Inland-Centered Paradise and GKL Struggle
Hold Rate Weakness Hampers Despite Drop Amount Increase
Lotte Tour Development Forecasts Solo Uptrend
This year, the opening of the foreigner casino Inspire on Yeongjongdo Island in Incheon has led to fierce competition for customers, dealing a direct blow to the performance of major casino companies. Grand Korea Leisure (GKL) and Paradise, which operate inland gaming venues, saw a sharp increase in marketing expenses and posted poor results. On the other hand, Lotte Tour Development, which operates a gaming venue in Jeju, is expected to see a rebound in performance benefiting from an increase in Chinese visitors.
According to the Financial Supervisory Service's electronic disclosure system and related industries on the 11th, GKL, which operates Seven Luck casinos in three locations including Gangnam and Yongsan in Seoul and Busan, reported a preliminary operating profit of 5.8 billion KRW for the third quarter, down 57.8% compared to the same period last year. Revenue decreased by 2.9% to 93.8 billion KRW. The casino drop amount for the third quarter was 2.7694 trillion KRW, up 13.5% year-on-year, but was affected by a hold rate of 10.4%, down 2.1 percentage points. Marketing expenses also increased by 18.1% to 47.6 billion KRW compared to 40.3 billion KRW in the third quarter of last year.
In the securities industry, it is believed that GKL's main source of revenue, Chinese VIPs, have shifted to casinos in Jeju, where no visa is required, and that marketing expansion at the Inspire Entertainment Resort Casino, which opened earlier this year, has absorbed some demand in Yeongjongdo, Incheon. A GKL official explained, "We are actively conducting marketing activities such as dispatching staff to major Asian countries including Japan, Taiwan, and Mongolia to attract overseas casino customers and meeting VIP clients. For the Chinese market, we maintain non-face-to-face marketing activities targeting existing customers to recover VIP demand and hold customized events to prevent existing customers from leaving."
Paradise, which operates foreigner casinos in four locations including Walkerhill in Seoul, Jeju, Busan, and Paradise City in Yeongjongdo, Incheon, also posted a preliminary operating profit of 36.2 billion KRW for the third quarter, down 36.6% year-on-year. Revenue decreased by 6.1% to 268.2 billion KRW. Although the drop amount reached a quarterly record high of 1.7732 trillion KRW, the hold rate fell by about 1.8 percentage points to 10.2% compared to the same period last year.
On the other hand, Lotte Tour Development, which operates a foreigner casino within the Jeju Dream Tower complex resort, is expected to see a 6000% increase in consolidated operating profit consensus for the third quarter to 18.3 billion KRW compared to the same period last year. Revenue is also expected to rise by 41.22% to 136.7 billion KRW. Previously, after the opening of Dream Tower in June 2021, Lotte Tour Development recorded operating losses in the 30 billion KRW range each quarter due to the impact of COVID-19, but turned profitable from the first quarter of this year as the foreigner casino recovered.
The increase in Chinese tourists is attributed to China's economic stimulus effects, visa-free policies for Chinese arrivals, and the expansion of direct overseas flight routes connecting Jeju. The number of overseas direct flights to Jeju increased from 159 in the second quarter to 195 in the third quarter. The industry expects the number of Chinese arrivals this year to exceed 1.5 million, recovering to 68% of the 2015 level. Currently, about 80% of all visitors to Dream Tower Casino are Chinese.
A Lotte Tour Development official stated, "With the expansion of overseas direct flight routes, the number of foreign tourists continues to increase, resulting in simultaneous revenue growth for both hotels and casinos."
The casino industry expects that with the Chinese government implementing a visa-free policy for Korean entrants starting from the 8th, tourism exchanges between the two countries will expand, and the number of Chinese tourists visiting South Korea will increase. Namsoo Lee, a researcher at Kiwoom Securities, also evaluated, "Although it will take some time for direct effects to appear, we can expect an increase in new Chinese demand (for casinos) due to improved Korea-China relations."
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