South Korea’s second largest foreigners-only casino operator Grand Korea Leisure (GKL) saw its net income drop by 34.7 percent in the first quarter of the year as fewer high rollers flew to the country to gamble.
In a filing with the Korea Exchange, GKL said its net income in the first three months of 2017 plunged to KRW17.53 billion (US$15.6 million) from KRW 27 billion ($23 million) of the same period last year.
Revenue was down 8.3 percent to KRW125.28 billion ($111.13 million) while operating income stood at KRW31.49 billion ($27.93 million).
“In its first quarter 2017 results… GKL reported weak visitor traffic from Japan and China, lower hold ratio, and offsetting rise in VIP gamers from Japan and China,” Daiwa Securities Group, Inc. analyst Thomas Kwon said in a note.
The worst, however, is far from over for GKL, according to several investment analysts.
Daiwa warned that GKL will face a strong headwind in the second half of 2017 from the recent opening of Paradise City in Incheon, South Korea and “continued difficulties in promoting its casino services to Chinese high rollers.”
The simmering geopolitical tension between China and South Korea may drive Chinese casino high rollers away from the land of the morning calm.
Analyst David Bain of Aegis Capital Corp. noted two months ago that China’s “escalating economic retaliation” against the deployment of a U.S. missile system on South Korean territory has put South Korea’s gambling industry at the losing end.
“Mainland Chinese travelers may look to Macau and other destinations as an alternative to South Korea,” the analyst pointed out.
Aegis Capital noted that Chinese tourists led the 17.2 million visitors in South Korea last year. There were over 8 million Chinese tourists in South Korea in 2016 while the country received 1.2 million visitors from China in January this year.
Group tours to South Korea starting March 16 were cancelled after China’s Tourism Administration issued a warning to its citizens on March 3 about the “outbound travel risk” that South Korea’s immigration policy entails.