[Click eStock] "Paradise Still Struggling... Hope Lies in Restarting the Complex Resort"

Domestic Hotel Demand Faces Limited Downward Pressure... Growth Potential Increases with Travel Resumption

Paradise City Four Seasons Outdoor Heated Pool.

[Asia Economy Reporter Minwoo Lee] Paradise, which continues to operate domestic VIP customer sales at foreign casinos, is struggling with poor performance. Analysts suggest that the company must rely on the expansion of domestic travel and the reopening of overseas travel to reactivate its integrated resorts.

On the 27th, Kiwoom Securities forecast that Paradise would record consolidated sales of 94.8 billion KRW and an operating loss of 16.4 billion KRW in the first quarter of this year. Sales are expected to decrease by 48.7% compared to the same period last year, and operating profit is projected to turn into a loss. By segment, casino sales are expected to be 37.8 billion KRW, hotel 14.1 billion KRW, and integrated resort 41.1 billion KRW, with most segments except the hotel recording about half of last year's figures. However, proactive cost management, including cost of sales, helped minimize the decline.

Including the 30.2 billion KRW casino sales from its subsidiary Paradise Segasami's P City Casino, total casino sales are expected to reach 68 billion KRW. Namsoo Lee, a researcher at Kiwoom Securities, said, "This is estimated as a reflection of the two competing Seoul branches being closed until mid-March," but added, "However, the impact of social distancing level 2.5 restrictions on lodging and other operations will also affect results, causing performance volatility due to the complex effects of COVID-19."

The effect of the Yeongjongdo integrated resort, which accounted for nearly 47% of total sales in 2019, is expected to recover quickly once travel resumes. Casino sales, maintained by domestic VIPs due to COVID-19, decreased by 66%, but hotel sales only fell by 35%. The proportion of "hokangseu" (hotel + vacation) has increased due to the absence of overseas travel by domestic travelers, and hotel performance, which recovered in the third and fourth quarters of last year, is expected to continue this year. However, with no VIP arrivals from China and Japan, casino sales recovery is expected to be difficult. Lee said, "When their entry resumes, the recovery speed will be faster than general travel due to special-purpose demand," adding, "In this regard, the performance potential of hotels and casinos is sufficient."

Competition in casino operations relying on domestic VIPs is expected to intensify further, influenced by the establishment of integrated resorts in Jeju Island. However, domestic travel demand is expected to remain solid, which is likely to limit the overall decline in hotel sales. Lee analyzed, "Considering the scale of recovery when casino VIP travel resumes, costs will increase additionally, but there will be a time lag in following the improvement in performance." Against this background, Kiwoom Securities maintained a 'Buy' rating on Paradise and raised the target price by 15.4% to 22,500 KRW. The closing price the previous day was 17,100 KRW.

This content was produced with the assistance of AI translation services.