Inside Asian Gaming

inside asian gaming September 2014 64 In Focus casino operators have been raising theminimumbet size considerably in recent years to maximize profits amid the limited availability of [gaming] tables,” says Hong Kong-based analyst D.S. Kim of BNP Paribas Securities. “Minimum bet sizes at mass tables in Macau are now more than HK$500 per hand, which is more than six times [that of] Las Vegas’ or Korea’s and is equivalent to 18% of the average monthly disposable income in China.” The analyst believes Korea’s 16 foreigners-only casinos can become “a good alternative to Macau for relatively low-end Chinese gamblers”. Chinese players who would be classed under the “premium- mass” category in Macau receive VIP treatment in Korea—for example, Paradise offers free flights and chauffeur-driven Rolls- Royce pickups to players with buy ins of US$50,000, according to Lee Hyuk-byung, head of the company’s casino business. Grand Korea Leisure, which operates three foreigners-only casinos in Seoul and Busan under the Seven Luck brand, doubled its staff devoted to Chinese high-rollers to 60 last year in a bid to capitalize on the growth. Megaresorts on the Way In a bid to kick-start the country’s foreigners-only market, worth more than US$1.3 billion last year (Kangwon Land, the only one of the country’s 17 casinos open to locals, generated an additional $1.3 billion), the South Korean government gave preliminary approval in March to a joint venture between Las Vegas-based Caesars Entertainment and Indonesia’s Lippo Group to build a US$794 million integrated casino resort on Yeongjong Island, a special economic zone located near the country’s main international airport, with a scheduled 2018 opening. The approval came just nine months after the government had initially turned down an application from Caesars, reportedly over concerns about the company’s industry- leading debt load. Yeongjong is also slated to include a gaming resort being developed by a joint venture between Paradise and Japanese gaming machine manufacturer Sega Sammy. Meanwhile, a consortium including Genting Singapore and Chinese property developer Landing International Development envisions a casino project on Jeju, a resort island that already hosts eight casinos and is a favored destination among Chinese, who enjoy visa-free access there for up to 30 days. The Paradise-Sega Sammy resort will play up its “Korean-ness,” because “Korea is a hot place right now” for Chinese travelers, says Choi Jong-hwan, chief executive of the joint venture. “The main content that we will be showing to the Chinese VIPs will be Korean culture,” adds Mr Choi. “Korea’s foreigners-only casinomarket size is only 3%of Macau’s, or about 20% of Singapore’s, in terms of revenue … because Korean casinos do not appeal as a ‘destination place’ for most gamblers, given their tiny scale, lack of hotels and non-gaming offerings and absence of [a] cluster [of resorts],” observes Mr Kim of BNP. “We anticipate the [openings of] integrated resorts from 2017 will alleviate the bottlenecks, in turn unlocking potential and enabling operators to tap into an already large addressable market.” He believes South Korea’s planned integrated resorts and strategic location between the world’s second- and third-largest economies—China and Japan—could turn it into “another China growth story” in the same vein as Macau. He forecasts the country’s gaming revenue could grow at least 85% between 2014 and 2018. Road bumps have already emerged, however. The Genting- Landing project was due to break ground in June but that was postponed to the third quarter after newly elected Jeju Gov. Won Hee- ryong has demanded to review the project despite the green light given it by the previous one. Jeju authorities have toughened their stance on growing Chinese investments on the island because of fears of speculation, though Mr Won stressed they “welcome healthy investments”. Another potential hurdle to the market’s development is the ban on locals playing at the upcoming megaresorts. Steve Park, managing director of KORE, a Korea-based consultancy focused on the local casino industry, warns that unless the restriction is lifted ,Korean players as well as investment in the country’s casinos could be siphoned away by Japan if and when it legalizes and develops casinos. Korean officials have repeatedly stressed the ban will remain in place until “a national consensus” is achieved. The Standard Chartered analysts add that casinos in Japan, along with planned resorts in Vladivostok on Russia’s Pacific coast—one of which is headed by Lawrence Ho, co-chairman of Macau casino operator Melco Crown Entertainment — would weaken South Korean’s grip on the northeastern China market. But Mr Choi believes casino legalization in Japan could actually be the stimulus South Korea needs to expand casino access to locals. He points out: “Many of the Koreans will be traveling into Japan to play in the casinos [there], and at that time, maybe the Korean government could be thinking of putting in an ‘open’ casino.” The Paradise-Sega Sammy resort will play up its “Korean-ness,” because “Korea is a hot place right now” for Chinese travelers, says Choi Jong-hwan, chief executive of the joint venture. “The main content that we will be showing to the Chinese VIPs will be Korean culture.”