South Korea casinos will find it difficult to achieve “robust returns”, says Fitch

South Korea’s new casino developments will find it difficult to see strong returns on investment due to restrictions on local patrons, says Fitch Ratings.

The rating agency said large scale integrated resort projects in South Korea will face competitive pressures from Macau, Singapore, the Philippines and Australia. “We believe this pressure will not abate as the first casino opened in Vladivostok, Russia in 2015, four new large-scale casinos are scheduled to open in Macau through 2017 and Japan continues to consider legalization,” said Fitch.

However, despite the foreigner-only rule, Fitch says operators still show keen interest in expansion, such as Mohegan Tribal Gaming Authority (MTGA), KCC Corp. and Incheon International Airport Corp. (IIAC) who were selected for a licence to build new developments.

Amidst the corruption crackdown and slowing economy in China, Fitch says the 16 existing foreigner-only properties saw casino revenue decline by 10 percent in 2015. Only Kangwon Land, which allows locals to enter, sees solid growth.

“Fitch believes chances that locals will be allowed to gamble elsewhere in the medium term are remote based on our conversations with the country’s officials and incumbent operators,” said Fitch.

“Still, we believe the Incheon projects could be viable if the total number of projects moving forward remains modest and Japan’s effort to legalize casinos fails to materialize, the agency added.