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Beijing Bulletin – Wednesday 19th April, 2017
In a first, South Korea is set to open its first ever casino resort this week – however, the diplomatic troubles in the region are set to affect the launch.
China, that usually accounts for about half of Korea’s foreigner gaming revenue, continues to protest the installation of the anti-North Korea missile defense system – the THAAD outside Seoul, and Chinese travel agents are blocking sale of tours to South Korea.
The diplomatic spat is scaring off gamblers ahead of the planned launch of the casino resort called Paradise City on Thursday.
Paradise City, which is being lauded by pros for its location – being five minutes drive from Seoul’s Incheon International Airport, just 329 km (204 miles) across the Yellow Sea from China – is being set up by South Korea’s largest casino operator, Paradise Co Ltd and Japanese slot machine maker Sega Sammy Holdings Inc.
In a bid to offset any revenue drop, Paradise and Sega Sammy said they will target consumers in Japan and Southeast Asia.
Speaking about non-VIPs, Yoo Seung-man, an analyst at HMC Investment & Securities said, “It’s a pity that, because of the missile issue, there might be fewer Chinese mass customers at first than expected. But it’s Northeast Asia’s first such resort so it could draw customers that wouldn’t otherwise visit South Korea.”
For two years now, South Korean casinos have benefited from Chinese policies.
A campaign against shows of wealth by public officials triggered an exodus of high rollers from Macau, China’s only legal casino hub.
However, in February, after South Korea secured land for its missile system, Chinese government officials gave travel agents a “7 point” verbal directive to cease tours to the country.
The state media even called for an open boycott of all things South Korean.
Compared to a year earlier, Chinese visitors to South Korea subsequently fell 39 percent in March this year.
South Korea data showed that in January and February, an 8 percent rise was recorded.
According to a statement issued by Paradise, many big-spending Chinese hold multiple citizenships and therefore they can easily visit the country regardless of the diplomatic situation.
However, the significant drop of 11 percent from a year earlier in March revenue, to 39.3 billion won ($34.54 million) has got authorities worried.
Paradise said in a statement, “There are concerns about the Chinese market. But we don’t expect the missile issue to continue in the long term.”
In Macau however, overall gaming revenue rose 18 percent in March, exceeding analyst forecasts.
This surge has been attributed to the diplomatic row by casino executives and junket operators.
Paradise and Sega Sammy have also noted that they would also market Paradise City’s hotels, convention halls and other non-gaming amenities to South Koreans who cannot enter the casino.
A spokeswoman for Paradise also said that the resort will offer exclusive space for junkets to boost junket income, which it expects to make up 5 to 10 percent of initial casino revenue.
Analyst Kwon Yoon-gu at Dongbu Securities said, “Casinos’ reliance on Chinese visitors is still on the high side. So (Paradise’s share price) can’t but be sensitive.”