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South Korea – Three more licences touted for Incheon Airport

By - 29 October 2014

The South Korean government’s blue print for Integrated Resort casinos is likely to include up to three more licences for Yeongjong Island near Incheon International Airport.

That is according to a report from Standard Chartered Equity Research. The casino industry has anticipated the master plan will be published by the end of this year.

Standard Chartered analysts Tyler Ahn in Seoul and Philip Tulk said: “Our checks with officials and industry participants suggest that Yeongjong Island will be the centre stage for IR [integrated resort] project development. We expect an additional two to three casino IRs to form a cluster with the two current projects. According to the government’s target, visitors from China should account for half of the 20 million total inbound tourists expected in 2017, versus 4m out of 12m total tourists in 2013. This would translate into a 23 per cent CAGR [compound annual growth rate] for China tourists and a 13 per cent CAGR for total inbound tourists in the next four years. Foreigner exclusive casinos] should benefit from China tourist growth. China visitors have the highest gaming profile (32 per cent higher per-visit [casino] drop than average) and represent the largest customer group.”

Paradise has already confirmed it is partnering with Japan’s Sega Sammy Holdings for a US$1.7bn project at Yeongjong to be called Paradise City with an opening slated of 2017. At the moment it would be a foreigners-only casino.

Caesars Entertainment meanwhile is expected to start construction work in Yeongjong Island in 2015, with the first phase likely to open three years later.

Standard Chartered believe GGR at South Korea’s foreigner-exclusive casinos will increase by four times by 2020 from last year’s total of $1.3bn. Along with the $1.25bn generated by domestic customers at Kangwon, the only casino where Koreans can gamble, and Korea is challenging the Philippines for third place in the top revenue generating gambling destinations behind Macau and Singapore.

South Korea’s President Park Guen-hye has charged a task force to relax laws for the new IRs. These are expected early next year.

Standard Chartered highlights a number of factors making the future bright for South Korean gaming, not least its proximity to the three biggest economies in Asia, including its own. Tourism from China has increased from 1.3m to 4.3m over the last five years. Standard Chartered is predicting a 15 per cent compound annual growth rate for VIP players from China over the next year and a half, highlighting that Korea is closer than Macau for cities in northern China, such as Shanghai.

Aside from Yeongjong Island, South Korea is also seeing plenty of casino activity on Jeju, a resort island off the south coast that benefits from visa-free access for Chinese players. Jeju already boasts eight out of Korea’s 16 foreigner-only casinos.

Malaysian operator Genting Group has confirmed its plans to build a $2.2bn IR on Jeju, whilst Paradise, who already operates three casinos in Jeju, has confirmed that it also plans to develop an IR on the island.

The provincial government wants to model its new casino era on Singapore’s Casino Regulatory Authority.
Jeju Governor Won Hee-ryong said: “We have to first establish an effective regulation and taxation system before starting discussions on whether to open or repeal new casinos.”

Lee Un-ju of the New Politics Alliance for Democracy (NPAD), added: “The casino industry needs restructuring to attract sound investment and ensure transparent operations to tackle illegal foreign capital outflow. The casino supervisory body proposed by Jeju governor will have to go through consultations with the central government.”

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