Jun 09, 2016 Newsdesk Latest News, Rest of Asia, Top of the deck  
The junket model that has worked effectively in Macau – whereby gaming promoters bring high rollers to casinos and absorb much of the credit risk in the VIP betting segment – would probably not be successful in South Korea, says Glenn Burm (pictured), a partner at financial services firm PwC Korea.
“Junkets have never been successful in [South] Korea. The models are so different. Junkets, for instance, try to bring VIPs into Korea – but both from the operator and the junket side, they don’t have the [needed] volume to accommodate the costs involved,” Mr Burm told GGRAsia. He was speaking on the sidelines of Global Gaming Expo (G2E) Asia, held in Macau in May.
The PwC Korea partner explained that junkets and casino operators usually have to find a consensus on how to share the little profit they can make after spending on benefits and other complimentary items for these VIPs.
In Macau, junket operators are offered incentives to bring players to casinos by being offered either a share of the revenue or a commission on rolling chip turnover; with the latter capped at 1.25 percent.
Mr Burm said: “The junket model has never been successful [in South Korea]. The Korean [casino] operators prefer to do direct marketing to VIPs. They bring in fewer customers but it is more profitable, because they don’t pay commissions to junkets.”
He added: “I don’t think the junket business will grow in Korea in the near future because the existing [casino] operators are a bit reluctant to utilise them.”
The construction of large-scale casino resorts in South Korea would probably not contribute to boosting significantly the operations of junkets in the country.
“The Mohegan Sun model is more of the U.S. model,” said Mr Burm, adding that the integrated resorts being developed in South Korea would most likely rely on mass-market customers.
The government of South Korea has awarded a licence to build a casino resort to a consortium between U.S.-based Mohegan Tribal Gaming Authority (also known as Mohegan Sun) and South Korean chemicals manufacturer KCC Corp.
The new property – to be located in Incheon, near the country capital Seoul – is expected to break ground in 2017, Bobby Soper, president of Mohegan Sun, told GGRAsia in February.
Ban on locals
The country’s authorities had been reviewing an unspecified number of proposals for new casino resorts, submitted as part of an integrated resort licence bidding process initiated in 2015. There were up to two new casino resort licences up for grabs, but the South Korean government decided to grant only one.
Mr Burm said Mohegan Sun was likely “the only bidder that could meet” the government requirements, while other bidders – like Hong Kong-listed NagaCorp Ltd – decided not to take part in the later stages of the process.
Some international casino operators might have pulled out once they realised that the South Korean government would not change its stance on allowing locals to gamble at home, added Mr Burm.
South Korea currently has 17 casinos, but the country’s nationals are only allowed to gamble at one of them – Kangwon Land in an upland area of Kangwon province.
“Kangwon Land has a monopoly licence until 2025, they’re going to do whatever they can to try to stop other operators into the domestic market,” Mr Burm told GGRAsia. For South Korean nationals to be allowed to gamble at domestic casinos, “someone has to come up with new legislation to open up the discussion,” he added.
Mr Burm additionally said that a few casino operators might have lost their interest in South Korea because of “some indications from China … that it was not too happy with Chinese citizens coming into Korea to gamble,” said the PwC Korea partner.
Several investment analysts have mentioned the Chinese authorities’ intentions to limit casinos’ direct marketing activities in the People’s Republic of China: understood to be aimed specifically at South Korea’s foreigner-only casinos.
Resort model
South Korea’s first large-scale integrated resort – Paradise City, developed by South Korea’s casino operator Paradise Co Ltd and Japanese pachinko operator Sega Sammy Holdings Inc – is expected to open in April 2017 in Incheon.
Mr Burm said the success of Paradise City would – to some extent – depend on how much Sega Sammy was actively involved. “It will be interesting to see how can they increase their customer base: if they’ll be targeting Japanese VIPs, Chinese VIPs, or mass-market customers,” the analyst said.
He added: “Paradise Co’s business portfolio has always been strong on the Japan side. So how to increase that, how to attract the Chinese mass-market: that will be the key critical factors to avoid impacting the existing business.”
Mr Burm said the new integrated resorts could benefit from the growing number of Chinese tourists to South Korea.
“The trend is more and more going towards the resort model, because Korea is moving more into attracting a mass market, people who want to spend time other than just in the casino,” said Mr Burm.
Japanese brokerage Nomura said in a report in April that the number of Chinese tourists visiting South Korea is expected to more than double in the period 2016 to 2020, to 15.5 million.
Jun 01, 2023
May 25, 2023
Jun 02, 2023
Jun 02, 2023
Jun 02, 2023
Genting Singapore Ltd says Lam Yi Young has resigned from his role as deputy chief executive of Resorts World at Sentosa Pte Ltd. The latter firm is an indirect wholly owned subsidiary of Genting...Jun 01, 2023
Alfastreet, a manufacturer of electronic gaming machines,...Jun 01, 2023
Casino equipment maker Sega Sammy Creation Inc is tweaking...Jun 01, 2023
The iGaming segment in Asia “has grown rapidly” since...May 31, 2023
Showing slot machine players – via animations on the...May 31, 2023
Macau stocks in likelihood “have been punished too much...May 31, 2023
There are foreign companies still interested in investing...May 31, 2023
Thailand could pass the necessary enabling legislation for...May 30, 2023
China will remain a key market for Asian gaming...May 30, 2023
Alejandro Tengco (pictured in a file photo), chairman and...May 30, 2023
There are “plenty of reasons” for the global gaming...May 30, 2023
Gaming equipment provider International Game Technology Plc...May 30, 2023
The Global Gaming Expo (G2E) Asia 2023 Special Edition:...May 29, 2023
Austria-based gaming equipment maker and operator Novomatic...May 25, 2023
Sports betting and online casino operating platform...May 24, 2023
The business performance in Asia of gaming content and...May 18, 2023
The organisers of Global Gaming Expo (G2E) Asia 2023...May 17, 2023
Gaming content and equipment supplier Light & Wonder...May 16, 2023
Casino equipment maker Sega Sammy Creation Inc is to...May 09, 2023
Casino slot machine and digital gaming content provider...May 05, 2023
The Global Gaming Expo (G2E) Asia event in Singapore is the...May 04, 2023
An adviser to a Thailand parliamentary committee mulling...(Click here for more)
US$8.1 billion
Macau’s casino gross gaming revenue in the five months to May 31