Place your bets on…….South Korea?

June 2, 2015 / By  

The recent crackdown on illicit gambling in Macau is causing a stir in the casino industry across Asia, and overall gaming revenues in Macau have plummeted by 37% in the first four months of 2015.

Outside of Macau, Asia’s casino industry appears to be booming, with a raft of projects announced across the region, including Vietnam, the Philippines, Australia and South Korea, where major developments are planned in Jeju and Incheon.

Casino giant Genting, jointly with Landing International, is planning to develop Resorts World Jeju (RWJ) to target eastern and northern China. RWJ will include 800 gaming tables and a casino floor of 27,000 sqm. The resort will also include a luxury hotel, shopping mall, theme park, serviced apartments and residential villas. The development broke ground in February 2015 and will open progressively from 2017, with completion expected by 2019.

American casino operator Mohegan Sun, in partnership with Incheon International Airport Corp, is planning to open a first-of-its kind ‘gateway entertainment city’ close to the airport, including the world’s first private jet terminal connected to a casino resort (250 roulette and black jack tables and 1,500 slot machines), a luxury hotel, retail and entertainment venues and an amusement park.. Subject to a casino licence being granted, the first phase could be completed by 2020, with the resort fully opened by 2040.

So what is supporting the rationale behind the development of these mega resorts?

South Korea has become one of Asia’s fastest growing casino markets, and is attracting interest due to the rapidly growing number of Chinese visitors, which as at April 2015 were up by 45% y-o-y. This growth is supported by the increasing number of direct flights from eastern Chinese cities, with several budget carriers opening routes to Jeju to meet the growing demand.

The South Korean gaming industry enjoyed growth of around 10% per annum between 2011 and 2013 and in 2014, gross gaming revenue reached KRW 1,375 billion (USD 1.2 billion). This is still small when compared with Macau (USD 44 billion), and Singapore (USD 4.3 billion).  Despite casino operators’ attempts to lure Chinese gamers to Korea, this figure represents a fall in revenues on 2013. Additionally, visitors from Japan, South Korea’s second largest source market, were down 16.9% as at April 2015 due to the depreciation of the Yen. As a result, some of the major gaming players popular with the Japanese have seen revenues fall.

So will these mega-projects succeed in a market that is already starting to show signs of softening? Is there demand to support these casinos, especially as gaming is viewed extremely negatively in Korean society? Singapore and Macau’s success was supported by locals being allowed to use the casinos, something South Koreans will not enjoy due to the mainly foreigner-only casino policy. Will the fall in Japanese visitors continue and will the Macau market recover?

For those willing to roll the dice the rewards could be huge. As with any major development project it doesn’t come without risk, so is it worth the gamble? Would you place your bets on South Korea?

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