Korea’s tremendous international appeal as the next big thing in gaming has seemingly gone AWOL in the space of two short years.

Gaming revenue, which peaked in 3Q14 at $348 million across its 16 foreigner-only casinos, has endured a steady decline since—reaching $300 million just once in the nine quarters since 2Q15 and sitting around US$250 million for each of 1Q17 and 2Q17.

A government initiative to boost tourism by offering two new casino licenses for foreigner-only integrated resorts attracted 34 initial expressions of interest after it was announced in January 2015, but only six companies followed through with an application by the November 2015 deadline. Just one of those—a consortium led by U.S. tribal gaming group Mohegan Gaming & Entertainment (also known as Mohegan Sun)—ultimately satisfied the government’s investment requirements.

An outbreak of the deadly Middle East Respiratory Syndrome (MERS) in mid-2015, combined with China’s economic downturn, hit Korea’s gaming industry hard; but unlike Macau—which has staged a remarkable recovery over the past 12 months—there has been no return to the good old days just yet. Instead, Korea finds itself seriously hamstrung by political events—most notably the relentless conflict with its North Korean neighbor.

Last March, Beijing announced a ban on all travel groups to South Korea in response to the latter’s decision to deploy a THAAD missile system following increased military activity north of the border. As a result, arrivals from China fell by almost 50 percent for the first seven months of 2017, according to the Korea Tourism Organization, from 4.7 million in 2016 to just 2.5 million through last July.

But that hasn’t stopped Mohegan Sun from pushing ahead with its $1.6 billion integrated resort in the Korean gateway city of Incheon, with ground set to be broken by 2Q18. Nor has it dissuaded another consortium headed by U.S. giant Caesars Entertainment Corp.—which was granted its license back in March 2014—from doing the same, despite its original partners recently pulling out.

“We are still quite excited about the prospects of opening an integrated resort near the Incheon airport,” said Steve Tight, president of international development for Caesars Entertainment. “We recognize that there are near-term geopolitical conflicts in any opportunity in Asia and we are confident by the time we open there will be a robust flow of international tourists to Korea from throughout Asia, including North Asia.”

FORGING AHEAD

The Caesars project will be the last of three new integrated resorts—Korea’s first true IRs—to open in Incheon. The first, Paradise City—run by Korea’s biggest foreigner-only operator Paradise Co in conjunction with Japan’s Sega Sammy—launched in April, with Mohegan Sun and Caesars both targeting 2020.

Originally planned to open in 2018, Caesars’ $740 million development was delayed when its joint venture partner, Hong Kong-listed real estate developer Lippo, announced in early 2016 its intention to depart citing, “the current outlook for the gaming industry in north Asia and the volatility of the global economy.”

“We had to then basically start from scratch with finding the right partner and securing the necessary continuation of entitlements in Korea,” Tight said. Caesars has since signed a new joint venture agreement with another Hong Kong-listed firm, Guangzhou R&F Properties, and is hoping to break ground before the end of 2017.

“We are still convinced that it’s critical to bring Caesars’ form of entertainment to Asia and Korea is a great flagship location given its proximity with Incheon airport and the number of tourists arriving in Korea every year,” Tight added.

It’s a similar story for Mohegan Sun, whose $1.6 billion phase one investment is by far the largest of all three Incheon IR projects. Dubbed “Inspire,” it will boast a 20,000-square-meter casino with 250 gaming tables and 1,500 gaming machines plus 1,350 hotel rooms, an indoor rainforest and adventure park and a Paramount Studios theme park.

Asked if recent headwinds had given the company cause for revision, newly appointed CEO Mario Kontomerkos told Inside Asian Gaming, “Mohegan Gaming & Entertainment remains confident with our contemplated investment levels and looks forward to a very long term partnership and presence in South Korea.

“These results are due to short-term issues and we don’t foresee these factors making an impact at the time of our opening. We are confident that Inspire’s unique and compelling entertainment offerings will appeal to many and quickly become a highly sought after experience.”

Kontomerkos added that Mohegan Sun was “impressed with South Korea’s resilience in withstanding ups and downs in regional tensions. We are confident in the long-term growth and stability of travel and tourism trends in northern Asia.”

ANALYSTS’ OUTLOOK

Opinions elsewhere are divided.

“The outlook for foreigner-only casinos is not good and must have the operators worried,” said Shaun McCamley, partner and head of Asia operations at consulting firm Global Market Advisors. “It’s difficult to believe that pre-set revenue forecasts will be met and will more than likely fall short of expectations.”

Korea’s two leading foreigner-only casino operators at present, Paradise Co and Grand Korea Leisure (GKL), have endured a difficult start to 2017 with GKL reporting a 39.8 percent year-on-year fall in net income to KRW15.42 billion ($13.6 million) for the three months to June 30.

Reprinted with permission from Inside Asian Gaming magazine. Ben Blaschke, managing editor for Inside Asian Gaming, can be reached at bb@asgam.com.


Pansy Ho’s Macau masterplan includes art and eSports

She has spent more than a decade pushing Macau’s art industry, now MGM China Executive Director Pansy Ho has singled out eSports as the next great opportunity for Macau to enhance its global tourism appeal by becoming “the preferred base for eSports in Asia.”

Revealing a surprisingly detailed plan tied closely to her own experiences in the art world, Ho told a small selected media gathering at November’s MGS Entertainment Show in Macau that long-term investment into key infrastructure and education projects focused specifically on eSports development can give Macau a significant edge over rival Asian cities as the sport continues to evolve in the coming years.

