"How Is This Possible?"... More Guests, Yet Revenue Plunged by 40%

Despite the rising number of foreign tourists visiting South Korea, foreigner-only casinos, which had been on an upward trajectory, reported an earnings shock last month. Companies with operations based on the mainland, such as Paradise and Grand Korea Leisure (GKL), were hit especially hard. This was attributed to a sharp drop in the hold rate, which represents the win rate of casino operators from games.

According to the Electronic Disclosure System of the Financial Supervisory Service on April 17, the combined casino revenue for the four venues operated by Paradise (Paradise City, Walkerhill, Busan, and Jeju Grand) in March totaled 49.5 billion won, a 39.6% decrease from the same period last year. Sales in January and February had increased by 31.4% and 24.4%, respectively, compared to the previous year, resulting in strong early-year performance before this sudden downturn. The combined casino revenue for GKL's three Seven Luck venues (Seoul COEX, Yongsan, and Busan) also slowed, coming in at 32.0 billion won in March, down 22.8% year-on-year, after recording increases of 6.6% and 17.3% in January and February, respectively.

Casino Games. Pixabay

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Industry analysts noted that last month's revenue decline was unusual, considering that the number of casino visitors and the drop amount (the money exchanged for chips to play casino games), which are directly linked to sales, remained steady or increased compared to previous periods. During this period, the number of Paradise VIP visitors reached 12,868, an increase of about 200 from the previous month (12,663), while the total number of GKL visitors (VIP and mass combined) rose by over 4,000 month-on-month to 17,978. Due to an increase in business days compared to February, the drop amount at both companies also rose by more than 50 billion won each, reaching 587.7 billion won for Paradise and 339.3 billion won for GKL.

As a result, the decline in the hold rate is being cited as the cause of the poor performance. Paradise's hold rate, which stood at 13-15% in January and February this year, fell to just 7.5% last month-about half the previous figure. GKL's hold rate also dropped by about 4 percentage points from February, ending at just 9.4%. Accordingly, securities firms expect profitability in the first quarter to worsen. During this period, the consensus (market average forecast) for Paradise's operating profit is 38.3 billion won, down 33% from the same period last year, while GKL is expected to post 16.7 billion won, a 17% decrease.

However, an industry official commented, "Casino games are based on probability, so temporary fluctuations in the hold rate are inevitable and not indicative of any structural problem. There is a tendency for the law of large numbers to apply as games are repeated, which means the average figure is likely to return over the course of a year, and the hold rate can recover annually."

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These foreigner-only casinos plan to focus on expanding visitor inflow, with expectations that inbound tourism to South Korea will rise in early May as Japan's Golden Week and China's Labor Day holiday-both corresponding to local versions of Labor Day-take place simultaneously. According to the Ministry of Culture, Sports and Tourism, the number of foreign tourists visiting South Korea in the first quarter of this year reached approximately 4.76 million, up 23% year-on-year, setting a new record for any first quarter despite the outbreak of the Middle East crisis last month.

Last month, Paradise completed the acquisition of the Grand Hyatt Incheon West Tower and reopened it as the Hyatt Regency Incheon Paradise City, thereby adding 501 rooms. Combined with the 769 rooms at the nearby Yeongjongdo integrated resort, Paradise City, the company now has a total of 1,270 rooms, expanding its scale and increasing capacity for complimentary VIP casino offers. A Paradise spokesperson said, "To coincide with Japan's Golden Week and China's Labor Day holiday, we plan to hold prize events for casino VIPs and integrated resort guests, and will carry out marketing using local channels such as China's Xiaohongshu and various social media platforms."

GKL also stated, "To attract overseas casino customers, we are dispatching employees directly to major Asian countries such as Japan, Taiwan, Mongolia, and Thailand, and meeting with VIP customers. We also plan to expand customized events such as VIP baccarat tournaments and dinner shows tailored to each customer and nationality."

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