South Korean casino operator Grand Korea Leisure Co Ltd (GKL) reported a 34.7 percent year-on-year decrease in net income for the first quarter of 2017, to KRW17.53 billion (US$15.6 million).
Revenue for the period was down 8.3 percent from the prior-year period, to KRW125.28 billion, the firm said in a filing to the Korea Exchange on Thursday. Revenue declined 15.7 percent sequentially.
Operating income for the three months to March 31 stood at KRW31.49 billion, a 25.3 percent decrease from the prior-year period, the firm said.
GKL – a subsidiary of the Korea Tourism Organization, which is an affiliated body of South Korea’s Ministry of Culture, Sports and Tourism – operates three foreigner-only casinos in South Korea under the Seven Luck brand.
According to a Thursday note from Daiwa Securities Group Inc, citing commentary by GKL’s management, the firm expects a “tough business environment” in the second half of 2017, mainly due to the opening in April of market rival Paradise Co Ltd’s Incheon resort, Paradise City, and GKL’s “continued difficulties in promoting its casino services to Chinese high rollers”.
Analyst Thomas Kwon added: “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.”
According to some investment analysts, the South Korean market for inbound tourism is currently facing headwinds due to a political row between that country and China over the siting on South Korean soil of a U.S.-supplied missile system – known as Terminal High Altitude Area Defense (THAAD) – designed to counter North Korea’s ballistic missile programme. The first parts of the system began being deployed in early March.
There has been no report of any official confirmation from China’s tourism body that it is intervening directly in the missile row by discouraging its nationals from visiting South Korea. But in early March, China’s tourism administration had warned Chinese travellers about potential entry visa issues when travelling to Jeju Island – a South Korean holiday destination with foreigner-only casinos drawing Chinese visitors.
The number of Chinese visitors to South Korea fell 40 percent year-on-year in March, according to data from the Korea Tourism Organization. In the previous month, the tally of such visitors had risen by 8.1 percent from a year earlier.
Chinese President Xi Jinping reportedly set out his opposition to the THAAD system in his first phone call with South Korea’s new leader Moon Jae-in. Mr Moon took office on Wednesday. During the call, both sides agreed to discuss ways to resolve the issue, according to South Korean news agency Yonhap, quoting an aide from Mr Moon.
The Yonhap story said that, during the phone call, the Chinese President “explained the reasons for Beijing’s strong and repeated opposition” to the deployment of the THAAD system in South Korea. The report added that, during the call, President Moon raised the issue of apparent economic retaliation against South Korean firms by China due to the THAAD deployment.
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”Continued negative coverage of the Abe administration, coupled with political losses for the Liberal Democratic Party ... may reduce support for the gaming agenda, which already has only limited public support”
Analyst at brokerage Sanford C. Bernstein