By Kate O'Keeffe
SEOUL--South Korea Tuesday gave a consortium including Caesars
Entertainment Corp. and Indonesian conglomerate Lippo Group
preliminary approval to include casino gambling in a planned $805
million resort near Seoul's main international airport.
The project, planned to open in time for the 2018 Winter
Olympics hosted by Korea, would be the Las Vegas giant's first
casino in booming Asia and the first casino run by an international
operator in Asia's fourth-largest economy.
The decision is a boon to Caesars, which has been dependent on
sluggish gambling revenue growth in the U.S. while struggling under
a mountain of debt taken on in a private-equity buyout in 2007. The
company has been aggressively looking for opportunities to expand
in Asia after failing to secure permission to build a casino in
Macau, where U.S. rivals Las Vegas Sands Corp., MGM Resorts
International and Wynn Resorts Ltd. are flourishing.
It is also a sign that South Korea has recommitted to its plan
to use international companies to expand tourism in the country
after initially rejecting casino license applications from both the
Caesars consortium and Japanese pachinko magnate Kazuo Okada's
Universal Entertainment Corp. in June . At that time the government
said the applications didn't meet qualifications, throwing the plan
to develop a new casino hub into disarray.
Steve Tight, Caesars' president of international development,
said Korea changed its mind on the consortium's bid after the
casino operator's standing improved with credit-rating firms and
after the group increased the size of its initial investment in the
project by committing to building a convention center in the first
phase of development. The resort will also include a luxury hotel
and entertainment venues, the company said. Its location in
Incheon, a port city near Seoul that Korea hopes to transform into
a casino hub, is about 100 miles west of Pyeongchang, where the
next Winter Olympics will be held.
Only foreigners will be allowed to gamble in the casino, which
is the policy at all but one of Korea's 17 existing casino resorts.
They generated a total of $2.5 billion in gambling revenue last
year, estimates CLSA analyst Brian Lee.
Caesars may be joined in Incheon by Korean casino operator
Paradise Co. and Japanese videogame and pachinko machine maker Sega
Sammy, who have also announced plans for a casino-resort in the
city. Paradise has said it plans to transfer the casino license
from one of its existing properties in Korea for use at the new
development. Meanwhile Genting Singapore and Chinese property group
Landing International Development Ltd. have said they plan to build
a casino-resort on Jeju Island, located off the southernmost tip of
the Korean peninsula. The group doesn't yet have a casino
license.
Korea's change of heart on the Caesars project comes as optimism
among casino executives grows that neighboring Japan could soon
legalize casino gambling in the country, a decision that would
increase competition in Asia's thriving gambling market. With Japan
Prime Minister Shinzo Abe and his ruling Liberal Democratic Party
expected to remain in power for years, gambling companies including
Caesars and its Las Vegas rivals are trying to seize the
opportunity with pitches for multibillion-dollar resorts.
The expansion of gambling in Korea is part of a surge in casino
building across Asia, where the Chinese territory of Macau has
become the world's largest gambling market, generating $45 billion
in gambling revenue--or seven times that of the Las Vegas
Strip--last year. Smaller hubs have also sprung up in Singapore and
the Philippines, benefiting from the rise of wealthy gamblers in
both mainland China and their home countries.
Bank of America Merrill Lynch analyst Billy Ng estimates that 20
new casinos will open in Asia over the next five years, increasing
the total to about 100 to serve three billion people. Still, that
would leave the region underdeveloped compared with the U.S., where
Mr. Ng says roughly 1,000 gambling facilities serve just 300
million people.
Write to Min-Jeong Lee at min-jeong.lee@wsj.com and Kate
O'Keeffe at Kathryn.OKeeffe@wsj.com
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