Tourism hit by spat with China
South Korean casino operator Paradise Co. Ltd. and Japanese slot-maker Sega Sammy Ltd., the forces behind the new Paradise City resort near Incheon International Airport, will be looking to non-Chinese customers for much of their patron base.
That’s the conclusion of analysts after a briefing at the resort April 12. Phase I of the property was set to launch on April 20; its casino includes 154 tables including 22 junket tables, as well as 281 slot machines and 62 electronic table games.
According to GGRAsia, the market may continue to suffer due to political tension between South Korea and China over a U.S. anti-ballistic missile system installed in South Korea to guard against North Korean missiles.
In March, analyst David Bain of Aegis Capital Corp. said Macau could benefit from Mainland Chinese tourists avoiding the South Korea market. According in an April note from Daiwa Securities analyst Thomas Kwon, the VIP-focused Paradise Co. could see a 6.2 percent year-on-year decline in Chinese high rollers in 2017, which represents a 42.2 percent decline on since 2014.
“Strategically, Paradise plans to work with Sega Sammy, a major shareholder with a 45 percent stake in Paradise City, to lure more Japanese and non-China gamers (from other Asian countries such as Thailand),” Kwon wrote.
Paradise CEO Park Pyung-yong said the resort is well-positioned to “capture rising demand for IR and related amusement content in the region due to its location, appealing K-pop content and luxury resort facilities.” The group’s revenue target for 2017 is KRW880 billion (US$772.5 million), up 27 percent year-on-year, and KRW1.1 trillion in 2018, an increase of 25 percent year-on-year.
“Paradise expects Paradise City to record an operating loss in 2017 due to high operating costs related to the casino opening, but believes its first IR will see strong earnings growth from 2018 thanks to strong operating leverage and reduced costs for existing casinos,” Kwon wrote. “The company expects Paradise’s revenue growth to accelerate in the second half of 2018 as it completes Phase II of Paradise City.”
Phase I of the resort will offer 711 hotel rooms including two pool villas and a convention center. Phase II, due in the first half of 2018, will include high-speed transportation to and from Incheon International Airport; a shopping plaza with a luxury boutique hotel; and a family theme park.
“It’s a pity that because of the missile issue there might be fewer Chinese mass customers at first than expected,” said analyst Yoo Seung-man of HMC Investment & Securities. “But it’s Northeast Asia’s first such resort, so it could draw customers that wouldn’t otherwise visit South Korea.”
A Paradise spokeswoman said the resort will also offer exclusive space for junket rooms, which it expects to make up 5 percent to 10 percent of initial casino revenue.
“Casinos’ reliance on Chinese visitors is still on the high side,” said analyst Kwon Yoon-gu of Dongbu Securities. “Paradise’s share price can’t but be sensitive.”
