Politics Aside, South Korea needs a Sound Financial Solution to its iGaming Conundrum
Published May 9, 2018 by Lee R
China is friends with South Korea again, but Chinese players are not acquiescing.
South Korea is struggling to harness iGaming benefits in light of local dynamics.
The Numbers
Figures released last Monday by the Korea Casino Association reveal revenues in January and February reached $191.56 million, for a 15.9 percent year-on-year jump.
The Growth Disruption
The market, which only allows foreigners to legally gamble, is recovering from the hit it took in 2017 from a ban that neighbour China imposed package tour sales to South Korea, sometimes known as junkets.
The Politics Behind the Hiccup
The disruption was actually politically motivated retaliation for the deployment of a US-backed missile defense system in southern South Korea that the Chinese government believed positioned the US in spying range, a ban that was recently lifted.
Offsetting Dynamic
The disruption was partially offset by a warming trend of relations between South Korea and Japan emanating from a landmark agreement in December 2015 bringing resolution to a historical dispute over Japanese enslavement of Korean women.
Japan In, China Not
Since then, commercial gaming Japanese visits to South Korea have increased, boosting the local market and spurring the South Korean tourism body to launch a new campaign to lure even more Japanese tourists and offset the loss of gaming patrons from China.
The Progress
All of this back story has resulted in an increase in the number of total visits to foreigner-only South Korea’s casinos by a 1.6 percent uptick in January and February to top out at 366,000.
January represented a 5.2% year-on-year jump, while February represented a 3.9% year-on-year increase.
Uncertainty on the Chinese Side
Meanwhile the Chinese issue was supposed to be over when Beijing lifted the sanctions, but no commercial activity to reflect the supposed warming of negotiations has manifested.
Other Sectors Hurt
The 18 casinos in South Korea are not the only businesses taking the hit from China: hotels, cosmetics companies, and duty-free shops are among the other sectors hit the hardest by the disruption in Chinese tourism flow, with Bank of Korea estimating the total revenues lost from the embargo at $4.5 billion in 2017.
Private Operators Taking the Hit
As far as individual operators, hotel and casino operator Paradise Group took the biggest hit, with revenues dropping 3.9% in 2017 to $623 million, translating to net loss of some $30 million. The Group acknowledged Chinese high rollers to account for 35 percent of its VIPs in 2017, for a full ten percent drop from 2016’s 45 percent.
Another operator taking a big hit was Grand Korea Leisure Company, which saw revenues drop 8.6 percent year on year.
Local Gaming Solution
There is one casino open to locals in South Korea, Kangwon Land of the remote highland Province of Gangwon. With the aftermath of the Chinese embargo still firmly in place and no end in sight, could an expansion in legal gaming across South Korea be the real solution for offsetting the Chinese embargo?
