Paradise Casino (Courtesy of Paradise)
Foreigners-only casino operators in South Korea reported weaker-than-expected operating profit in the second quarter as prolific gamblers traveling from China have swept game tables, more than offsetting increases in the number of casino visitors and drop value.
Last week, Grand Korea Leisure Co. (GKL) reported 13.2 billion won ($9.8 million) in operating profit for the April-June period this year, falling short of the securities firms’ estimate of 15 billion won.
GKL operates three foreigners-only casinos under the name Seven Luck in Seoul and Busan, Korea.
The poorer-than-expected result comes despite its solid gains in casino visitors and drop value.
In the first half of this year, the number of visitors to its casinos jumped 38% year-over-year to about 440,000. The drop, the amount of money game players pay for casino chips to play games at the game tables, also added 16% to 1.9 trillion won over the same period.
The declining hold percentage is blamed for its disappointing profit, industry observers said.
The hold percentage is the amount a casino gains from a game played by players, often used to determine the average earnings from a table.
(Graphics by Dongbeom Yun)
DECLINING HOLD RATE IS BLAMED
The hold rate of 10% means that a player loses 10% of his or her bet per game to the casino. The higher the hold percentage, the bigger the casino’s profit.
GKL’s hold percentage stood at 10.5% in the second quarter, down 1.5 percentage points from the same period of last year, according to the Korean casino industry on Sunday. In July only, it slid to its record low of 6.3%.
GKL’s latest hold percentage is considered unusually low, considering that the average hold percentage for foreigners-only casinos hovers around 13%, while that for casinos allowing local players to play is about 20%.
The country’s other foreigners-only casino operator Paradise Casino operated by Paradise Co. also reported a hold percentage of 12% in the same period, down 1 percentage point from a year ago.
The weak hold rate resulted in an operating profit of 32 billion won for Paradise Casino, coming below the market estimate of 44.5 billion won.
Seven Luck casino by GKL (Courtesy of GKL)
PROLIFIC CHINESE GAMBLERS DRAG DOWN HOLD%
The industry attributed a rise in wealthy Chinese gamblers in Korean casinos to the declining hold percentage.
Chinese are among the world’s most prolific gamblers but are banned from making bets in their home country, where gambling is illegal as part of the government’s crackdown on corruption and conspicuous spending, except for heavily regulated state-sanctioned lotteries.
This has forced wealthy Chinese gamblers to travel outside their country to gamble, and Korea is one of their favorite neighboring countries to visit to make bets.
“Chinese VIPs boast a higher winning rate than average players,” said an official from a local casino.
While foreigners-only casinos suffered falling hold rates and profits in Korea, the country’s casinos for local gamblers enjoyed strong earnings.
Kangwon Land Casino’s hold percentage hit 24.6% in the second quarter, 2 percentage points higher than the prior year.
Thanks to the higher hold percentage, Kangwon Land Inc., the operator of Korea’s only casino open to locals, reported 73.4 billion won in operating profit for the second quarter, beating the market expectations of 71.0 billion won despite falls in visitors and the drop by 5% on-year, respectively.
Kangwon Land Casino (Courtesy of Kangwon Land Casino)
The big gap in the hold percentage between foreigners-only casinos and those for locals calls for a revision in the county’s regulations on gambling to level the playing fields for all gamblers regardless of their nationality.
Under the current Korean law, gambling is generally prohibited for local citizens, except for minor bets made for entertainment and at certain government-authorized facilities, such as Kangwon Land Casino in Gangwon Province.
The rule limits the daily casino operation hours to 20 hours while a gambler cannot make a bet exceeding 300,000 won per game, which lowers a gambler’s winning probability against the casino.
Despite a fall in the hold percentage, Korea’s foreigners-only casinos expect their earnings to grow throughout the year.
“We expect more Japanese tourists will visit in the second half, and revenue from high-net-worth VIPs making big bets is on a steady rise,” said an official from Paradise Casino.
By Jae-Kwang Ahn
ahnjk@hankyung.com
Sookyung Seo edited this article.
