subsidiary at Incheon shows the best operating margins, a promising sign for Paradise City. As Japan’s push to legalize casinos inches closer to realization, SEGA SAMMY HOLDINGS is positioning itself as a frontrunner to secure one of the gaming licenses that could soon be on offer. In a bid to cut its teeth in casino resort development and operation, the Japanese pachinko manufacturing giant will break ground next month on the first phase of a highly touted destination resort with gaming it is developing in South Korea with that country’s Paradise Group on Yeongjong Island, a special economic zone located near the port city of Incheon and the country’s main international airport. A 2017 opening is planned for the US$1.7 billion Paradise City, as it’s known, and plans are to capitalize on China’s booming market in outbound tourism with a hotel, a casino with 120 table games and 700 slots and electronic gaming machines and an array of non- gaming attractions, including retail shopping, entertainment and MICE facilities. SEGA SAMMY stated a desire as far back as 2007 to invest in casinos in Japan should the opportunity arise, and in 2012 purchased a resort in Miyazaki Prefecture. Two months after that acquisition was announced, Chairman Hajime Satomi reasserted the company’s intentions, saying, “Of course, [a casino] is what we have in mind.” SEGA SAMMY expects to generate 157 billion yen (US$1.5 billion) in total revenue in the six months ending 30th September. Although it already ranks as one of Japan’s biggest companies based on recurring income, a casino license would propel it much higher. Hajime Satomi Chairman, President and CEO SEGA SAMMY HOLDINGS SEGA SAMMY was created in 2004 when Sammy Corporation bought a controlling interest in ailing video game giant Sega. The 72-year-old Mr Satomi, who heads the combined group, founded Sammy in 1975 and built it into one of the biggest suppliers of pachinko and pachislot machines in Japan (its major rival in the market is Sankyo Corporation). In the current fiscal year ending 31st March 2015, Sammy expects to sell 250,000 pachinko machines and 374,000 pachislots. The company is also developing innovative games for the casino industry through its subsidiary SEGA SAMMY CREATION. The first of these—splashy, outsized, carnival-style takes on baccarat, sic bo and big wheel—were unveiled in May at the G2E Asia expo in Macau.