GGRAsia – Landing seeks balanced revenue mix at Jeju Shinhwa World

Landing seeks balanced revenue mix at Jeju Shinhwa World

Jan 24, 2018 Newsdesk Latest News, Rest of Asia, Top of the deck

Management at the Jeju Shinhwa World resort say they want a “50-50” balance of gaming to non-gaming revenue. Currently the recently-launched project doesn’t have a working casino, but hopes to have one soon, subject to approval from the authorities in Jeju, the semi-autonomous South Korean island that plays host to the scheme.

“Our goal is to have a balanced revenue for the gaming and non-gaming segment…we aim to have a 50-50 contribution from these two segments for the overall project,” said David Hoon, senior vice president of the project’s promoter Hong Kong-listed Landing International Development Ltd.

The estimated investment cost for the whole Jeju Shinhwa World project is US$2.4 billion, according to Mr Hoon.

Another executive from the group had already flagged that the property did not expect to be dependent on mainland Chinese customers.

Mr Hoon stated in his remarks, referring to a Singapore casino resort run by Genting Singapore Plc: “If you look at Resorts World Sentosa in Singapore, their EBITDA [earnings before interest, taxation, depreciation and amortisation] margin for a year is about 40 percent… our goal is to be able to achieve the same level as in Singapore, i.e., 30 to 40 percent [of EBITDA margin]. But frankly…it will have to take two to three years for the business to stabilise.”

Investment analysts covering the casino gaming business have indicated that typically, the margin on VIP gambling is smaller than that on the mass-market sort, due to issues including player general reinvestment costs, rolling chip programmes, and in many cases commissions for junkets; while margins on some non-gaming activities offered by casino resorts are in turn superior to those available on many gambling activities.

In full-year 2016, the EBITDA margin for Resorts World Sentosa was 35.9 percent, according to GGRAsia calculations based on publicly-disclosed company data.

The 627-room Jeju Shinhwa World Marriott Resort at Jeju Shinhwa World received its first guests on December 22 and is the planned venue for the casino. Landing International’s management hopes that by the end of February the hotel will have an operating gaming facility. It will be accessible only to non-Korean customers, and is likely to offer 160 gaming tables and 240 slots and electronic table games. The launch of such a facility is conditional on the local government agreeing to shift gaming rights from Landing’s existing Jeju casino hotel property, the Hyatt Regency Jeju.

Notwithstanding management comments on seeking a balance between gaming and non-gaming revenue, the scale of the foreigner-only Jeju Shinhwa World casino is unprecedented in that local market, according to Albert Lim, senior vice president of resort operations at Landing Jeju Development Co Ltd, a unit of the group.

“Each of the casinos here has about 30 to 50 gaming tables…currently there are eight operating casinos on the island,” he stated, referring to existing foreigner-only venues on the island.

Landing International is looking to open another hotel, the 538-room Shinhwa Resort Jeju Shinhwa World, and a water park at the resort complex in summer this year. The resort project promoter is also planning to launch a Four Seasons Resort and Spa by the end of 2019, which will bring the overall hotel room inventory of Jeju Shinhwa World to more than 2,000 units, according to Mr Lim.

The Four Seasons Resort and Spa, along with an outdoor theme park called Lionsgate Movie World, are for a second phase of Jeju Shinhwa World. Lionsgate Movie World is slated to be completed in 2019.

Commenting on the capital investment for the whole project, Mr Hoon stated: “We as Landing International, the Hong Kong company, have injected US$1.5 billion. So this project is substantially funded by way of shareholders’ equity. And then we also have taken some bank borrowings.”

At the briefing, Mr Hoon noted that his firm was not likely to seek a further share placement exercise for the second phase of Jeju Shinhwa World, but would instead pay for it via bank borrowings, property sales at the site and operating cash flow from phase one.