The Chinese ban on the sale of package tours to South Korea has dented the revenues of the country’s casino sector, which is overwhelmingly foreigner only.

China Travel Ban Hits South Korea Casinos

Paradise City on Yeongjong Island opened in 2017 with the hope of attracting wealthy Chinese gamblers, but the package tours ban has caused revenues to slide for the Paradise Group. (Image: Paradise Group)

The ban was one of several retaliatory measures adopted by the Chinese government in March 2017 following a diplomatic fallout over the Washington-backed deployment of a Terminal High Altitude Area Defense (THAAD) battery in south-eastern South Korea. Beijing has claimed that the system’s radar can be used to spy on China.

The resulting decline in visitors has battered South Korean industries that rely on foreign visitors. The casino sector, with its ban on locals, is highly exposed to the fallout from a dearth in tourism.

Of South Korea’s 18 casinos, just one is legally open to locals – Kangwon Land, in the remote highlands of Gangwon Province, where the Winter Olympics were staged.

Tourism Drought

Of the total of 1.2 million gamblers who visited South Korea last year, 44.4 percent were Chinese, down from 50 percent the previous year.

By contrast, the Philippine President Rodrigo Duterte has recently engineered a detente with the Beijing that has seen the easing of visa restrictions between the two countries, which had previously been at loggerheads over disputed territories in the South China Sea. As a result, the Philippine casino industry is booming like never before.

The good news for South Korea’s casinos is the lucrative Chinese VIP segment is not accustomed to buying package vacations – these high rollers are far more likely to arrive by private jet.

Revenues Down

But the casinos took a hit, nevertheless. South Korean news agency Yonhap has reported that revenues for the Paradise Group, which operates hotels and casinos in the country, were down 3.9 percent in 2017, to $623 million. That translated into a net loss of almost $30 million.

Paradise said Chinese tourists accounted for 35 percent of VIP clients last year, compared with 45 percent the previous year.

Meanwhile, revenues for the state-owned operator Grand Korea Leisure Co dropped 8.6 percent year on year.

Seoul and Beijing’s relations improved after negotiations last November and the latter has agreed to lift some of its economic restrictions on South Korea. But the package tour ban largely remains in place, which does not bode well for casino performance in the forthcoming year.

“Foreigners-only casinos fared far worse last year due to a decrease in the number of Chinese tourists,” an “industry watcher” told Yonhap. “They are expected to have tough times this year unless China completely lifts its ban.”