“How do we make sure we become attractive enough that we are selected as the place where eSports events or activities take place? This is what we need to look into but it’s not as straightforward as simply organizing events because the level of the events will suffer if it only caters to the local population,” she said. “The idea here is quite the contrary. It’s not to enable Macau to become a place to cater to local events, it is to instill an idea to use Macau as a base to eventually attract more international and more interactive events … rather than simply to [rely on] local participation. “We need to make it attractive compared to, first and foremost, places that have a larger population base and therefore inherently a wider player concentration.”

Ho’s interest in eSports comes both as a surprise and as no surprise at all. On the one hand, professional video gaming seems as disparate from fine art as raw vegan from rump steak. Yet when it comes to truly fulfilling the Macau government’s diversification brief, Ho recognizes that the two industries have much more in common than meets the eye. And key to it all is preparation.

“We need to get ourselves ready,” Ho explained, pointing to government policy, the building of relevant infrastructure and focused education of the public as vital to Macau becoming an industry leader—be it in eSports or art. “For instance, can Macau be the home of art trading in Asia? No, not today. Why? Because you cannot even organize the importation of these art works without having to go through a lot of hurdles. I know it because we have done it before.

“So, together with the government, this has to be a serious endeavor. It starts with policies because certain regulations might need to be revised, then we have the facilities but we still need the know-how.

“If we have an art fair in Macau with 100 stalls, how many people can we provide to supervise? We need to groom these people and we need to fast track it because normally it takes two to three generations.

“When you go to Europe and you talk to the people who are supervising a high-quality art event or work in the art galleries, they are not just memorizing information—they take a keen interest. They are often art students pursuing their passion for the arts. Do we have that? No, we don’t. In fact the current system does not quite encourage this kind of mindset, [but] we need people to be diversified. When we talk about Macau being diversified, if the people themselves are not diversified, how does the city become diversified?”

Ho is well positioned to make such observations. Aside from her business acumen—she is group executive chairman and managing director of Shun Tak, chairman of Macau Tower & Entertainment Center, vice-chairman of the board of Macau International Airport Co and non-executive director at Sing Tao News Corp Ltd among many other roles—the 54-year-old has long been recognized as a central figure in Macau’s burgeoning arts scene.

It is, for example, under her direction that MGM Macau has walls and halls filled with fine art yet refrains from boasting of their presence, allowing guests to discover and appreciate of their own accord. For those specifically searching for visual stimulation, there is also the 5,000-square-foot MGM Art Space—the only dedicated gallery space found in any of Macau’s integrated resorts.network. But gaining traction on a global scale has been far from simple, which is why Ho wants Macau to learn from its mistakes and stay one step ahead when it comes to eSports.

“When we started to mention art a few years back, people were really looking bewildered and saying, ‘What for?’ The what for was whether a sustainable industry could be derived from this initiative,” she recounted. “Now at this juncture people believe that in fact art is heading in the right direction and now is the time we need to capture that opportunity.

“If you look at Hong Kong, in the space of just five years they have developed the world’s largest art fair. How did this happen? It happened because they only needed one shot at it because they have always been well prepared. It’s what we call the back-end—readiness. Hong Kong has been ready in terms of its tax regime, logistics, even having the hospitality and MICE capabilities so that when the right moment comes, you bring all of these capabilities together. This is what we need to do for Macau.”

Likewise, Ho says similar long-term planning—particularly in regards to the latest technology and facilities—must be implemented within the eSports realm to ensure Macau is ready to capitalize when future opportunities arise.

“Just like how we have built out our hospitality infrastructure in the past 18 to 20 years, we are now in a position to consider taking it to the next level so we can be competitive and ensure our own unique appeal,” she said. “Of course, we know that everyone now is very excited about eSports. It is the new game on the block. But even eSports is going through an evolution and I anticipate there will be many new generational developments in a very short space of time with new technologies and more specialized architecture.

“At the moment, the best thing to do is, rather than jumping into making one or two events, I would rather spend more effort on enhancing our infrastructure to enhance our capabilities so that when the time is right we will be positioned to step forward as the preferred base for eSports in Asia.”

It is with this in mind that MGM China developed some of the standout features of its new MGM Cotai integrated resort, which will open its doors in 2018. In August, MGM released preview imagery of the property’s MGM Theater at Cotai, described as Asia’s “first dynamic theater.” Designed by Scéno Plus, a world leading performance arts and entertainment design firm, MGM Theater at COTAI will offer 28 million pixels of viewing to audiences via a giant 900-square-meter, 4K (ultra HD) LED screen equivalent to the size of three tennis courts. The theater will be able to seat up to 2,000 people in more than 10 different configurations including custom arrangements for traditional concerts, fashion shows and movie premieres as well as a 360-degree configuration for talk shows, product launches and international DJs.

“We are definitely capable,” Ho said when asked about the potential for MGM Cotai to host international eSports events in the future. “When we built the property, we built it to have that capability. While everyone is building larger, bigger stadiums or exhibition venues, we are the smallest still in terms of our capacity and space but just as we talk about our smart economy, we have been trying to play smart in our design.”

“We have utilized our space in a way that we think leads the rest in terms of how we will be able to bring all sorts of new ideas,” Ho added. “The spaces aren’t the largest but they are enabled to be able to provide the capability to organize any sort of event. That is what our contribution will be in the future. It will almost automatically become the venue of choice when it comes to eSports.”

Reprinted with permission from Inside Asian Gaming magazine. Ben Blaschke, managing editor for Inside Asian Gaming, can be reached at bb@asgam.com.