Challenging times are on the horizon for South Korea’s future casinos.
Several weeks ago, the Ministry of Culture, Sports and Tourism (MCST) awarded the country’s new integrated resort license to Connecticut tribal casino operator Mohegan Sun, which has partnered with South Korean chemicals maker KCC Corp. for a $5 billion casino resort at the Incheon International Airport.
The consortium, called Inspire Integrated Resort, plans to open the casino’s doors by 2020. But even before the casino operator was able to break ground, a credit rating agency already has a word of warning.
Fitch Ratings Inc believes that South Korea’s new casino “will have difficulty achieving robust returns on investments.” The reason: a government’s rule that will limit the integrated resort to foreigners only.
In addition, the credit rating agency also noted that any foreigners-only integrated resorts in South Korea will face competition from casinos in other countries in the Asia-Pacific region.
“We believe this pressure will not abate as the first casino opened in Vladivostok, Russia, 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 note.
Currently, South Korea has 17 casinos, but locals are only allowed to gamble at Kangwon Land, located in an upland area of Kangwon province.
Fitch said Kangwon Land “continues to see solid growth,” but the other casinos—the ones that cater only to foreigners—saw their aggregate casino revenue drop by 10 percent last year.
“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 said.
Mohegan Sun’s project will feature a three-tower luxury hotel complex with 1,350 five star and six star guest rooms, a Paramount Studios-themed amusement park, and a 20,000 square meter casino with 250 gaming tables and 1,500 slot machines.
Aside from Mohegan Sun, two other casino projects are also planned for Incheon. The first is another foreigners-only casino by local Paradise Co Ltd., which has partnered with Japanese pachinko operator Sega Sammy Holdings. The second project will be a joint venture between Caesars Entertainment and Hong Kong-listed real estate developer Lippo Ltd. Construction.
Still, Fitch believes casinos in Incheon “could be viable if the total number of projects moving forward remains modest and Japan’s effort to legalize casinos fails to materialize,” especially since the “Incheon International Airport is one of the most heavily trafficked airports for international passengers in the world.”
