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Signs of recovery seen amidst diversification efforts

South Korea’s foreigner-only casinos are showing signs of renewed growth, helped by the Winter Olympic games and operator efforts to diversify their visitor base.

Sales at the properties were hit hard last year after China banned tour groups to the country in protest at Seoul’s decision to deploy a U.S. anti-missile defence system. Beijing began relaxing that ban in November last year, though it’s unclear whether it has been lifted entirely.

According to industry data released by the Korea Casino Association, sales in January and February reached KRW204.8 billion (US$191.6 million), representing an increase of 15.9 percent from the same period last year.

The figures reflected a boost from additional visitors to Winter Olympics, which were held about 30 miles north of Kangwon Land, the only place in the country where locals are permitted to gamble. The state-owned resort had been widely expected to be a key beneficiary of the games.

However, the data also showed an increase in the number of visitors to the nation’s 16 foreigner-only casinos, up 1.6 percent in the first two months of the year to 366,000 - due mainly to increased visitors from Japan.  

The number of Chinese visitors continued to decline, with a fall of 3.2 percent in January and 5.2 percent in February.

"Chinese visitors are still the biggest group of customers at foreigners-only casinos, but their number continues to fall," a casino industry official said. "We are seeing a turnaround this year, thanks to a steady increase of tourists from Japan."

The number of visitors from Taiwan also fell 16.7 percent in January but increased 32.3 percent in February, according to the data.

According to Korea Tourism Organisation figures, the number of Chinese visitors to South Korea plunged by 48 percent in 2017. The sector makes up almost a third of its total tourism base.

Much of the optimism that had surrounded the expansion of the casino sector in the country came from the rising tide of tourists from China, for whom the K-pop phenomena and Korean culture hold a strong appeal.

Seoul is also just a two-hour flight from Beijing, making it much closer for travellers from Northern China than Macau.

The prospects attracted a flurry of interest from foreign investors, including Caesars Entertainment, the Mohegan Sun, Genting and Landing International.

However, an outbreak of Middle Eastern Respiratory System in 2015 shut down the tourism industry, highlighting the risks of reliance on foreign revenue. The missile spat came just as the operators had begun to rebound.

Genting has since pulled out of its project on the southern island of Jeju, selling to its joint venture partner Landing. Caesars said it broke ground on its project in Incheon near Seoul’s international airport in August last year, though has given few further details on progress.

Mohegan Sun has pushed back the groundbreaking on its project, also near the airport, to the first half of this year, due to delays in receiving necessary permits.

“There is no doubt that, based on the designs Project Inspire will be a “breakthrough,” one-of-a-kind resort for both Korea and the rest of Northern Asia,” it said in a financial filing. “We continue to target an overall project opening for late 2020/early 2021, and with the benefit of excellent demographics, a prime location, and what we believe will be a world-class development and operations team, we look forward to opening of what we believe will be one of the most iconic and successful integrated resorts in Asia and a game changer for our company.”

Meanwhile, despite benefiting from its proximity to the Olympics site, Kangwon Land still finds itself under government scrutiny following a hiring scandal. It was also told to reduce its opening times from 20 hours a day to 18 hours and will now be open from 10 am to 4 am.

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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