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China Demand a Boon to S.Korea Casinos: Brokerage

March 17, 2023 China Industry Updates

With the easing of China’s zero-Covid policy and the relaxation of travel restrictions, the “factors that had been hindering” customer access to casinos in South Korea “have now been resolved,” says brokerage NH Investment & Securities Co Ltd.

South Korea was a popular destination for Chinese tourists before the pandemic. For a period after China relaxed its Covid-19 countermeasures in early January, the South Korean authorities had required Covid-19 tests for visitors inbound from mainland China, Hong Kong and Macau. But such requirement was lifted on March 11.

“We expect a release of pent-up demand, led by mass customers from China following the anticipated [South] Korea-China flight expansion in March,” stated the report by analyst Hazell Lee, cited in the Business Korea news outlet.

“As for Chinese VIPs, a recovery should unfold throughout the rest of 2023, but the pace is to be gradual,” she added.

Casino operators in South Korea have seen a boom in business volumes in the first two months of 2023.

Casino sales at Grand Korea Leisure Co Ltd, an operator of foreigner-only casinos, rose by 437.2 percent year-on-year in February, to just above KRW36.77 billion (US$28. million). Paradise Co, another foreigner-only casino operator, reported casino revenue of KRW44.67 billion for February, up 162.7 from the prior-year period.

In the report, Ms Lee stated that as the business environment had “fully normalised”, it was “only a matter of time before top-line figures return to pre-crisis levels”.

Following the lifting of the mandatory Covid-19 tests for inbound travellers from China to South Korea, “the number of flights between the two countries is also set to rise significantly,” noted the analyst.

“Against this backdrop, pent-up demand should lead to a significant increase in the number of Chinese mass visitors to domestic casinos,” wrote Ms Lee.

“In the case of Chinese VIPs, a gradual recovery is expected due to the unfavourable external environment related to VIP games, including strengthened junket regulations and punishments for related operatives,” she added.

The brokerage also stated that pent-up demand from Japanese VIPs “has stood out” as flights between South Korea and Japan had increased “following the resumption of visa-free entry between the two countries in October”.

“In particular, for firms adept at attracting Japanese customers, Japanese VIP numbers are recovering to pre-pandemic levels,” said the institution.

The brokerage also gave some commentary on Kangwon Land Inc, the operator of South Korea’s only casino resort open to locals.

In April 2022, shortly after the social distancing rule was lifted in South Korea, “strong pent-up demand was observed at the domestic casino open to [South] Korean nationals”.

“However, sales have recently been below the pre-pandemic level, as: overseas travel has become smoother; and demand for leisure activities among Koreans has shifted to overseas travel,” said Ms Lee.

She added: “Once revenue stabilises, top-line growth is expected to pick up in earnest on increased business hours and table numbers compared to those before the Covid-19 crisis.”

Kangwon Land Inc returned to profit in full-year 2022, recording net income of KRW115.6 billion. The firm recommended a final dividend of KRW350 per share for the year ended December 31, 2022.

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