South Korea's tourism ministry has given preliminary approval for a large scale, foreigners-only casino developed by a conglomeration of Las Vegas-based operators Caesars, Hong Kong investment group Lippo and Singapore properly developers OUE LTD.
This is a promising development for the consortium who hope to build an integrated resort near Incheon International Airport west of Seoul, after South Korea's Ministry of Culture, Sport and Tourism rejected their previous application in June 2013 citing concerns about Caesars’ credit rating. The company remain in financially dubious circumstances but a chance to finally enter the booming Asian market could be their much needed turnaround.
A South Korean government source told Reuters their plans for ownership were to have Caesars hold 40%, OUE another 40% and Lippo 20%. South Korea's casinos are currently small but this new development is expected to cost around $2.2bn and provide a glamorous new allure for South Korea's big spending Chinese neighbours.
While the South Korean government frown on gambling on behalf of their own citizens, leaving only one of its 17 casinos open to them, President Park Geun Hye recently pledged to reduce the country's dependence on exports. Like Japan and elsewhere on the continent, South Korea is now looking to boost its economy by emulating the success of Macau, China - which brings in seven times as much revenue annually as Las Vegas.
Song Hak Jun, a professor in the hotel and convention management department at Pai Chai University in Daejon, South Korea told Bloomberg: "Korea is the optimal location to draw Chinese bettors. Everyone's competing to absorb China's outbound demand. Having casino resorts will bring explosive growth to Korea too."
South Korea plans to draw 10 million Chinese visitors a year by 2020, more than double that of 2012, reports Bloomberg. It's thought the IR built by the Caesars consortium could play a large part in this, along with their competitors in the region. Southeast Asia's largest casino operators by market value, Genting Singapore, are partnering with Chinese property developers Landing International Development to build a rival resort on the island of Jeju.
Another competing joint venture is planned on behalf of South Korean firm Paradise, who are already established in South Korea's foreigner-only market, with Japan's Sega Sammy Holdings Inc, the videogame and panchinko machine company. The Paradise/Sega Sammy consortium are looking to spend 1.9 trillion won to build a complex, also in Incheon, the first part of which they hope to complete by 2017.
Already the groups are enjoying a boost in shares thanks to the news, with Lippo up 36%, Paradise up 4.4% and OUE up 6%. The Ministry said the Caesars project would be good for South Korea too, with more than 890 billion won in tourism income from new visitors and 8,000 jobs created during the four-year construction, Bloomberg reports.
However the Caesars approval is only preliminary, offering no promises about a gaming licence, and the government have reserved their right to withdraw if investment conditions aren't met.
Currently the consortium have been asked to build a five-star hotel and invest $500m in three-and-a-half years and, if approved by the South Korean parliament, won't be able to operate the casino until it invests $700m reports Reuters, citing an unidentified government source.
If all goes to plan the complex will be built over several phases and be complete in time for the 2018 Winter Olympics in Pyeongchang, South Korea.