Russia will prove problematic
Large-scale casinos resorts planned for South Korea “will have difficulty achieving robust returns on investments” if they permit only foreigners to enter and play, according to an analysis from Fitch Ratings Inc. The credit rating agency says integrated resorts that bar locals will “face competitive pressures” from casinos in other Asia Pacific jurisdictions, including Summit Ascent’s Tigre de Cristal in Russia’s Primorye economic zone, which opened in late 2015.
“We believe this pressure will not abate, as the first casino opened in Vladivostok in 2015, four new large-scale casinos are scheduled to open in Macau through 2017, and Japan continues to consider legalization,” Fitch said in a March note cited by the website CalvinAyre.com.
Of South Korea’s 17 casinos, only one permits South Koreans to enter; that casino, Kangwon Land, has seen “solid growth,” Fitch reports, while foreigners-only gaming halls in the rest of the country posted an average 10 percent decline in gaming revenue in 2015.
“Fitch believes chances that locals will be allowed to gamble elsewhere in the medium term are remote based on our conversations with the country’s officials and incumbent operators,” the agency wrote.
The newest resort approved for South Korea is a joint venture of U.S.-based Mohegan Tribal Gaming Authority and South Korean chemicals manufacturer KCC Corp. Their $1.6 billion complex, called Inspire,” will be located near the Incheon International Airport. It will include a casino with 250 gaming tables and 1,500 slot machines; a luxury hotel with three towers totaling 1,350 rooms; a 15,000-seat arena; a Paramount Studios theme park; and an eco-adventure park. The operators expect Phase I of the resort to open by 2020.
Two other casinos are also planned for Incheon. South Korean casino operator Paradise Co. Ltd. and Japanese pachinko giant Sega Sammy Holdings have partnered on the $1 billion Paradise City project, already under construction; and U.S. casino operator Caesars Entertainment Corp. and Hong Kong-listed real estate developer Lippo Ltd. Construction also plan a development. All will be open only to foreigners.
Fitch says Mohegan Sun’s Inspire project faces some “execution risk” for several reasons: it’s the tribal operator’s first venture outside the United States, and it will open three years later than Paradise City. That said, if Mohegan Sun succeeds in the jurisdiction, it will constitute a “significant upside” for the operator, which has seen its fortunes rise and fall in its home base of Connecticut, where its flagship faces more competition. The tribe was compelled to restructure more than $1 billion in debt in 2012, and last year lost out on a bid for a gaming license in Massachusetts.
Though it seems unlikely locals will be allowed to gamble beyond Kangwon Province “in the medium term,” Fitch reported, “we believe the Incheon projects could be viable if the total number of projects moving forward remains modest and Japan’s effort to legalize casinos fails to materialize.”
If nothing else, the location is prime. Incheon International Airport is “one of the most heavily trafficked airports for international passengers in the world,” the report said.
